Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of BATS Exchange, Inc., 2763-2766 [2015-00702]

Download as PDF Federal Register / Vol. 80, No. 12 / Tuesday, January 20, 2015 / Notices Period will continue until all requirements are met.18 The Exchange proposes to offer the IPO Indicator to provide information about the number and price at which shares of a member firm’s orders entered for execution in an IPO Halt Cross (‘‘IPO shares’’) would execute in an IPO if it were to price at the present time.19 Under the proposal, the IPO Indicator will now be offered as a stand-alone service and would use the NOII information of an IPO security together with information about the member firm’s orders on NASDAQ in the IPO security.20 The Exchange notes that, similar to accessing the IPO Indicator from the NASDAQ Workstation as the Exchange currently offers,21 subscribing member firms will be able to access the IPO Indicator from the main IPO Workstation screen.22 Under the proposal, the Exchange states that member firms using the IPO Indicator would be able to see the Current Reference Price, the number of paired shares, the number of imbalance shares, the total number of IPO shares the subscribing member firm has entered for execution in the IPO Halt Cross, the nature of such shares (buy or sell), and the number of IPO shares that would be executed in the Halt Cross at that time for each of those categories.23 In addition, the Exchange states that subscribing member firms using the IPO Indicator would also be able to see details about its IPO shares presented by individual orders or order blocks, which would include the number of IPO shares in a particular order or order block, the number and percentage of IPO shares of the order or order block that would be executed in the Halt Cross if it occurred at any given time in the process, based on the NOII disseminated every five seconds, and the price at which the order or order block was submitted.24 rljohnson on DSK3VPTVN1PROD with NOTICES III. Discussion and Commission Findings After careful review, the Commission finds that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange.25 In particular, the 18 See id. Alternatively, the underwriter may, with the concurrence of the Exchange, determine to postpone and reschedule the IPO. See id. 19 See id. 20 The Exchange states that the information provided by the IPO Indicator is limited to the subscribing member firm’s orders. See id. 21 See supra note 4 and accompanying text. 22 See Notice, supra note 3, at 71491. 23 See id. 24 See id. 25 In approving this proposal, the Commission has considered the proposed rule’s impact on VerDate Sep<11>2014 14:47 Jan 16, 2015 Jkt 235001 Commission finds that the proposed rule change is consistent with Section 6(b)(5) of the Act,26 which requires, among other things, that the rules of a national securities exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, and Section 6(b)(8) of the Act,27 which requires that the rules of the exchange do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. As described above, the Exchange proposes to adopt Exchange Rule 7015(i) to offer stand-alone access to the IPO Indicator. The Commission notes that it recently approved a proposed rule change that allows the Exchange to provide the IPO Indicator through the NASDAQ Workstation.28 Offering the IPO indicator through the IPO Workstation will provide all member firms that are interested in subscribing to the IPO indicator a means to access it, at no cost at this time, in lieu of paying for a full NASDAQ Workstation subscription.29 Accordingly, the Commission believes that the proposed rule change adopting the IPO Workstation is designed to protect investors and the public interest by providing member firms with more information regarding their orders submitted for participation in an IPO Halt Cross. IV. Conclusion It is therefore ordered, pursuant to Section 19(b)(2) of the Act,30 that the proposed rule change (SR–NASDAQ– 2014–110) be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.31 Brent J. Fields, Secretary. [FR Doc. 2015–00700 Filed 1–16–15; 8:45 am] BILLING CODE 8011–01–P efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 26 15 U.S.C. 78f(b)(5). 27 15 U.S.C. 78f(b)(8). 28 See supra note 4 and accompanying text. 29 See Notice, supra note 3 at 71492. The Exchange notes that not all member firms subscribe to the NASDAQ Workstation and prospective users of the IPO indicator may not desire to pay for a full NASDAQ Workstation subscription for the sole purpose of assessing the IPO indicator. 30 15 U.S.C. 78s(b)(2). 31 17 CFR 200.30–3(a)(12). PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 2763 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–74043; File No. SR–BATS– 2015–01] Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of BATS Exchange, Inc. January 13, 2015. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on January 2, 2015, BATS Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BATS’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Exchange has designated the proposed rule change as one establishing or changing a member due, fee, or other charge imposed by the Exchange under Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b–4(f)(2) thereunder,4 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of the Substance of the Proposed Rule Change The Exchange filed a proposal to amend the fee schedule applicable to Members 5 and non-members of the Exchange pursuant to BATS Rules 15.1(a) and (c). Changes to the fee schedule pursuant to this proposal 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 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 5 A Member is defined as ‘‘any registered broker or dealer that has been admitted to membership in the Exchange.’’ See Exchange Rule 1.5(n). 2 17 E:\FR\FM\20JAN1.SGM 20JAN1 2764 Federal Register / Vol. 80, No. 12 / Tuesday, January 20, 2015 / Notices 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 immediately in order to: (1) Adopt pricing for Retail Orders, as defined below, on the Exchange, including a new Retail Order Tier; (2) add Membership Fees; and (3) make certain non-substantive clean-up changes to the fee schedule. rljohnson on DSK3VPTVN1PROD with NOTICES Retail Order Pricing The Exchange recently adopted rules related to the Exchange’s Retail Order Attribution Program.6 Under such program, the Exchange allows Members to designate Retail Orders 7 that they enter to be identified as being Retail Orders on the Exchange’s proprietary data feeds. Not all Retail Orders entered by a Member will be identified as being a Retail Order, but rather a Retail Order will only be displayed on the Exchange’s proprietary data feeds as a Retail Order where the Member designates that the order be identified as such. There are not currently any pricing incentives for participation in the Retail Order Attribution Program. The Exchange proposes to introduce new fee codes ZA and ZR in order to provide pricing specific to Retail Orders executed on the Exchange. The Exchange notes that such proposed pricing would apply to all Retail Orders and that a Retail Order would not need to be attributable in order to receive the proposed pricing. The Exchange is proposing new fee code ZA to apply to Retail Orders that add liquidity to the Exchange. A transaction with fee code ZA is proposed to be assigned a rebate of $0.0032 per share. The Exchange is 6 See Securities Exchange Act Release No. 73237 (September 26, 2014), 79 FR 59537 (October 2, 2014) (SR–BATS–2014–043). 7 As defined in Rule 11.25(a)(2), a ‘‘Retail Order’’ is an agency or riskless principal order that meets the criteria of FINRA Rule 5320.03 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. A Retail Member Organization or ‘‘RMO’’ is a Member (or a division thereof) that has been approved by the Exchange under Rule 11.25 to submit Retail Orders. VerDate Sep<11>2014 14:47 Jan 16, 2015 Jkt 235001 also proposing new fee code ZR to apply to Retail Orders that remove liquidity from the Exchange. A transaction with fee code ZR and is proposed to be assigned a charge of $0.0030 per share, which is the same as the standard fee for removing liquidity from the Exchange. Proposed fee codes ZA and ZR will only apply to Retail Orders that add or remove liquidity, respectively, in executions that occur on the Exchange. Where a Retail Order is routed, executes in an auction, or executes in the Opening or Re-Opening, the appropriate fee code will apply and proposed fee codes ZA and ZR will not apply. In addition to the proposed standard pricing for Retail Orders executed on the Exchange, the Exchange is also proposing to add a new Retail Order Tier. As proposed, the Exchange would offer a rebate of $0.0034 per share for adding liquidity for a Retail Order executed on the Exchange where the Member adds an average daily volume of Retail Orders (fee code ZA), that is 0.07% or more of average daily TCV.8 Membership Fees The Exchange is also proposing to charge an Annual Membership Fee for Members of the Exchange of $2,500, which will support their Exchange membership for the calendar year. The fee will be charged per Member firm. Beginning in January 2015, the Exchange plans to charge an Annual Membership Fee which will be assessed on all Members as of a date determined by the Exchange in January of each year. For any month in which a firm is approved for membership with the Exchange after the January renewal period, the Annual Membership Fee will be pro-rated beginning on the date on which membership is approved and based on the number of remaining trading days in that year. The fee will be assessed in the month following membership approval. For example, if a firm applies and is accepted for membership with the Exchange on February 15, 2015, the new Member will be assessed a pro-rated Annual Membership Fee for the period beginning on February 15 through the end of 2015. The fee will be assessed in the next month’s billing cycle, which in this case, would be March 2015. Such fees will be non-refundable. However, 8 TCV means total consolidated volume calculated as the volume reported by all exchanges and trade reporting facilities to a consolidated transaction reporting plan for the month for which the fees apply. The Exchange excludes from its calculation of TCV volume on any day that the Exchange experiences an Exchange System Disruption, on any day with a scheduled early market close and the Russell Reconstitution Day. PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 where a Member is pending a voluntary termination of rights as a Member pursuant to Rule 2.8 prior to the date any Annual Membership Fee for a given year will be assessed (i.e., January 1, 2015) and the Member does not utilize the facilities of the Exchange while such voluntary termination of rights is pending, then the Member will not be obligated to pay the Annual Membership Fee. The Exchange believes this to be appropriate because there is ordinarily a 30 day waiting period before such resignation shall take effect. Non-Substantive Changes Finally, the Exchange is proposing to make certain non-substantive clean-up changes to the fee schedule. Footnote 2 relates to Step-Up Tiers in which displayed orders that add liquidity to the Exchange receive enhanced rebates where the Member meets certain thresholds related to a Member’s StepUp Add TCV.9 Footnote 2 currently states that it applies to fee codes B, V, and Y, however footnote 2 does not currently appear in the Fee Codes and Associated Fees table next to fee codes V and Y (but does appear next to fee code B). As such, the Exchange is proposing to add footnote 2 to fee codes V and Y in the Fee Codes and Associated Fees table in the fee schedule. This is a non-substantive change to the fee schedule because footnote 2 states that it applies to each of fee codes B, V, and Y and the Exchange is adding the footnote to fee codes V and Y in order to make the fee schedule as consistent as possible to indicate that footnote 2 should apply to those fee codes. The Exchange proposes to implement the amendments to its fee schedule effective January 2, 2015. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6 of the Act.10 Specifically, the Exchange believes that the proposed rule change is consistent with Sections 6(b)(4) of the Act and 6(b)(5) of the Act,11 in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and other persons using any facility or system which the Exchange operates or controls. The Exchange 9 Step-Up Add TCV means ADAV as a percentage of TCV in January 2014 subtracted from current ADAV as a percentage of TCV. 10 15 U.S.C. 78f. 11 15 U.S.C. 78f(b)(4) and (5). E:\FR\FM\20JAN1.SGM 20JAN1 rljohnson on DSK3VPTVN1PROD with NOTICES Federal Register / Vol. 80, No. 12 / Tuesday, January 20, 2015 / Notices notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive. The Exchange believes that the new Retail Order rebate and fee code associated with adding liquidity is reasonable and equitable because it will incentivize Members to submit orders designated as Retail Orders to the Exchange which will enhance liquidity in Retail Orders on the Exchange and further incentivize Members who wish to execute against Retail Orders to send additional orders to the Exchange. The Exchange believes that this increased liquidity would potentially stimulate further price competition for Retail Orders, thereby deepening the Exchange’s liquidity pool in both nonRetail and Retail Orders, supporting the quality of price discovery, and promoting market transparency, further rendering the proposal reasonable and equitable. The Exchange believes that the new Retail Order rebate is nondiscriminatory because it is equally available to all Members that enter Retail Orders. The Exchange believes that the new Retail Order fee code for removing liquidity is reasonable, equitable, and non-discriminatory because, as stated above, the fees associated with a Retail Order that removes liquidity on the Exchange is the same as the standard fee for removing liquidity for a non-Retail Order. The only difference is that the Exchange is now providing a more specific fee code in order to make it easier for Members to understand their monthly invoices, which the Exchange again believes makes the proposed change reasonable, equitable, and nondiscriminatory. The Exchange also believes that its proposed new Retail Order Tier and associated enhanced rebate are reasonable and equitable because the tiers based on added Retail Order volume is intended to reward those Members that and incentivize other Members to add a larger amount of volume in Retail Orders on the Exchange by providing an additional $0.0002 per share rebate for Members that have a add an average daily volume of Retail Orders that is 0.07% or more of average daily TCV. Further, the Exchange believes that the new Retail Order Tier is reasonable and equitable because it incentivizes and rewards Members for posting Retail Orders on the Exchange, which is consistent with the overall goal of enhancing market quality on the Exchange. The Exchange also believes that the proposed rebates VerDate Sep<11>2014 14:47 Jan 16, 2015 Jkt 235001 [sic] associated with the tier is nondiscriminatory in that it is equally available to all Members and, again, because it is consistent with the goal of enhancing market quality on the Exchange. Volume-based rebates and fees such as the ones proposed by and maintained on the Exchange, including Step-Up Tiers, the cross-asset step-up tier, the cross-asset tier and the Retail Order Tier proposed herein, have been widely adopted in the cash equities markets and are equitable because they are open to all Members on an equal basis and provide additional benefits or discounts that are reasonably related to the value to an exchange’s market quality associated with higher levels of market activity, such as higher levels of liquidity provision and/or growth patterns, and introduction of higher volumes of orders into the price and volume discovery processes. The Exchange notes that it is not proposing to modify any existing tiers, but rather to add a new tier that will provide Members with additional ways to receive higher rebates, meaning that under the proposal, a Member will receive either the same or a higher rebate than they would receive today. Accordingly, the Exchange believes that the proposed additions to the Exchange’s tiered pricing structure and incentives are not unfairly discriminatory because they will apply uniformly to all Members and are consistent with the overall goals of enhancing market quality on the Exchange. The Exchange also believes that assessing an Annual Membership Fee provides an equitable allocation of reasonable dues, fees and other charges among its Members and other persons using its facilities. The Exchange makes all services and products subject to these fees available on a nondiscriminatory basis to similarly situated recipients. The Exchange believes that the Annual Membership Fee is a reasonable and equitable method of ensuring that its fees fund a greater portion of the cost of regulating activity on the Exchange, and that even after assessing these fees, the overall cost of Exchange membership is reasonable as compared with the costs of membership in other SROs.12 The Exchange believes that the proposed addition of an Annual Membership Fee 12 See, e.g., NASDAQ Rule 7001(a) (assessing an [sic] $3,000 annual membership fee); see also New York Stock Exchange Price List 2015, at https:// www.nyse.com/publicdocs/nyse/markets/nyse/ NYSE_Price_List.pdf (assessing a $40,000 annual trading license fee for the first two licenses held by a member organization). PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 2765 is non-discriminatory in that it applies uniformly to all Members. Finally, the Exchange believes that the clarifying change that adds the footnote 2 to fee codes V and Y in the Fee Codes and Associated Fees table is reasonable as it will help to avoid confusion for those that review the Exchange’s fee schedule. The Exchange notes that the proposed change is not designed to amend any fee or rebate, nor alter the manner in which it assesses fees or calculates rebates. The Exchange believes that the proposed amendment is intended to make the fee schedule clearer and less confusing for investors and eliminate potential investor confusion, thereby removing impediments to and perfecting the mechanism of a free and open market and a national market system, and, in general, protecting investors and the public interest. 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. To the contrary, the Exchange believes that the proposed changes will allow the Exchange to compete more ably with other execution venues by providing more competitive prices for Retail Orders that add liquidity in securities traded on the Exchange, thereby making it a more desirable destination venue for its customers. Also, because the market for order execution is extremely competitive, Members may readily opt to disfavor the Exchange’s routing services if they believe that alternatives offer them better value. The Exchange’s proposed membership fees will be lower than the cost of membership on other exchanges,13 and therefore, may stimulate intramarket competition by attracting additional firms to become Members on the Exchange. In addition, membership fees are subject to competition from other exchanges. Accordingly, if the changes proposed herein are unattractive to market participants, it is likely the Exchange will see a decline in membership and/ or trading activity as a result. The proposed fee change will not impact intermarket competition because it will apply to all Members equally. As stated above, the Exchange notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if the deem fee structures, 13 See E:\FR\FM\20JAN1.SGM id. 20JAN1 2766 Federal Register / Vol. 80, No. 12 / Tuesday, January 20, 2015 / Notices including Annual Membership Fees, to be unreasonable or excessive. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any written comments from members or other interested parties. 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 14 and paragraph (f) of Rule 19b–4 thereunder.15 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: rljohnson on DSK3VPTVN1PROD with NOTICES Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BATS–2015–01 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BATS–2015–01. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of such filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–BATS– 2015–01, and should be submitted on or before February 10, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Brent J. Fields, Secretary. [FR Doc. 2015–00702 Filed 1–16–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–74045; File No. SR–BX– 2015–003] Self-Regulatory Organizations; NASDAQ OMX BX, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding the Extranet Access Fee January 13, 2015. 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 January 5, 2015, NASDAQ OMX BX, Inc. (‘‘BX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 16 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 14 15 U.S.C. 78s(b)(3)(A). 15 17 CFR 240.19b–4(f). VerDate Sep<11>2014 14:47 Jan 16, 2015 Jkt 235001 PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend BX Rule 7025 (Extranet Access Fee) of the Exchange’s Pricing Schedule entitled ‘‘Extranet Access Fee’’ (‘‘Pricing Schedule’’), as well as to clarify the applicability of the Extranet Access Fee and thereby conform it to the equivalent fee of other markets. The text of the proposed rule change is available on the Exchange’s Web site at https:// nasdaqomxbx.cchwallstreet.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change 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 The purpose of the proposal is to amend BX Rule 7025 of the Exchange’s Pricing Schedule, as well as to clarify the applicability of the Extranet Access Fee and thereby conform it to the equivalent fee of other markets.3 Specifically, the Exchange proposes to modify BX Rule 7025 to indicate that certain non-Exchange Customer Premises Equipment (‘‘CPE’’) Products shall be assessed a monthly access fee of $1,000 per CPE. The Exchange also proposes to conform the Extranet Access Fee to that of another market, specifically NASDAQ Rule 7025, by substituting ‘‘recipient’’ for ‘‘client organization’’ and also indicating that if 3 The Exchange, NASDAQ OMX PHLX LLC (‘‘Phlx’’), and The NASDAQ Stock Market LLC (‘‘NASDAQ’’) are self-regulatory organizations (‘‘SROs’’) that are wholly owned subsidiaries of The NASDAQ OMX Group, Inc. (‘‘NASDAQ OMX’’). NOM (a facility of NASDAQ), BX, BX Options (a facility of BX), Phlx, and PSX (a facility of Phlx) (together with the Exchange known as the ‘‘NASDAQ Markets’’), are independently filing proposals to conform their respective Extranet Access Fee rules to NASDAQ Rule 7025. E:\FR\FM\20JAN1.SGM 20JAN1

Agencies

[Federal Register Volume 80, Number 12 (Tuesday, January 20, 2015)]
[Notices]
[Pages 2763-2766]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-00702]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74043; File No. SR-BATS-2015-01]


Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Fees for Use of BATS Exchange, Inc.

January 13, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on January 2, 2015, BATS Exchange, Inc. (the ``Exchange'' or 
``BATS'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange filed a proposal to amend the fee schedule applicable 
to Members \5\ and non-members of the Exchange pursuant to BATS Rules 
15.1(a) and (c). Changes to the fee schedule pursuant to this proposal 
are effective upon filing.
---------------------------------------------------------------------------

    \5\ A Member is defined as ``any registered broker or dealer 
that has been admitted to membership in the Exchange.'' See Exchange 
Rule 1.5(n).
---------------------------------------------------------------------------

    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

[[Page 2764]]

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 
immediately in order to: (1) Adopt pricing for Retail Orders, as 
defined below, on the Exchange, including a new Retail Order Tier; (2) 
add Membership Fees; and (3) make certain non-substantive clean-up 
changes to the fee schedule.
Retail Order Pricing
    The Exchange recently adopted rules related to the Exchange's 
Retail Order Attribution Program.\6\ Under such program, the Exchange 
allows Members to designate Retail Orders \7\ that they enter to be 
identified as being Retail Orders on the Exchange's proprietary data 
feeds. Not all Retail Orders entered by a Member will be identified as 
being a Retail Order, but rather a Retail Order will only be displayed 
on the Exchange's proprietary data feeds as a Retail Order where the 
Member designates that the order be identified as such. There are not 
currently any pricing incentives for participation in the Retail Order 
Attribution Program.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 73237 (September 26, 
2014), 79 FR 59537 (October 2, 2014) (SR-BATS-2014-043).
    \7\ As defined in Rule 11.25(a)(2), a ``Retail Order'' is an 
agency or riskless principal order that meets the criteria of FINRA 
Rule 5320.03 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. A Retail Member 
Organization or ``RMO'' is a Member (or a division thereof) that has 
been approved by the Exchange under Rule 11.25 to submit Retail 
Orders.
---------------------------------------------------------------------------

    The Exchange proposes to introduce new fee codes ZA and ZR in order 
to provide pricing specific to Retail Orders executed on the Exchange. 
The Exchange notes that such proposed pricing would apply to all Retail 
Orders and that a Retail Order would not need to be attributable in 
order to receive the proposed pricing. The Exchange is proposing new 
fee code ZA to apply to Retail Orders that add liquidity to the 
Exchange. A transaction with fee code ZA is proposed to be assigned a 
rebate of $0.0032 per share. The Exchange is also proposing new fee 
code ZR to apply to Retail Orders that remove liquidity from the 
Exchange. A transaction with fee code ZR and is proposed to be assigned 
a charge of $0.0030 per share, which is the same as the standard fee 
for removing liquidity from the Exchange. Proposed fee codes ZA and ZR 
will only apply to Retail Orders that add or remove liquidity, 
respectively, in executions that occur on the Exchange. Where a Retail 
Order is routed, executes in an auction, or executes in the Opening or 
Re-Opening, the appropriate fee code will apply and proposed fee codes 
ZA and ZR will not apply.
    In addition to the proposed standard pricing for Retail Orders 
executed on the Exchange, the Exchange is also proposing to add a new 
Retail Order Tier. As proposed, the Exchange would offer a rebate of 
$0.0034 per share for adding liquidity for a Retail Order executed on 
the Exchange where the Member adds an average daily volume of Retail 
Orders (fee code ZA), that is 0.07% or more of average daily TCV.\8\
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    \8\ TCV means total consolidated volume calculated as the volume 
reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply. The Exchange excludes from its calculation of TCV volume 
on any day that the Exchange experiences an Exchange System 
Disruption, on any day with a scheduled early market close and the 
Russell Reconstitution Day.
---------------------------------------------------------------------------

Membership Fees
    The Exchange is also proposing to charge an Annual Membership Fee 
for Members of the Exchange of $2,500, which will support their 
Exchange membership for the calendar year. The fee will be charged per 
Member firm. Beginning in January 2015, the Exchange plans to charge an 
Annual Membership Fee which will be assessed on all Members as of a 
date determined by the Exchange in January of each year. For any month 
in which a firm is approved for membership with the Exchange after the 
January renewal period, the Annual Membership Fee will be pro-rated 
beginning on the date on which membership is approved and based on the 
number of remaining trading days in that year. The fee will be assessed 
in the month following membership approval. For example, if a firm 
applies and is accepted for membership with the Exchange on February 
15, 2015, the new Member will be assessed a pro-rated Annual Membership 
Fee for the period beginning on February 15 through the end of 2015. 
The fee will be assessed in the next month's billing cycle, which in 
this case, would be March 2015. Such fees will be non-refundable. 
However, where a Member is pending a voluntary termination of rights as 
a Member pursuant to Rule 2.8 prior to the date any Annual Membership 
Fee for a given year will be assessed (i.e., January 1, 2015) and the 
Member does not utilize the facilities of the Exchange while such 
voluntary termination of rights is pending, then the Member will not be 
obligated to pay the Annual Membership Fee. The Exchange believes this 
to be appropriate because there is ordinarily a 30 day waiting period 
before such resignation shall take effect.
Non-Substantive Changes
    Finally, the Exchange is proposing to make certain non-substantive 
clean-up changes to the fee schedule. Footnote 2 relates to Step-Up 
Tiers in which displayed orders that add liquidity to the Exchange 
receive enhanced rebates where the Member meets certain thresholds 
related to a Member's Step-Up Add TCV.\9\ Footnote 2 currently states 
that it applies to fee codes B, V, and Y, however footnote 2 does not 
currently appear in the Fee Codes and Associated Fees table next to fee 
codes V and Y (but does appear next to fee code B). As such, the 
Exchange is proposing to add footnote 2 to fee codes V and Y in the Fee 
Codes and Associated Fees table in the fee schedule. This is a non-
substantive change to the fee schedule because footnote 2 states that 
it applies to each of fee codes B, V, and Y and the Exchange is adding 
the footnote to fee codes V and Y in order to make the fee schedule as 
consistent as possible to indicate that footnote 2 should apply to 
those fee codes.
---------------------------------------------------------------------------

    \9\ Step-Up Add TCV means ADAV as a percentage of TCV in January 
2014 subtracted from current ADAV as a percentage of TCV.
---------------------------------------------------------------------------

    The Exchange proposes to implement the amendments to its fee 
schedule effective January 2, 2015.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder that are applicable to a national securities exchange, and, 
in particular, with the requirements of Section 6 of the Act.\10\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent with Sections 6(b)(4) of the Act and 6(b)(5) of the Act,\11\ 
in that it provides for the equitable allocation of reasonable dues, 
fees and other charges among members and other persons using any 
facility or system which the Exchange operates or controls. The 
Exchange

[[Page 2765]]

notes that it operates in a highly competitive market in which market 
participants can readily direct order flow to competing venues if they 
deem fee levels at a particular venue to be excessive.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------

    The Exchange believes that the new Retail Order rebate and fee code 
associated with adding liquidity is reasonable and equitable because it 
will incentivize Members to submit orders designated as Retail Orders 
to the Exchange which will enhance liquidity in Retail Orders on the 
Exchange and further incentivize Members who wish to execute against 
Retail Orders to send additional orders to the Exchange. The Exchange 
believes that this increased liquidity would potentially stimulate 
further price competition for Retail Orders, thereby deepening the 
Exchange's liquidity pool in both non-Retail and Retail Orders, 
supporting the quality of price discovery, and promoting market 
transparency, further rendering the proposal reasonable and equitable. 
The Exchange believes that the new Retail Order rebate is non-
discriminatory because it is equally available to all Members that 
enter Retail Orders.
    The Exchange believes that the new Retail Order fee code for 
removing liquidity is reasonable, equitable, and non-discriminatory 
because, as stated above, the fees associated with a Retail Order that 
removes liquidity on the Exchange is the same as the standard fee for 
removing liquidity for a non-Retail Order. The only difference is that 
the Exchange is now providing a more specific fee code in order to make 
it easier for Members to understand their monthly invoices, which the 
Exchange again believes makes the proposed change reasonable, 
equitable, and non-discriminatory.
    The Exchange also believes that its proposed new Retail Order Tier 
and associated enhanced rebate are reasonable and equitable because the 
tiers based on added Retail Order volume is intended to reward those 
Members that and incentivize other Members to add a larger amount of 
volume in Retail Orders on the Exchange by providing an additional 
$0.0002 per share rebate for Members that have a add an average daily 
volume of Retail Orders that is 0.07% or more of average daily TCV. 
Further, the Exchange believes that the new Retail Order Tier is 
reasonable and equitable because it incentivizes and rewards Members 
for posting Retail Orders on the Exchange, which is consistent with the 
overall goal of enhancing market quality on the Exchange. The Exchange 
also believes that the proposed rebates [sic] associated with the tier 
is non-discriminatory in that it is equally available to all Members 
and, again, because it is consistent with the goal of enhancing market 
quality on the Exchange.
    Volume-based rebates and fees such as the ones proposed by and 
maintained on the Exchange, including Step-Up Tiers, the cross-asset 
step-up tier, the cross-asset tier and the Retail Order Tier proposed 
herein, have been widely adopted in the cash equities markets and are 
equitable because they are open to all Members on an equal basis and 
provide additional benefits or discounts that are reasonably related to 
the value to an exchange's market quality associated with higher levels 
of market activity, such as higher levels of liquidity provision and/or 
growth patterns, and introduction of higher volumes of orders into the 
price and volume discovery processes. The Exchange notes that it is not 
proposing to modify any existing tiers, but rather to add a new tier 
that will provide Members with additional ways to receive higher 
rebates, meaning that under the proposal, a Member will receive either 
the same or a higher rebate than they would receive today. Accordingly, 
the Exchange believes that the proposed additions to the Exchange's 
tiered pricing structure and incentives are not unfairly discriminatory 
because they will apply uniformly to all Members and are consistent 
with the overall goals of enhancing market quality on the Exchange.
    The Exchange also believes that assessing an Annual Membership Fee 
provides an equitable allocation of reasonable dues, fees and other 
charges among its Members and other persons using its facilities. The 
Exchange makes all services and products subject to these fees 
available on a non-discriminatory basis to similarly situated 
recipients. The Exchange believes that the Annual Membership Fee is a 
reasonable and equitable method of ensuring that its fees fund a 
greater portion of the cost of regulating activity on the Exchange, and 
that even after assessing these fees, the overall cost of Exchange 
membership is reasonable as compared with the costs of membership in 
other SROs.\12\ The Exchange believes that the proposed addition of an 
Annual Membership Fee is non-discriminatory in that it applies 
uniformly to all Members.
---------------------------------------------------------------------------

    \12\ See, e.g., NASDAQ Rule 7001(a) (assessing an [sic] $3,000 
annual membership fee); see also New York Stock Exchange Price List 
2015, at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf (assessing a $40,000 annual trading license fee 
for the first two licenses held by a member organization).
---------------------------------------------------------------------------

    Finally, the Exchange believes that the clarifying change that adds 
the footnote 2 to fee codes V and Y in the Fee Codes and Associated 
Fees table is reasonable as it will help to avoid confusion for those 
that review the Exchange's fee schedule. The Exchange notes that the 
proposed change is not designed to amend any fee or rebate, nor alter 
the manner in which it assesses fees or calculates rebates. The 
Exchange believes that the proposed amendment is intended to make the 
fee schedule clearer and less confusing for investors and eliminate 
potential investor confusion, thereby removing impediments to and 
perfecting the mechanism of a free and open market and a national 
market system, and, in general, protecting investors and the public 
interest.

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. To 
the contrary, the Exchange believes that the proposed changes will 
allow the Exchange to compete more ably with other execution venues by 
providing more competitive prices for Retail Orders that add liquidity 
in securities traded on the Exchange, thereby making it a more 
desirable destination venue for its customers. Also, because the market 
for order execution is extremely competitive, Members may readily opt 
to disfavor the Exchange's routing services if they believe that 
alternatives offer them better value.
    The Exchange's proposed membership fees will be lower than the cost 
of membership on other exchanges,\13\ and therefore, may stimulate 
intramarket competition by attracting additional firms to become 
Members on the Exchange. In addition, membership fees are subject to 
competition from other exchanges. Accordingly, if the changes proposed 
herein are unattractive to market participants, it is likely the 
Exchange will see a decline in membership and/or trading activity as a 
result. The proposed fee change will not impact intermarket competition 
because it will apply to all Members equally. As stated above, the 
Exchange notes that it operates in a highly competitive market in which 
market participants can readily direct order flow to competing venues 
if the deem fee structures,

[[Page 2766]]

including Annual Membership Fees, to be unreasonable or excessive.
---------------------------------------------------------------------------

    \13\ See id.
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

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 \14\ and paragraph (f) of Rule 19b-4 
thereunder.\15\ 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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BATS-2015-01 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-BATS-2015-01. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549 on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BATS-2015-01, and should be 
submitted on or before February 10, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-00702 Filed 1-16-15; 8:45 am]
BILLING CODE 8011-01-P
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