Self-Regulatory Organizations; BATS Exchange, Inc.; BATS Y-Exchange, Inc.; EDGA Exchange, Inc.; EDGX Exchange, Inc.; Notice of Amendments No. 2 and Order Granting Accelerated Approval to Proposed Rule Changes, as Modified by Amendments Nos. 1 and 2, To Establish a New Market Data Product Called the BATS One Feed, 78920-78924 [2014-30586]

Download as PDF 78920 Federal Register / Vol. 79, No. 250 / Wednesday, December 31, 2014 / Notices 2. Pursuant to 39 U.S.C. 505, Lyudmila Bzhilyanskaya is appointed to serve as an officer of the Commission to represent the interests of the general public in these proceedings (Public Representative). 3. Comments are due no later than January 2, 2015. 4. The Secretary shall arrange for publication of this order in the Federal Register. By the Commission. Shoshana M. Grove, Secretary. [FR Doc. 2014–30577 Filed 12–30–14; 8:45 am] BILLING CODE 7710–FW–P SECURITIES AND EXCHANGE COMMISSION Submission for OMB Review; Comment Request Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE., Washington, DC 20549–2736. mstockstill on DSK4VPTVN1PROD with NOTICES Extension: Rule 15c2–7, SEC File No. 270–420, OMB Control No. 3235–0479. Notice is hereby given that pursuant to the Paperwork Reduction Act of 1995 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget (‘‘OMB’’) a request for approval of extension of the previously approved collection of information provided for in Rule 15c2–7 (17 CFR 240.15c2–7) under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). Rule 15c2–7 places disclosure requirements on broker-dealers who have correspondent relationships, or agreements identified in the rule, with other broker-dealers. Whenever any such broker-dealer enters a quotation for a security through an inter-dealer quotation system, Rule 15c2–7 requires the broker-dealer to disclose these relationships and agreements in the manner required by the rule. The interdealer quotation system must also be able to make these disclosures public in association with the quotation the broker-dealer is making. When Rule 15c2–7 was adopted in 1964, the information it requires was necessary for execution of the Commission’s mandate under the Securities Exchange Act of 1934 to prevent fraudulent, manipulative and deceptive acts by broker-dealers. In the absence of the information collection required under Rule 15c2–7, investors VerDate Sep<11>2014 22:02 Dec 30, 2014 Jkt 235001 and broker-dealers would have been unable to accurately determine the market depth of, and demand for, securities in an inter-dealer quotation system. There are approximately 4,342 brokerdealers registered with the Commission. Any of these broker-dealers could be potential respondents for Rule 15c2–7, so the Commission is using that number as the number of respondents. Rule 15c2–7 applies only to quotations entered into an inter-dealer quotation system, such as the OTC Bulletin Board (‘‘OTCBB’’) or OTC Link (formerly ‘‘Pink Sheets’’), operated by OTC Markets Group Inc. (‘‘OTC Link’’). According to representatives of both OTC Link and the OTCBB, neither entity has recently received, or anticipates receiving any Rule 15c2–7 notices. However, because such notices could be made, the Commission estimates that one filing is made annually pursuant to Rule 15c2–7. Based on prior industry reports, the Commission estimates that the average time required to enter a disclosure pursuant to the rule is .75 minutes, or 45 seconds. The Commission sees no reason to change this estimate. We estimate that impacted respondents spend a total of .0125 hours per year to comply with the requirements of Rule 15c2–7 (1 notice (×) 45 seconds/notice). An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number. The public may view background documentation for this information collection at the following Web site: www.reginfo.gov. Comments should be directed to: (i) Desk Officer for the Securities and Exchange Commission, Office of Information and Regulatory Affairs, Office of Management and Budget, Room 10102, New Executive Office Building, Washington, DC 20503, or by sending an email to: Shagufta_ Ahmed@omb.eop.gov; and (ii) Pamela Dyson, Acting Director/Chief Information Officer, Securities and Exchange Commission, c/o Remi PavlikSimon, 100 F Street NE., Washington, DC 20549, or by sending send an email to: PRA_Mailbox@sec.gov. Comments must be submitted to OMB within 30 days of this notice. Dated: December 23, 2014. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–30590 Filed 12–30–14; 8:45 am] BILLING CODE 8011–01–P PO 00000 Frm 00142 Fmt 4703 Sfmt 4703 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–73918; File Nos. SR–BATS– 2014–055; SR–BYX–2014–030; SR–EDGA– 2014–25; SR–EDGX–2014–25] Self-Regulatory Organizations; BATS Exchange, Inc.; BATS Y-Exchange, Inc.; EDGA Exchange, Inc.; EDGX Exchange, Inc.; Notice of Amendments No. 2 and Order Granting Accelerated Approval to Proposed Rule Changes, as Modified by Amendments Nos. 1 and 2, To Establish a New Market Data Product Called the BATS One Feed December 23, 2014 I. Introduction On October 30, 2014, BATS Exchange, Inc. (‘‘BATS’’), BATS Y-Exchange, Inc. (‘‘BYX’’), EDGA Exchange, Inc. (‘‘EDGA’’), and EDGX Exchange, Inc.; (‘‘EDGX’’) (collectively, the ‘‘Exchanges’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 proposed rule changes to establish a new market data product called the ‘‘BATS One Feed.’’ On November 13, 2014, each of the Exchanges filed an Amendment No. 1 to its proposed rule change. The proposed rule changes, each as amended by an Amendment No. 1, were published for comment in the Federal Register on November 20, 2014.3 On December 15, 2014, each of the Exchanges filed an Amendment No. 2 to its proposed rule change. On December 15, 2014, each of the Exchanges submitted a comment letter on its proposed rule change, each of which included a redline showing the changes made by their Amendments No. 2.4 No other comments on the proposed rule changes have been received. However, similar proposed rule changes were filed with the Commission by the Exchanges earlier this year and subsequently withdrawn; 5 three 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release Nos. 73594 (Nov. 14, 2014), 79 FR 69142 (SR–BATS–2014– 055); 73595 (Nov. 14, 2014) 79 FR 69160 (SR–BYX– 2014–030); 73596 (Nov. 14, 2014), 79 FR 69148 (SR–EDGA–2014–25); and 73597 (Nov. 14, 2014), 79 FR 69180 (SR–EDGX–2014–25). 4 See Letter from Chris Solgan, Assistant General Counsel, DirectEdge, dated December 12, 2014 (SR– BATS–2014–055); Letter from Chris Solgan, Assistant General Counsel, DirectEdge, dated December 12, 2014 (SR–BYX–2014–030); Letter from Chris Solgan, Assistant General Counsel, DirectEdge, dated December 12, 2014 (SR–EDGA– 2014–25); and Letter from Chris Solgan, Assistant General Counsel, DirectEdge, dated December 12, 2014 (SR–EDGX–2014–25). 5 Those proposed rule changes were published for comment in the Federal Register on August 1, 2014. 2 17 E:\FR\FM\31DEN1.SGM 31DEN1 Federal Register / Vol. 79, No. 250 / Wednesday, December 31, 2014 / Notices comment letters were received in response to two of those proposed rule changes.6 The Commission is publishing this Notice and Order to solicit comment on the Amendments No. 2 and to approve each of the proposed rule changes, as modified by Amendments Nos. 1 and 2, on an accelerated basis. mstockstill on DSK4VPTVN1PROD with NOTICES II. Description of the Proposals The Exchanges propose to establish a new market data product called the BATS One Feed, which would be offered by each of the Exchanges. The BATS One Feed would be a consolidated data feed based on market data derived from underlying data feeds offered by each of the Exchanges. Specifically, the Exchanges would use the following data feeds, which are also available to other vendors, to create the proposed BATS One Feed: the EdgeBook Depth feed for EDGX, the EdgeBook Depth feed for EDGA, the BYX PITCH Feed, and the BATS PITCH Feed. The Exchanges have represented that they will continue to make these individual underlying feeds available and that, as a result, the source of the market data they would use to create the proposed BATS One Feed would be the same as the source available to other vendors. As described more fully below, the BATS One Feed would be a data feed that disseminates, on a real-time basis, the aggregate best bid and offer (‘‘BBO’’) of all displayed orders for securities traded on the Exchanges and for which the Exchanges report quotes under the Consolidated Tape Association (‘‘CTA’’) Plan or the Nasdaq/UTP Plan. The BATS One Feed would also contain the individual last sale information for each of the Exchanges. In addition, the BATS One Feed would include messages from the Exchanges about trading on their See Securities Exchange Act Release Nos. 72688 (July 28, 2014), 79 FR 44941 (SR–BATS–2014–028); 72690 (July 28, 2014), 79 FR 44929 (SR–BYX–2014– 011); 72689 (July 28, 2014), 79 FR 44917 (SR– EDGA–2014–16); and 56415 (July 28, 2014), 79 FR 44892 (SR–EDGX–2014–19). On September 15, 2014, the Commission extended its review period until October 30, 2014. See Securities Exchange Act Release Nos. 73099, 79 FR 56418 (Sept. 19, 2014) (SR–BATS–2014–028); 73102, 79 FR 56419 (Sept. 19, 2014) (SR–BYX–2014–011); 73098, 79 FR 56415 (Sept. 19, 2014) (SR–EDGA–2014–16); and 73099, 79 FR 56418 (Sept. 19, 2014) (SR–EDGX–2014–19). On October 29, 2014, the Exchanges withdrew these proposed rule changes. 6 See Letter from Sal Arnuk and Joe Saluzzi, Themis Trading LLC, to Elizabeth M. Murphy, Secretary, Commission, dated August 21, 2014 (SR– BATS–2014–028) (‘‘Themis Letter’’); Letter from Ira D. Hammerman, General Counsel, SIFMA, to Kevin O’Neill, Deputy Secretary, Commission, dated August 22, 2014 (SR–BATS–2014–028) (‘‘SIFMA Letter’’); and Letter from Suzanne Hamlet Shatto to the Commission, dated August 19, 2014 (SR– EDGA–2014–16) (‘‘Shatto Letter’’). VerDate Sep<11>2014 22:02 Dec 30, 2014 Jkt 235001 markets. Finally, the BATS One Feed would contain an optional functionality that would enable recipients to elect to receive aggregated two-sided quotations from the Exchanges for up to five (5) price levels. Description of the BATS One Feed The BATS One Feed would contain the aggregate BBO of the Exchanges for all securities that are traded on the Exchanges and for which the Exchanges report quotes under the CTA Plan or the Nasdaq/UTP Plan. The aggregate BBO would include the total size of all orders at the BBO available on all Exchanges.7 The BATS One Feed would also disseminate last sale information for each of the individual Exchanges. The last sale information would include the price, size, time of execution, and the individual Exchange on which the trade was executed. The last sale message would also include the cumulative number of shares executed on all Exchanges for that trading day. The Exchanges have represented that they would disseminate the aggregate BBO of the Exchanges and last sale information through the BATS One Feed no earlier than each individual Exchange provides its BBO and last sale information to the processors under the CTA Plan or the Nasdaq/UTP Plan. The BATS One Feed would also include Symbol Summary, Market Status, Retail Liquidity Identifier on behalf of BYX, Trading Status, and Trade Break messages. The Symbol Summary message would include the total executed volume across all of the Exchanges. The Market Status message would be disseminated to reflect a change in the status of one of the Exchanges. For example, the Market Status message would indicate whether one of the Exchanges is experiencing a systems issue or disruption and quotation or trade information from that market is not currently being disseminated via the BATS One Feed as part of the aggregated BBO. The Market Status message would also indicate when an Exchange is no longer experiencing a systems issue or disruption to properly reflect the status of the aggregated BBO. The Retail Liquidity Identifier indicator message would be disseminated via the BATS One Feed on behalf of the BYX only pursuant to BYX’s Retail Price Improvement (‘‘RPI’’) 7 The Exchanges have stated that quotations of odd lot size, which is generally less than 100 shares, would be included in the total size of all orders at a particular price level in the BATS One Feed but are currently not reported by the Exchanges to the consolidated tape. PO 00000 Frm 00143 Fmt 4703 Sfmt 4703 78921 Program.8 The Retail Liquidity Identifier indicates when RPI interest priced at least $0.001 better than BYX’s Protected Bid or Protected Offer for a particular security is available in the System. The Exchanges propose to disseminate the Retail Liquidity Indicator via the BATS One Feed in the same manner as it is currently disseminated through consolidated data streams (i.e., pursuant to the Consolidated Tape Association Plan/Consolidated Quotation Plan, or CTA/CQ, for Tape A and Tape B securities, and the Nasdaq UTP Plan for Tape C securities) as well as through proprietary BYX data feeds. The Retail Liquidity Identifier reflects the symbol and the side (buy or sell) of the RPI interest, but does not include the price or size of the RPI interest. In particular, like CQ and UTP quoting outputs, the BATS One Feed would include a field for codes related to the Retail Price Improvement Identifier. The codes indicate RPI interest that is priced better than BYX’s Protected Bid or Protected Offer by at least the minimum level of price improvement as required by the Program. The Trade Break message would indicate when an execution on one of the Exchanges has been broken in accordance with the individual Exchange’s rules.9 The Trading Status message would indicate the current trading status of a security on each individual Exchange. For example, a Trading Status message would be sent when a short sale price restriction is in effect pursuant to Rule 201 of Regulation SHO (‘‘Short Sale Circuit Breaker’’),10 or the security is subject to a trading halt, suspension or pause declared by the listing market. A Trading Status message would be sent whenever a security’s trading status changes. Optional Functionality for Aggregate Depth of Book. The BATS One Feed would also offer an additional, optional functionality that would enable recipients to receive two-sided quotations from the Exchanges for five (5) price levels for all securities that are traded on the Exchanges. The option for 8 For a description of BYX’s RPI Program, see BYX Rule 11.24. See also Securities Exchange Act Release No. 68303 (November 27, 2012), 77 FR 71652 (December 3, 2012) (SR–BYX–2012–019) (Order Granting Approval of Proposed Rule Change, as Modified by Amendment No. 2, to Adopt a Retail Price Improvement Program); Securities Exchange Act Release No. 67734 (August 27, 2012), 77 FR 53242 (August 31, 2012) (SR–BYX–2019–019) (Notice of Filing of Proposed Rule Change to Adopt a Retail Price Improvement Program). 9 See, e.g., Exchange and EDGA Rule 11.13 (Clearly Erroneous Executions) and BATS and BYX Rule 11.17 (Clearly Erroneous Executions). 10 17 CFR 242.200(g); 17 CFR 242.201. E:\FR\FM\31DEN1.SGM 31DEN1 mstockstill on DSK4VPTVN1PROD with NOTICES 78922 Federal Register / Vol. 79, No. 250 / Wednesday, December 31, 2014 / Notices receiving the BATS One Feed with this depth of book functionality is referred to as the ‘‘BATS One Premium Feed;’’ the option for receiving the BATS One Feed without this functionality is referred to as the ‘‘BATS One Summary Feed.’’ For each price level on one of the Exchanges, the BATS One Premium Feed option of the BATS One Feed would include a two-sided quote and the number of shares available to buy and sell at that particular price level.11 Distribution of the BATS One Feed. The Exchanges represent that they have taken into consideration their affiliated relationships in the design of the BATS One Feed to assure that vendors would be able to offer a similar product on the same terms as the Exchanges, both from the perspective of latency and cost. The Exchanges have stated that they propose to offer the BATS One Feed voluntarily in response to demand from vendors and subscribers that are interested in receiving the aggregate BBO and last sale information from the Exchanges as part of a single data feed. The Exchanges assert that the BATS One Feed can be used by industry professionals and retail investors looking for a cost effective, easy-to-administer, high quality market data product with the characteristics of the BATS One Feed. The Exchanges also assert that the BATS One Feed would help protect a free and open market by providing vendors and subscribers additional choices in receiving this type of market data, thus promoting competition and innovation. With respect to latency, the Exchanges have represented that the path for distribution by the Exchanges of BATS One Feed would not be faster than the path for distribution that would be used by a vendor to distribute an independently created a BATS One-like product. Accordingly, the Exchanges have stated, the proposed BATS One data feed is a data product that a competing vendor could create and sell without being in a disadvantaged position relative to the Exchange. In recognition that the Exchanges are the source of their own market data and affiliated with one another, the Exchanges have represented that the source of the market data they would use to create the proposed BATS One Feed is available to other vendors. Specifically, the Exchanges have represented that they would use the following data feeds to create the proposed BATS One Feed, each of 11 Recipients who do not elect to receive the BATS One Premium Feed would receive the aggregate BBO of the Exchanges under the BATS Summary Feed, which, unlike the BATS Premium Feed, would not delineate the size available at the BBO on each individual Exchange. VerDate Sep<11>2014 22:02 Dec 30, 2014 Jkt 235001 which is available to other vendors: the EdgeBook Depth feed for EDGX, the EdgeBook Depth feed for EDGA, the BYX PITCH Feed, and the BATS PITCH Feed. The Exchanges have also represented that they will continue to make available these individual underlying feeds and that, as a result, the source of the market data they would use to create the proposed BATS One Feed is the same as the source available to competing vendors. The Exchanges have also made the following representations regarding the latency of the BATS One Feed and any consolidated feed to be offered by a competing vendor. In order to create the BATS One Feed, the system creating and supporting the BATS One Feed would need to receive the individual data feeds from each Exchange and, in turn, aggregate and summarize that data to create the BATS One Feed and then distribute it to end users. This is the same process a competing vendor would undergo should it create a market data product similar to the BATS One Feed to distribute to its end users. In addition, a competing vendor could locate its servers in the same facilities as the system creating and supporting the BATS One Feed and could therefore receive the individual data feeds from each Exchange at the same time as the system creating and supporting the BATS One Feed. Thus, the Exchanges have stated that they would not have any unfair advantage over competing vendors with respect to obtaining data from the individual Exchanges, because the technology supporting the BATS One Feed would similarly need to obtain the underlying data feeds and because this connection would be on a level playing field with a competing vendor located at the same facility as the Exchanges. Likewise, the BATS One data feed would not have a speed ` advantage vis-a-vis competing vendors with respect to access to end user customers, whether those end users are also located in the same data center or not. With regard to cost, the Exchanges have represented that they will file a separate rule filing with the Commission to establish fees for BATS One Feed and that these fees would be designed to ensure that vendors could compete with the Exchanges by creating a similar product. To ensure a vendor can compete with the Exchanges by creating the same product as the BATS One Feed and selling it to their clients, the Exchanges have also represented that they would charge their clients for the BATS One Feed an amount that is no less than the cost to a market data vendor to obtain all the underlying PO 00000 Frm 00144 Fmt 4703 Sfmt 4703 feeds, plus an amount to be determined that would reflect the value of the aggregation and consolidation function. Thus, the pricing for the BATS One Feed would enable a vendor to receive the underlying data feeds and offer a similar product on a competitive basis and with no pricing disadvantage relative to the Exchanges. Implementation Date The Exchanges have represented that they anticipate making the BATS One Feed available as soon as practicable after approval of the proposed rule changes by the Commission and the effectiveness of rule filings to establish the fees for the BATS One Feed.12 III. Summary of Comments As noted above, the Commission received three comment letters on previous versions of the proposed changes filed by some of the Exchanges.13 In their current proposals, the Exchanges have responded to the points raised by these commenters. The three commenters generally oppose the proposed BATS One Feed. The Shatto Letter expressed general concerns about the transparency of order flow information to regulators. The Themis Letter expressed objections to the proposed BATS One Feed on the grounds that it would introduce a new proprietary data feed and expressed concerns generally about the complexity arising from the proliferation of new data technologies. In their response to the commenters, the Exchanges argued that the Themis Letter and Shatto Letter are not responsive to the issues raised in the proposal or are aimed at existing elements of U.S. market structure that have been previously approved by the Commission. The SIFMA Letter primarily argues that the fees for the proposed BATS One Feed do not meet the requirements of the Act, including the requirement that such fees be ‘‘fair and reasonable’’ under section 11A(c)(1)(C) of the Act. SIFMA also contends that BATS has circumvented the requirement to receive Commission approval for this product by offering and marketing the BATS One Feed since August 1, 2014. In their response to the SIFMA Letter, the Exchanges noted that the thrust of the SIFMA Letter is aimed at the initially proposed fees, which have now been removed from the proposed rule changes and are to be filed with the Commission via separate rule filings. 12 Each of the Exchanges intend to file a separate proposal establishing the fees for the BATS One Feed. 13 See SIFMA Letter, Shatto Letter, and Themis Letter, supra note 6. E:\FR\FM\31DEN1.SGM 31DEN1 Federal Register / Vol. 79, No. 250 / Wednesday, December 31, 2014 / Notices The Exchanges also noted that, while the SIFMA Letter correctly states that BATS has marketed the BATS One Feed since August 1, 2014, the SIFMA Letter incorrectly asserts that BATS has offered the BATS One Feed since that same date. The Exchanges have represented that all of their marketing materials have included statements that the BATS One Feed’s implementation was pending to Commission approval, and at no point have the Exchanges offered the BATS One product for any use other than for testing and certification. mstockstill on DSK4VPTVN1PROD with NOTICES IV. Discussion and Commission Findings After carefully considering the proposals and the comments submitted, the Commission finds that the proposed rule changes, as modified by Amendments Nos. 1 and 2, are consistent with the requirements of the Act and the rules and regulations thereunder applicable to national securities exchanges.14 In particular, the Commission finds that the proposed rule changes are consistent with the requirements of section 11A(c)(1)(C) of the Act 15 and with Rule 603(a)(2) of Regulation NMS thereunder,16 which requires that any national securities exchange, national securities association, broker, or dealer that distributes information with respect to quotations for or transactions in an NMS stock to a securities information processor, broker, dealer, or other persons shall do so on terms that are not unreasonably discriminatory. The Commission also finds that the proposed rule changes are consistent with section 6(b)(5) of the Act, which requires that the rules of an exchange be designed to promote just and equitable 14 In approving this proposed rule change, the Commission notes that it has considered the proposed rule’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 15 Section 11A(c)(1)(C) of the Act requires, among other things, that no self-regulatory organization, member thereof, securities information processor, broker or dealer make use of the mails or any means or instrumentality of interstate commerce to collect, process, distribute, publish or prepare for distribution or publication any information with respect to quotations for or transactions in any security other than an exempted security in contravention of such rules and regulations as the Commission shall prescribe as necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act to assure that all securities information processors may, for purposes of distribution and publication, obtain on fair and reasonable terms such information with respect to quotations for and transactions in such securities as is collected, processed, or prepared for distribution or publication by an exclusive processor of such information acting in such capacity. 15 U.S.C. 78k– 1(c)(1)(C). 16 17 CFR 242.603(a)(2). VerDate Sep<11>2014 22:02 Dec 30, 2014 Jkt 235001 principles of trade, remove impediments to and perfect the mechanisms of a free and open market and a national market system and, in general, to protect investors and the public interest, and section 6(b)(8) of the Act, which requires that the rules of an exchange not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.17 The Commission notes that, to create the BATS One Feed, the Exchanges would use underlying data feeds that belong to the Exchanges: the EdgeBook Depth feed for EDGX, the EdgeBook Depth feed for EDGA, the BYX PITCH Feed, and the BATS PITCH Feed. Accordingly, the Commission’s review of the Exchanges’ proposals has focused, in particular, on whether the proposals would result in affiliated exchanges— which are separate self-regulatory organizations under the Act—making their data products or services available to one another at terms (e.g., content, pricing, or latency) that are more favorable than those available to unaffiliated market participants. The Exchanges have represented that the BATS One Feed would be created using underlying data feeds that are available for subscription by vendors. In recognition that the Exchanges are the source of their own market data and that they are affiliated with one another, the Exchanges have also represented that they will continue to make available all of the individual underlying feeds and that the source of the market data they would use to create the proposed BATS One Feed is the same as the source available to competing vendors. With respect to latency, the Exchanges have represented that competing vendors could locate their servers in the same facilities as the system creating and supporting the BATS One Feed, and, therefore, could receive the underlying data feeds at the same time as the system creating and supporting the BATS One Feed. Therefore, the Exchanges have contended that, a competing vendor could obtain the underlying data feeds from the Exchanges on the same latency basis as the system that would be performing the aggregation and consolidation of the proposed BATS One Feed and could provide the same kind of product to its customers with the same latency they could achieve by purchasing the BATS One Feed from the Exchanges.18 The Exchanges have also 17 15 U.S.C. 78f(b)(5) and (b)(8). Exchanges have represented that, in order to create the BATS One Feed, the system creating and supporting the BATS One Feed would need to 18 The PO 00000 Frm 00145 Fmt 4703 Sfmt 4703 78923 represented that they have designed the BATS One Feed so that they would have no advantages over a competing vendor with respect to the speed of access to the underlying feeds. With respect to pricing, although specific fees to be charged for the BATS One Feed are not part of the proposed rule changes, the Exchanges have represented that they will assess a fee that is at least equal to the aggregate cost of the underlying feeds (i.e., at least as much as the cost to a vendor of subscribing to each of the underlying data feeds), plus an additional amount (to be determined) that would reflect the value of the aggregation and consolidation function performed to create the BATS One Feed.19 Based on the Exchange’s representations with respect to the content, latency, and pricing of the BATS One Feed—which are central to the Commission’s analysis of the proposal—the Commission finds that the Exchanges’ proposals are consistent with the Act and the rules and regulations thereunder applicable to national securities exchanges. The Commission believes that these representations are designed to ensure that BATS, BYX, EDGA, and EDGX, which are separate self-regulatory organizations, do not, because of their relationship as affiliates, offer one another products or services on a more favorable basis than that available to other competing market participants. For the foregoing reasons, the Commission finds that the proposed rule changes, as amended, are consistent with section 11A(c)(1)(C) of the Act and Rule 603(a)(2) of Regulation NMS receive the underlying data feeds from each Exchange and, in turn, aggregate and summarize that data to create the BATS One Feed and then distribute it to end users. The Exchanges have stated that this is the same process a competing vendor would undergo should it create a market data product similar to the BATS One Feed to distribute to its end users. 19 SIFMA has objected to the BATS One Feed primarily over concerns about fees for this product being ‘‘fair and reasonable,’’ consistent with section 11A(c)(1)(C) of the Act. The Commission notes, however, that the proposed rule changes do not contain proposed fees and that Exchanges have represented that they will not offer the BATS One Feed until the requisite fee filings under section 19(b) of the Act have been filed and are effective. The Commission will review any such filings when they have been submitted. SIFMA has also argued that BATS has circumvented the process of receiving Commission approval and has been actively offering and marketing the BATS One Feed for months. The Commission notes, however, that the Exchanges have represented that, although they have been marketing the BATS One Feed, all of their marketing materials have included statements that the BATS One Feed’s implementation was pending to Commission approval and at no point have the Exchanges offered the BATS One product for any use other than for testing and certification. E:\FR\FM\31DEN1.SGM 31DEN1 78924 Federal Register / Vol. 79, No. 250 / Wednesday, December 31, 2014 / Notices thereunder,20 and sections 6(b)(5) and (b)(8) of the Act.21 V. Accelerated Approval of Proposed Rule Changes, as Modified by Amendments No. 2 The Amendments No. 2 revised the proposed rule changes to: (i) Clarify how the BATS One Feed would be created, (ii) make additional clarifying statements with respect to the latency and cost of the BATS One Feed, and (iii) bring together the discussion of key aspects of the description of the proposal in the same section. Accordingly, the Commission does not believe that the Amendments No. 2 raises any novel regulatory issues and therefore finds that good cause exists to approve the proposals, as modified by Amendments Nos. 1 and 2, on an accelerated basis. VI. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether Amendments No. 2 to the proposed rule changes are 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 Numbers SR–BATS–2014–055; SR–BYX–2014– 030; SR–EDGA–2014–25; or SR–EDGX– 2014–25 on the subject line. mstockstill on DSK4VPTVN1PROD with NOTICES Paper Comments communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Numbers SR–BATS– 2014–055; SR–BYX–2014–030; SR– EDGA–2014–25; or SR–EDGX–2014–25 and should be submitted on or before January 21, 2015. VII. Conclusion It is therefore ordered, pursuant to section 19(b)(2) of the Act,22 that the proposed rule changes, as modified by Amendments Nos. 1 and 2, (SR–BATS– 2014–055; SR–BYX–2014–030; SR– EDGA–2014–25; SR–EDGX–2014–25) be, and hereby are, approved on an accelerated basis. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–30586 Filed 12–30–14; 8:45 am] BILLING CODE 8011–01–P • 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 Numbers SR–BATS–2014–055; SR– BYX–2014–030; SR–EDGA–2014–25; or SR–EDGX–2014–25. 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 SECURITIES AND EXCHANGE COMMISSION [Release No. 73927; File No. SR–Phlx–2014– 80] U.S.C. 78k–1(c)(1)(C) and 17 CFR 242.603(a)(2). 21 15 U.S.C. 78f(b)(5) and (b)(8). VerDate Sep<11>2014 22:02 Dec 30, 2014 Jkt 235001 I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange proposes to amend Strategy Fee Caps which are currently located in the Exchange Fee Schedule at Section II, entitled ‘‘Multiply Listed Options.’’ While changes to the Pricing Schedule pursuant to this proposal are effective upon filing, the Exchange has designated the proposed amendment to be operative on January 2, 2015. The text of the proposed rule change is available on the Exchange’s Web site at https://nasdaqomxphlx.cchwall street.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 aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Self-Regulatory Organizations; NASDAQ OMX PHLX LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Strategy Fee Caps December 23, 2014. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on December 18, 2014, NASDAQ OMX PHLX LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission 22 15 20 15 (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III, below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 23 17 PO 00000 Frm 00146 Fmt 4703 Sfmt 4703 The purpose of this filing is to amend the Strategy Fee Caps which are currently located in Section II, entitled ‘‘Multiply Listed Options.’’ 3 Today, the Exchange caps transaction fees for certain dividend,4 merger,5 short stock 3 This includes options overlying equities, ETFs, ETNs and indexes which are Multiply Listed. 4 A dividend strategy is defined as transactions done to achieve a dividend arbitrage involving the purchase, sale and exercise of in-the-money options of the same class, executed the first business day prior to the date on which the underlying stock goes ex-dividend. 5 A merger strategy is defined as transactions done to achieve a merger arbitrage involving the purchase, sale and exercise of options of the same class and expiration date, executed the first business day prior to the date on which E:\FR\FM\31DEN1.SGM 31DEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 250 (Wednesday, December 31, 2014)]
[Notices]
[Pages 78920-78924]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-30586]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73918; File Nos. SR-BATS-2014-055; SR-BYX-2014-030; SR-
EDGA-2014-25; SR-EDGX-2014-25]


Self-Regulatory Organizations; BATS Exchange, Inc.; BATS Y-
Exchange, Inc.; EDGA Exchange, Inc.; EDGX Exchange, Inc.; Notice of 
Amendments No. 2 and Order Granting Accelerated Approval to Proposed 
Rule Changes, as Modified by Amendments Nos. 1 and 2, To Establish a 
New Market Data Product Called the BATS One Feed

December 23, 2014

I. Introduction

    On October 30, 2014, BATS Exchange, Inc. (``BATS''), BATS Y-
Exchange, Inc. (``BYX''), EDGA Exchange, Inc. (``EDGA''), and EDGX 
Exchange, Inc.; (``EDGX'') (collectively, the ``Exchanges'') filed with 
the Securities and Exchange Commission (``Commission''), pursuant to 
section 19(b)(1) of the Securities Exchange Act of 1934 (``Act'') \1\ 
and Rule 19b-4 thereunder,\2\ proposed rule changes to establish a new 
market data product called the ``BATS One Feed.'' On November 13, 2014, 
each of the Exchanges filed an Amendment No. 1 to its proposed rule 
change. The proposed rule changes, each as amended by an Amendment No. 
1, were published for comment in the Federal Register on November 20, 
2014.\3\ On December 15, 2014, each of the Exchanges filed an Amendment 
No. 2 to its proposed rule change. On December 15, 2014, each of the 
Exchanges submitted a comment letter on its proposed rule change, each 
of which included a redline showing the changes made by their 
Amendments No. 2.\4\ No other comments on the proposed rule changes 
have been received. However, similar proposed rule changes were filed 
with the Commission by the Exchanges earlier this year and subsequently 
withdrawn; \5\ three

[[Page 78921]]

comment letters were received in response to two of those proposed rule 
changes.\6\ The Commission is publishing this Notice and Order to 
solicit comment on the Amendments No. 2 and to approve each of the 
proposed rule changes, as modified by Amendments Nos. 1 and 2, on an 
accelerated basis.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release Nos. 73594 (Nov. 14, 
2014), 79 FR 69142 (SR-BATS-2014-055); 73595 (Nov. 14, 2014) 79 FR 
69160 (SR-BYX-2014-030); 73596 (Nov. 14, 2014), 79 FR 69148 (SR-
EDGA-2014-25); and 73597 (Nov. 14, 2014), 79 FR 69180 (SR-EDGX-2014-
25).
    \4\ See Letter from Chris Solgan, Assistant General Counsel, 
DirectEdge, dated December 12, 2014 (SR-BATS-2014-055); Letter from 
Chris Solgan, Assistant General Counsel, DirectEdge, dated December 
12, 2014 (SR-BYX-2014-030); Letter from Chris Solgan, Assistant 
General Counsel, DirectEdge, dated December 12, 2014 (SR-EDGA-2014-
25); and Letter from Chris Solgan, Assistant General Counsel, 
DirectEdge, dated December 12, 2014 (SR-EDGX-2014-25).
    \5\ Those proposed rule changes were published for comment in 
the Federal Register on August 1, 2014. See Securities Exchange Act 
Release Nos. 72688 (July 28, 2014), 79 FR 44941 (SR-BATS-2014-028); 
72690 (July 28, 2014), 79 FR 44929 (SR-BYX-2014-011); 72689 (July 
28, 2014), 79 FR 44917 (SR-EDGA-2014-16); and 56415 (July 28, 2014), 
79 FR 44892 (SR-EDGX-2014-19). On September 15, 2014, the Commission 
extended its review period until October 30, 2014. See Securities 
Exchange Act Release Nos. 73099, 79 FR 56418 (Sept. 19, 2014) (SR-
BATS-2014-028); 73102, 79 FR 56419 (Sept. 19, 2014) (SR-BYX-2014-
011); 73098, 79 FR 56415 (Sept. 19, 2014) (SR-EDGA-2014-16); and 
73099, 79 FR 56418 (Sept. 19, 2014) (SR-EDGX-2014-19). On October 
29, 2014, the Exchanges withdrew these proposed rule changes.
    \6\ See Letter from Sal Arnuk and Joe Saluzzi, Themis Trading 
LLC, to Elizabeth M. Murphy, Secretary, Commission, dated August 21, 
2014 (SR-BATS-2014-028) (``Themis Letter''); Letter from Ira D. 
Hammerman, General Counsel, SIFMA, to Kevin O'Neill, Deputy 
Secretary, Commission, dated August 22, 2014 (SR-BATS-2014-028) 
(``SIFMA Letter''); and Letter from Suzanne Hamlet Shatto to the 
Commission, dated August 19, 2014 (SR-EDGA-2014-16) (``Shatto 
Letter'').
---------------------------------------------------------------------------

II. Description of the Proposals

    The Exchanges propose to establish a new market data product called 
the BATS One Feed, which would be offered by each of the Exchanges. The 
BATS One Feed would be a consolidated data feed based on market data 
derived from underlying data feeds offered by each of the Exchanges. 
Specifically, the Exchanges would use the following data feeds, which 
are also available to other vendors, to create the proposed BATS One 
Feed: the EdgeBook Depth feed for EDGX, the EdgeBook Depth feed for 
EDGA, the BYX PITCH Feed, and the BATS PITCH Feed. The Exchanges have 
represented that they will continue to make these individual underlying 
feeds available and that, as a result, the source of the market data 
they would use to create the proposed BATS One Feed would be the same 
as the source available to other vendors. As described more fully 
below, the BATS One Feed would be a data feed that disseminates, on a 
real-time basis, the aggregate best bid and offer (``BBO'') of all 
displayed orders for securities traded on the Exchanges and for which 
the Exchanges report quotes under the Consolidated Tape Association 
(``CTA'') Plan or the Nasdaq/UTP Plan. The BATS One Feed would also 
contain the individual last sale information for each of the Exchanges. 
In addition, the BATS One Feed would include messages from the 
Exchanges about trading on their markets. Finally, the BATS One Feed 
would contain an optional functionality that would enable recipients to 
elect to receive aggregated two-sided quotations from the Exchanges for 
up to five (5) price levels.
Description of the BATS One Feed
    The BATS One Feed would contain the aggregate BBO of the Exchanges 
for all securities that are traded on the Exchanges and for which the 
Exchanges report quotes under the CTA Plan or the Nasdaq/UTP Plan. The 
aggregate BBO would include the total size of all orders at the BBO 
available on all Exchanges.\7\ The BATS One Feed would also disseminate 
last sale information for each of the individual Exchanges. The last 
sale information would include the price, size, time of execution, and 
the individual Exchange on which the trade was executed. The last sale 
message would also include the cumulative number of shares executed on 
all Exchanges for that trading day. The Exchanges have represented that 
they would disseminate the aggregate BBO of the Exchanges and last sale 
information through the BATS One Feed no earlier than each individual 
Exchange provides its BBO and last sale information to the processors 
under the CTA Plan or the Nasdaq/UTP Plan.
---------------------------------------------------------------------------

    \7\ The Exchanges have stated that quotations of odd lot size, 
which is generally less than 100 shares, would be included in the 
total size of all orders at a particular price level in the BATS One 
Feed but are currently not reported by the Exchanges to the 
consolidated tape.
---------------------------------------------------------------------------

    The BATS One Feed would also include Symbol Summary, Market Status, 
Retail Liquidity Identifier on behalf of BYX, Trading Status, and Trade 
Break messages. The Symbol Summary message would include the total 
executed volume across all of the Exchanges. The Market Status message 
would be disseminated to reflect a change in the status of one of the 
Exchanges. For example, the Market Status message would indicate 
whether one of the Exchanges is experiencing a systems issue or 
disruption and quotation or trade information from that market is not 
currently being disseminated via the BATS One Feed as part of the 
aggregated BBO. The Market Status message would also indicate when an 
Exchange is no longer experiencing a systems issue or disruption to 
properly reflect the status of the aggregated BBO.
    The Retail Liquidity Identifier indicator message would be 
disseminated via the BATS One Feed on behalf of the BYX only pursuant 
to BYX's Retail Price Improvement (``RPI'') Program.\8\ The Retail 
Liquidity Identifier indicates when RPI interest priced at least $0.001 
better than BYX's Protected Bid or Protected Offer for a particular 
security is available in the System. The Exchanges propose to 
disseminate the Retail Liquidity Indicator via the BATS One Feed in the 
same manner as it is currently disseminated through consolidated data 
streams (i.e., pursuant to the Consolidated Tape Association Plan/
Consolidated Quotation Plan, or CTA/CQ, for Tape A and Tape B 
securities, and the Nasdaq UTP Plan for Tape C securities) as well as 
through proprietary BYX data feeds. The Retail Liquidity Identifier 
reflects the symbol and the side (buy or sell) of the RPI interest, but 
does not include the price or size of the RPI interest. In particular, 
like CQ and UTP quoting outputs, the BATS One Feed would include a 
field for codes related to the Retail Price Improvement Identifier. The 
codes indicate RPI interest that is priced better than BYX's Protected 
Bid or Protected Offer by at least the minimum level of price 
improvement as required by the Program.
---------------------------------------------------------------------------

    \8\ For a description of BYX's RPI Program, see BYX Rule 11.24. 
See also Securities Exchange Act Release No. 68303 (November 27, 
2012), 77 FR 71652 (December 3, 2012) (SR-BYX-2012-019) (Order 
Granting Approval of Proposed Rule Change, as Modified by Amendment 
No. 2, to Adopt a Retail Price Improvement Program); Securities 
Exchange Act Release No. 67734 (August 27, 2012), 77 FR 53242 
(August 31, 2012) (SR-BYX-2019-019) (Notice of Filing of Proposed 
Rule Change to Adopt a Retail Price Improvement Program).
---------------------------------------------------------------------------

    The Trade Break message would indicate when an execution on one of 
the Exchanges has been broken in accordance with the individual 
Exchange's rules.\9\ The Trading Status message would indicate the 
current trading status of a security on each individual Exchange. For 
example, a Trading Status message would be sent when a short sale price 
restriction is in effect pursuant to Rule 201 of Regulation SHO 
(``Short Sale Circuit Breaker''),\10\ or the security is subject to a 
trading halt, suspension or pause declared by the listing market. A 
Trading Status message would be sent whenever a security's trading 
status changes.
---------------------------------------------------------------------------

    \9\ See, e.g., Exchange and EDGA Rule 11.13 (Clearly Erroneous 
Executions) and BATS and BYX Rule 11.17 (Clearly Erroneous 
Executions).
    \10\ 17 CFR 242.200(g); 17 CFR 242.201.
---------------------------------------------------------------------------

    Optional Functionality for Aggregate Depth of Book. The BATS One 
Feed would also offer an additional, optional functionality that would 
enable recipients to receive two-sided quotations from the Exchanges 
for five (5) price levels for all securities that are traded on the 
Exchanges. The option for

[[Page 78922]]

receiving the BATS One Feed with this depth of book functionality is 
referred to as the ``BATS One Premium Feed;'' the option for receiving 
the BATS One Feed without this functionality is referred to as the 
``BATS One Summary Feed.'' For each price level on one of the 
Exchanges, the BATS One Premium Feed option of the BATS One Feed would 
include a two-sided quote and the number of shares available to buy and 
sell at that particular price level.\11\
---------------------------------------------------------------------------

    \11\ Recipients who do not elect to receive the BATS One Premium 
Feed would receive the aggregate BBO of the Exchanges under the BATS 
Summary Feed, which, unlike the BATS Premium Feed, would not 
delineate the size available at the BBO on each individual Exchange.
---------------------------------------------------------------------------

    Distribution of the BATS One Feed. The Exchanges represent that 
they have taken into consideration their affiliated relationships in 
the design of the BATS One Feed to assure that vendors would be able to 
offer a similar product on the same terms as the Exchanges, both from 
the perspective of latency and cost. The Exchanges have stated that 
they propose to offer the BATS One Feed voluntarily in response to 
demand from vendors and subscribers that are interested in receiving 
the aggregate BBO and last sale information from the Exchanges as part 
of a single data feed. The Exchanges assert that the BATS One Feed can 
be used by industry professionals and retail investors looking for a 
cost effective, easy-to-administer, high quality market data product 
with the characteristics of the BATS One Feed. The Exchanges also 
assert that the BATS One Feed would help protect a free and open market 
by providing vendors and subscribers additional choices in receiving 
this type of market data, thus promoting competition and innovation.
    With respect to latency, the Exchanges have represented that the 
path for distribution by the Exchanges of BATS One Feed would not be 
faster than the path for distribution that would be used by a vendor to 
distribute an independently created a BATS One-like product. 
Accordingly, the Exchanges have stated, the proposed BATS One data feed 
is a data product that a competing vendor could create and sell without 
being in a disadvantaged position relative to the Exchange. In 
recognition that the Exchanges are the source of their own market data 
and affiliated with one another, the Exchanges have represented that 
the source of the market data they would use to create the proposed 
BATS One Feed is available to other vendors. Specifically, the 
Exchanges have represented that they would use the following data feeds 
to create the proposed BATS One Feed, each of which is available to 
other vendors: the EdgeBook Depth feed for EDGX, the EdgeBook Depth 
feed for EDGA, the BYX PITCH Feed, and the BATS PITCH Feed. The 
Exchanges have also represented that they will continue to make 
available these individual underlying feeds and that, as a result, the 
source of the market data they would use to create the proposed BATS 
One Feed is the same as the source available to competing vendors.
    The Exchanges have also made the following representations 
regarding the latency of the BATS One Feed and any consolidated feed to 
be offered by a competing vendor. In order to create the BATS One Feed, 
the system creating and supporting the BATS One Feed would need to 
receive the individual data feeds from each Exchange and, in turn, 
aggregate and summarize that data to create the BATS One Feed and then 
distribute it to end users. This is the same process a competing vendor 
would undergo should it create a market data product similar to the 
BATS One Feed to distribute to its end users. In addition, a competing 
vendor could locate its servers in the same facilities as the system 
creating and supporting the BATS One Feed and could therefore receive 
the individual data feeds from each Exchange at the same time as the 
system creating and supporting the BATS One Feed. Thus, the Exchanges 
have stated that they would not have any unfair advantage over 
competing vendors with respect to obtaining data from the individual 
Exchanges, because the technology supporting the BATS One Feed would 
similarly need to obtain the underlying data feeds and because this 
connection would be on a level playing field with a competing vendor 
located at the same facility as the Exchanges. Likewise, the BATS One 
data feed would not have a speed advantage vis-[agrave]-vis competing 
vendors with respect to access to end user customers, whether those end 
users are also located in the same data center or not.
    With regard to cost, the Exchanges have represented that they will 
file a separate rule filing with the Commission to establish fees for 
BATS One Feed and that these fees would be designed to ensure that 
vendors could compete with the Exchanges by creating a similar product. 
To ensure a vendor can compete with the Exchanges by creating the same 
product as the BATS One Feed and selling it to their clients, the 
Exchanges have also represented that they would charge their clients 
for the BATS One Feed an amount that is no less than the cost to a 
market data vendor to obtain all the underlying feeds, plus an amount 
to be determined that would reflect the value of the aggregation and 
consolidation function. Thus, the pricing for the BATS One Feed would 
enable a vendor to receive the underlying data feeds and offer a 
similar product on a competitive basis and with no pricing disadvantage 
relative to the Exchanges.
Implementation Date
    The Exchanges have represented that they anticipate making the BATS 
One Feed available as soon as practicable after approval of the 
proposed rule changes by the Commission and the effectiveness of rule 
filings to establish the fees for the BATS One Feed.\12\
---------------------------------------------------------------------------

    \12\ Each of the Exchanges intend to file a separate proposal 
establishing the fees for the BATS One Feed.
---------------------------------------------------------------------------

III. Summary of Comments

    As noted above, the Commission received three comment letters on 
previous versions of the proposed changes filed by some of the 
Exchanges.\13\ In their current proposals, the Exchanges have responded 
to the points raised by these commenters.
---------------------------------------------------------------------------

    \13\ See SIFMA Letter, Shatto Letter, and Themis Letter, supra 
note 6.
---------------------------------------------------------------------------

    The three commenters generally oppose the proposed BATS One Feed. 
The Shatto Letter expressed general concerns about the transparency of 
order flow information to regulators. The Themis Letter expressed 
objections to the proposed BATS One Feed on the grounds that it would 
introduce a new proprietary data feed and expressed concerns generally 
about the complexity arising from the proliferation of new data 
technologies. In their response to the commenters, the Exchanges argued 
that the Themis Letter and Shatto Letter are not responsive to the 
issues raised in the proposal or are aimed at existing elements of U.S. 
market structure that have been previously approved by the Commission.
    The SIFMA Letter primarily argues that the fees for the proposed 
BATS One Feed do not meet the requirements of the Act, including the 
requirement that such fees be ``fair and reasonable'' under section 
11A(c)(1)(C) of the Act. SIFMA also contends that BATS has circumvented 
the requirement to receive Commission approval for this product by 
offering and marketing the BATS One Feed since August 1, 2014. In their 
response to the SIFMA Letter, the Exchanges noted that the thrust of 
the SIFMA Letter is aimed at the initially proposed fees, which have 
now been removed from the proposed rule changes and are to be filed 
with the Commission via separate rule filings.

[[Page 78923]]

The Exchanges also noted that, while the SIFMA Letter correctly states 
that BATS has marketed the BATS One Feed since August 1, 2014, the 
SIFMA Letter incorrectly asserts that BATS has offered the BATS One 
Feed since that same date. The Exchanges have represented that all of 
their marketing materials have included statements that the BATS One 
Feed's implementation was pending to Commission approval, and at no 
point have the Exchanges offered the BATS One product for any use other 
than for testing and certification.

IV. Discussion and Commission Findings

    After carefully considering the proposals and the comments 
submitted, the Commission finds that the proposed rule changes, as 
modified by Amendments Nos. 1 and 2, are consistent with the 
requirements of the Act and the rules and regulations thereunder 
applicable to national securities exchanges.\14\ In particular, the 
Commission finds that the proposed rule changes are consistent with the 
requirements of section 11A(c)(1)(C) of the Act \15\ and with Rule 
603(a)(2) of Regulation NMS thereunder,\16\ which requires that any 
national securities exchange, national securities association, broker, 
or dealer that distributes information with respect to quotations for 
or transactions in an NMS stock to a securities information processor, 
broker, dealer, or other persons shall do so on terms that are not 
unreasonably discriminatory. The Commission also finds that the 
proposed rule changes are consistent with section 6(b)(5) of the Act, 
which requires that the rules of an exchange be designed to promote 
just and equitable principles of trade, remove impediments to and 
perfect the mechanisms of a free and open market and a national market 
system and, in general, to protect investors and the public interest, 
and section 6(b)(8) of the Act, which requires that the rules of an 
exchange not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.\17\
---------------------------------------------------------------------------

    \14\ In approving this proposed rule change, the Commission 
notes that it has considered the proposed rule's impact on 
efficiency, competition, and capital formation. 15 U.S.C. 78c(f).
    \15\ Section 11A(c)(1)(C) of the Act requires, among other 
things, that no self-regulatory organization, member thereof, 
securities information processor, broker or dealer make use of the 
mails or any means or instrumentality of interstate commerce to 
collect, process, distribute, publish or prepare for distribution or 
publication any information with respect to quotations for or 
transactions in any security other than an exempted security in 
contravention of such rules and regulations as the Commission shall 
prescribe as necessary or appropriate in the public interest, for 
the protection of investors, or otherwise in furtherance of the 
purposes of the Act to assure that all securities information 
processors may, for purposes of distribution and publication, obtain 
on fair and reasonable terms such information with respect to 
quotations for and transactions in such securities as is collected, 
processed, or prepared for distribution or publication by an 
exclusive processor of such information acting in such capacity. 15 
U.S.C. 78k-1(c)(1)(C).
    \16\ 17 CFR 242.603(a)(2).
    \17\ 15 U.S.C. 78f(b)(5) and (b)(8).
---------------------------------------------------------------------------

    The Commission notes that, to create the BATS One Feed, the 
Exchanges would use underlying data feeds that belong to the Exchanges: 
the EdgeBook Depth feed for EDGX, the EdgeBook Depth feed for EDGA, the 
BYX PITCH Feed, and the BATS PITCH Feed. Accordingly, the Commission's 
review of the Exchanges' proposals has focused, in particular, on 
whether the proposals would result in affiliated exchanges--which are 
separate self-regulatory organizations under the Act--making their data 
products or services available to one another at terms (e.g., content, 
pricing, or latency) that are more favorable than those available to 
unaffiliated market participants.
    The Exchanges have represented that the BATS One Feed would be 
created using underlying data feeds that are available for subscription 
by vendors. In recognition that the Exchanges are the source of their 
own market data and that they are affiliated with one another, the 
Exchanges have also represented that they will continue to make 
available all of the individual underlying feeds and that the source of 
the market data they would use to create the proposed BATS One Feed is 
the same as the source available to competing vendors.
    With respect to latency, the Exchanges have represented that 
competing vendors could locate their servers in the same facilities as 
the system creating and supporting the BATS One Feed, and, therefore, 
could receive the underlying data feeds at the same time as the system 
creating and supporting the BATS One Feed. Therefore, the Exchanges 
have contended that, a competing vendor could obtain the underlying 
data feeds from the Exchanges on the same latency basis as the system 
that would be performing the aggregation and consolidation of the 
proposed BATS One Feed and could provide the same kind of product to 
its customers with the same latency they could achieve by purchasing 
the BATS One Feed from the Exchanges.\18\ The Exchanges have also 
represented that they have designed the BATS One Feed so that they 
would have no advantages over a competing vendor with respect to the 
speed of access to the underlying feeds.
---------------------------------------------------------------------------

    \18\ The Exchanges have represented that, in order to create the 
BATS One Feed, the system creating and supporting the BATS One Feed 
would need to receive the underlying data feeds from each Exchange 
and, in turn, aggregate and summarize that data to create the BATS 
One Feed and then distribute it to end users. The Exchanges have 
stated that this is the same process a competing vendor would 
undergo should it create a market data product similar to the BATS 
One Feed to distribute to its end users.
---------------------------------------------------------------------------

    With respect to pricing, although specific fees to be charged for 
the BATS One Feed are not part of the proposed rule changes, the 
Exchanges have represented that they will assess a fee that is at least 
equal to the aggregate cost of the underlying feeds (i.e., at least as 
much as the cost to a vendor of subscribing to each of the underlying 
data feeds), plus an additional amount (to be determined) that would 
reflect the value of the aggregation and consolidation function 
performed to create the BATS One Feed.\19\
---------------------------------------------------------------------------

    \19\ SIFMA has objected to the BATS One Feed primarily over 
concerns about fees for this product being ``fair and reasonable,'' 
consistent with section 11A(c)(1)(C) of the Act. The Commission 
notes, however, that the proposed rule changes do not contain 
proposed fees and that Exchanges have represented that they will not 
offer the BATS One Feed until the requisite fee filings under 
section 19(b) of the Act have been filed and are effective. The 
Commission will review any such filings when they have been 
submitted.
     SIFMA has also argued that BATS has circumvented the process of 
receiving Commission approval and has been actively offering and 
marketing the BATS One Feed for months. The Commission notes, 
however, that the Exchanges have represented that, although they 
have been marketing the BATS One Feed, all of their marketing 
materials have included statements that the BATS One Feed's 
implementation was pending to Commission approval and at no point 
have the Exchanges offered the BATS One product for any use other 
than for testing and certification.
---------------------------------------------------------------------------

    Based on the Exchange's representations with respect to the 
content, latency, and pricing of the BATS One Feed--which are central 
to the Commission's analysis of the proposal--the Commission finds that 
the Exchanges' proposals are consistent with the Act and the rules and 
regulations thereunder applicable to national securities exchanges. The 
Commission believes that these representations are designed to ensure 
that BATS, BYX, EDGA, and EDGX, which are separate self-regulatory 
organizations, do not, because of their relationship as affiliates, 
offer one another products or services on a more favorable basis than 
that available to other competing market participants.
    For the foregoing reasons, the Commission finds that the proposed 
rule changes, as amended, are consistent with section 11A(c)(1)(C) of 
the Act and Rule 603(a)(2) of Regulation NMS

[[Page 78924]]

thereunder,\20\ and sections 6(b)(5) and (b)(8) of the Act.\21\
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    \20\ 15 U.S.C. 78k-1(c)(1)(C) and 17 CFR 242.603(a)(2).
    \21\ 15 U.S.C. 78f(b)(5) and (b)(8).
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V. Accelerated Approval of Proposed Rule Changes, as Modified by 
Amendments No. 2

    The Amendments No. 2 revised the proposed rule changes to: (i) 
Clarify how the BATS One Feed would be created, (ii) make additional 
clarifying statements with respect to the latency and cost of the BATS 
One Feed, and (iii) bring together the discussion of key aspects of the 
description of the proposal in the same section. Accordingly, the 
Commission does not believe that the Amendments No. 2 raises any novel 
regulatory issues and therefore finds that good cause exists to approve 
the proposals, as modified by Amendments Nos. 1 and 2, on an 
accelerated basis.

VI. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether Amendments No. 2 
to the proposed rule changes are 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 Numbers SR-BATS-2014-055; SR-BYX-2014-030; SR-EDGA-2014-25; or SR-
EDGX-2014-25 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 Numbers SR-BATS-2014-055; SR-BYX-
2014-030; SR-EDGA-2014-25; or SR-EDGX-2014-25. 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 the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change; the Commission does not edit 
personal identifying information from submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Numbers SR-BATS-2014-055; SR-BYX-2014-
030; SR-EDGA-2014-25; or SR-EDGX-2014-25 and should be submitted on or 
before January 21, 2015.

VII. Conclusion

    It is therefore ordered, pursuant to section 19(b)(2) of the 
Act,\22\ that the proposed rule changes, as modified by Amendments Nos. 
1 and 2, (SR-BATS-2014-055; SR-BYX-2014-030; SR-EDGA-2014-25; SR-EDGX-
2014-25) be, and hereby are, approved on an accelerated basis.
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    \22\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-30586 Filed 12-30-14; 8:45 am]
BILLING CODE 8011-01-P

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