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., 38247-38251 [2015-16271]

Download as PDF Federal Register / Vol. 80, No. 127 / Thursday, July 2, 2015 / Notices representative of the Exchange’s efforts to minimize risk in its market during the closing process, and to harmonize and simplify the processing of MDAY and GTMC orders during the closing process. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) Significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to section 19(b)(3)(A)(iii) of the Act 19 and subparagraph (f)(6) of Rule 19b–4 thereunder.20 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. 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: asabaliauskas on DSK5VPTVN1PROD 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– NASDAQ–2015–064 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–NASDAQ–2015–064. 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 offices 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– NASDAQ–2015–064, and should be submitted on or before July 23, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–16274 Filed 7–1–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–75313; File No. SR–BATS– 2015–46] 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. June 26, 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 June 19, 2015, BATS Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BATS’’) filed with the Securities and Exchange Commission CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. (‘‘Commission’’) the proposed rule change as described in Items I and II 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 Substance of the Proposed Rule Change The Exchange filed a proposal to amend its fee schedule applicable to its equity options platform to: (i) Establish fees for the Multicast PITCH market data feed; and (ii) add definitions for terms that apply to market data fees. The text of the proposed rule change is available at the Exchange’s Web site at www.batstrading.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its fee schedule applicable to its equity options platform to: (i) Establish fees for the Multicast PITCH market data feed; and (ii) add definitions for terms that apply to market data fees. Definitions Applicable to Market Data Fees The Exchange proposes to include in its fee schedule the following defined terms that relate to the Exchange’s 21 17 19 15 U.S.C. 78s(b)(3)(a)(iii). 20 17 CFR 240.19b–4(f)(6). VerDate Sep<11>2014 21:16 Jul 01, 2015 1 15 Jkt 235001 PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 38247 3 15 4 17 E:\FR\FM\02JYN1.SGM U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). 02JYN1 38248 Federal Register / Vol. 80, No. 127 / Thursday, July 2, 2015 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES market data fees. The proposed definitions are designed to provide greater transparency with regard to how the Exchange assesses fees for market data. First, the Exchange proposes to define a ‘‘Distributor’’ as ‘‘any entity that receives an Exchange Market Data product directly from the Exchange or indirectly through another entity and then distributes it internally or externally to a third party.’’ 5 In turn, an Internal Distributor and External Distributor will be separately defined. An Internal Distributor will be defined as a ‘‘Distributor that receives the Exchange Market Data product and then distributes that data to one or more Users within the Distributor’s own entity.’’ 6 An External Distributor will be defined as a ‘‘Distributor that receives the Exchange Market Data product and then distributes that data to a third party or one or more Users outside the Distributor’s own entity.’’ 7 Secondly, the Exchange proposes to add a definition of ‘‘User’’ to its fee schedule. A User will be defined as a ‘‘natural person, a proprietorship, corporation, partnership, or entity, or device (computer or other automated service), that is entitled to receive Exchange data.’’ For purposes of its market data fees, the Exchange will distinguish between ‘‘Non-Professional Users’’ and ‘‘Professional Users.’’ Specifically, a Non-Professional User will be defined as ‘‘a natural person who is not: (i) Registered or qualified in any capacity with the Commission, the Commodity Futures Trading Commission, any state securities agency, any securities exchange or association; any commodities or futures contract market or association; (ii) engaged as an ‘‘investment adviser’’ as that term is defined in section 202(a)(11) of the Investment Advisers Act of 1940 5 The proposed definition of ‘‘Distributor’’ is based on the definition of Distributor in fee schedules of the BATS Exchange, Inc. (‘‘BATS Equities’’), the BATS Y–Exchange, Inc. (‘‘BYX’’), the EDGX Exchange, Inc. (‘‘EDGX’’), and the EDGA Exchange, Inc. (‘‘EDGA’’ together with BATS Equities, BYX, and EDGX, the ‘‘BATS Exchanges’’). See the BATS Equities fee schedule available at https://batstrading.com/support/fee_schedule/bzx/, BYX fee schedule available at https:// batstrading.com/support/fee_schedule/byx/, EDGX fee schedule available at https://batstrading.com/ support/fee_schedule/edgx/, and EDGA fee schedule available at https://batstrading.com/ support/fee_schedule/edga/ (collectively, the ‘‘BATS Exchange Fee Schedules’’). 6 The proposed definition of ‘‘Internal Distributor’’ is similar to the definition of Internal Distributor in fee schedules of the BATS Exchanges. Id. 7 The proposed definition of ‘‘External Distributor’’ is similar to the definition of External Distributor in fee schedules of the BATS Exchanges. Id. VerDate Sep<11>2014 21:16 Jul 01, 2015 Jkt 235001 (whether or not registered or qualified under that Act); or (iii) employed by a bank or other organization exempt from registration under federal or state securities laws to perform functions that will require registration or qualification if such functions were performed for an organization not so exempt.’’ 8 A Professional User will be defined as ‘‘any User other than a Non-Professional User.’’ 9 Multicast PITCH Fees Multicast PITCH is a market data feed that includes depth of book quotations and execution information based on options orders traded on the Exchange.10 Currently, the Exchange does not charge any fees for receipt of Multicast PITCH. The Exchange now proposes to amend its fee schedule to incorporate fees related to Multicast PITCH. These fees include the following, each of which are described in detail below: (i) A Distribution Fee; (ii) Usage Fees for both Professional and Non-Professional Users; and (iii) an Enterprise Fee. Distribution Fee. As proposed, each Distributor that receives Multicast PITCH shall pay a fee of $1,500 per month. The proposed Distribution Fee would apply equally to both Internal Distributors and External Distributors. User Fees. The Exchange proposes to charge those who receive Multicast PITCH from either an Internal or External Distributor different fees for both their Professional Users and NonProfessional Users. The Exchange will assess a monthly fee for Professional Users of $30.00 per User. NonProfessional Users will be assessed a monthly fee of $1.00 per User. Both Internal and External Distributors would be required to count every Professional User and NonProfessional User to which they provide Multicast PITCH, the requirements for which are similar to that currently in place for the BATS One Feed.11 Thus, 8 The proposed definition of ‘‘Professional User’’ is similar to the definition of Professional User in fee schedules of the BATS Exchanges. Id. 9 The proposed definition of ‘‘Non-Professional User’’ is similar to the definition of Professional User in fee schedules of the BATS Exchanges. See BATS Exchange Fee Schedules, supra note 6. 10 See Exchange Rule 21.15(a). 11 See Securities Exchange Act Release Nos. 74285 (February 18, 2015), 80 FR 9828 (February 24, 2015) (SR–BATS–2015–11); 74283 (February 18, 2015), 80 FR 9809 (February 24, 2015) (SR–EDGA– 2015–09); 74282 (February 17, 2015), 80 FR 9487 (February 23, 2015) (SR–EDGX–2015–09); and 74284 (February 18, 2015), 80 FR 9792 (February 24, 2015) (SR–BYX–2015–09) (‘‘Initial BATS One Feed Fee Filings’’). The only difference is that the counting requirements proposed herein would require the counting of Users receiving Multicast PITCH through both internal and external PO 00000 Frm 00077 Fmt 4703 Sfmt 4703 the Distributor’s count will include every person and device that accesses the data regardless of the purpose for which the individual or device uses the data. Distributors must report all Professional and Non-Professional Users in accordance with the following: • In connection with a Distributor’s distribution of Multicast PITCH, the Distributor should count as one User each unique User that the Distributor has entitled to have access to Multicast PITCH. However, where a device is dedicated specifically to a single individual, the Distributor should count only the individual and need not count the device. • The Distributor should identify and report each unique User. If a User uses the same unique method to gain access to Multicast PITCH, the Distributor should count that as one User. However, if a unique User uses multiple methods to gain access to Multicast PITCH (e.g., a single User has multiple passwords and user identifications), the Distributor should report all of those methods as an individual User. • Distributors should report each unique individual person who receives access through multiple devices as one User so long as each device is dedicated specifically to that individual. • If a Distributor entitles one or more individuals to use the same device, the Distributor should include only the individuals, and not the device, in the count. Enterprise Fee. The Exchange also proposes to establish a $3,500 per month Enterprise Fee that will permit a recipient firm who receives Multicast PITCH from a Distributor to receive the data for an unlimited number of Professional and Non-Professional Users. For example, if a recipient firm had 500 Professional Users who each receive Multicast PITCH at $30.00 per month, then that recipient firm will pay $15,000 per month in Professional Users fees. Under the proposed Enterprise Fee, the recipient firm will pay a flat fee of $3,500 per month for an unlimited number of Professional and NonProfessional Users for Multicast PITCH. A recipient firm must pay a separate Enterprise Fee for each Distributor that controls display of Multicast PITCH if it wishes such User to be covered by an Enterprise Fee rather than by per User fees. A recipient firm that pays the Enterprise Fee will not have to report its distribution. Because Usage Fees are solely charged to recipient firms who’s Users receive the BATS One Feed from an External Distributor and not through internal distribution, the BATS One Feed counting requirements only require the counting of Users by Distributors that disseminate the BATS One Feed externally. E:\FR\FM\02JYN1.SGM 02JYN1 Federal Register / Vol. 80, No. 127 / Thursday, July 2, 2015 / Notices number of Users on a monthly basis. However, every six months, a recipient firm must provide the Exchange with a count of the total number of natural person users of each product, including both Professional and Non-Professional Users. Implementation Date The Exchange proposes to implement these amendments to its fee schedule on July 1, 2015. asabaliauskas on DSK5VPTVN1PROD with NOTICES 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of section 6 of the Act,12 in general, and furthers the objectives of section 6(b)(4),13 in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its members and other recipients of Exchange data. The Exchange believes that the proposed rates are equitable and nondiscriminatory in that they apply uniformly to all recipients of Exchange data. The Exchange believes the proposed fees are competitive with those charged by other venues and, therefore, reasonable and equitably allocated to recipients. Lastly, the Exchange also believes that the proposed fees are reasonable and nondiscriminatory because they will apply uniformly to all recipients. The Exchange also believes that the proposed rule change is consistent with section 11(A) of the Act 14 in that it supports (i) fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets and (ii) the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities. Furthermore, the proposed rule change is consistent with Rule 603 of Regulation NMS,15 which provides that any national securities exchange that distributes information with respect to quotations for or transactions in an NMS stock do so on terms that are not unreasonably discriminatory. In adopting Regulation NMS, the Commission granted self-regulatory organizations and broker-dealers increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also 12 15 U.S.C. 78f. U.S.C. 78f(b)(4). 14 15 U.S.C. 78k–1. 15 See 17 CFR 242.603. 13 15 VerDate Sep<11>2014 21:16 Jul 01, 2015 Jkt 235001 spur innovation and competition for the provision of market data. In addition, the proposed fees would not permit unfair discrimination because all of the Exchange’s customers and market data vendors will be subject to the proposed fees on an equivalent basis. Multicast PITCH is distributed and purchased on a voluntary basis, in that neither the Exchange nor market data distributors are required by any rule or regulation to make this data available. Accordingly, Distributors and Users can discontinue use at any time and for any reason, including due to an assessment of the reasonableness of fees charged. Firms have a wide variety of alternative market data products from which to choose, such as similar proprietary data products offered by other exchanges and consolidated data. Moreover, the Exchange is not required to make any proprietary data products available or to offer any specific pricing alternatives to any customers. In addition, the fees that are the subject of this rule filing are constrained by competition. As explained below in the Exchange’s Statement on Burden on Competition, the existence of alternatives to Multicast PITCH further ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can elect such alternatives. That is, the Exchange competes with other exchanges (and their affiliates) that provide similar market data products. If another exchange (or its affiliate) were to charge less to consolidate and distribute its similar product than the Exchange charges to consolidate and distribute Multicast PITCH, prospective Users likely would not subscribe to, or would cease subscribing to, the Multicast PITCH. The Exchange notes that the Commission is not required to undertake a cost-of-service or ratemaking approach. The Exchange believes that, even if it were possible as a matter of economic theory, cost-based pricing for non-core market data would be so complicated that it could not be done practically.16 16 The Exchange believes that cost-based pricing would be impractical because it would create enormous administrative burdens for all parties, including the Commission, to cost-regulate a large number of participants and standardize and analyze extraordinary amounts of information, accounts, and reports. In addition, it is impossible to regulate market data prices in isolation from prices charged by markets for other services that are joint products. Cost-based rate regulation would also lead to litigation and may distort incentives, including those to minimize costs and to innovate, leading to further waste. Under cost-based pricing, the Commission would be burdened with determining PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 38249 User Fees. The Exchange believes that implementing the Professional and NonProfessional User fees for Multicast PITCH is equitable and reasonable because it will result in greater availability to Professional and NonProfessional Users. Moreover, introducing a modest Non-Professional User fee for Multicast PITCH is reasonable because it provides an additional method for retail investors to access Multicast PITCH data by providing the same data that is available to Professional Users. The Exchange believes that the proposed fees are equitable and not unfairly discriminatory because they will be charged uniformly to recipient firms and Users. The fee structure of differentiated Professional and NonProfessional fees is utilized for by the Exchange for the BATS One Feed and has long been used by other exchanges for their proprietary data products, and by the Nasdaq UTP and the CTA and CQ Plans in order to reduce the price of data to retail investors and make it more broadly available.17 Offering Multicast PITCH to Non-Professional Users with the same data available to Professional Users results in greater equity among data recipients. In addition, the proposed fees are reasonable when compared to similar fees for comparable products offered by the NYSE Arca, Inc. (‘‘NYSE Arca’’). Specifically, NYSE Arca offers NYSE ArcaBook for Arca Options—Depth of Book, which includes depth of book information for options traded on NYSE Arca, for a monthly fee of $50.00 per professional subscriber and $1.00 per a fair rate of return, and the industry could experience frequent rate increases based on escalating expense levels. Even in industries historically subject to utility regulation, cost-based ratemaking has been discredited. As such, the Exchange believes that cost-based ratemaking would be inappropriate for proprietary market data and inconsistent with Congress’s direction that the Commission use its authority to foster the development of the national market system, and that market forces will continue to provide appropriate pricing discipline. See Appendix C to NYSE’s comments to the Commission’s 2000 Concept Release on the Regulation of Market Information Fees and Revenues, which can be found on the Commission’s Web site at https:// www.sec.gov/rules/concept/s72899/buck1.htm. See also Securities Exchange Act Release No. 73816 (December 11, 2014), 79 FR 75200 (December 17, 2014) (SR–NYSE–2014–64) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Establish an Access Fee for the NYSE Best Quote and Trades Data Feed, Operative December 1, 2014). 17 See the Initial BATS One Feed Fee Filings, supra note 12. See also, e.g., Securities Exchange Act Release No. 20002, File No. S7–433 (July 22, 1983) (establishing nonprofessional fees for CTA data); Nasdaq Rules 7023(b), 7047. E:\FR\FM\02JYN1.SGM 02JYN1 asabaliauskas on DSK5VPTVN1PROD with NOTICES 38250 Federal Register / Vol. 80, No. 127 / Thursday, July 2, 2015 / Notices non-professional subscriber.18 The Exchange’s proposed per User Fees for Multicast PITCH is less than or equal to the NYSE Arca’s fees for NYSE ArcaBook for Arca Options—Depth of Book. Enterprise Fee. The proposed Enterprise Fee for Multicast PITCH is equitable and reasonable as the fees proposed are less than the enterprise fees currently charged for NYSE ArcaBook for Arca Options—Depth of Book. NYSE Arca provides a fee cap $5,000 per month for NYSE ArcaBook for Arca Options—Depth of Book for non-professional user only,19 while the Exchange is proposing a monthly Enterprise Fee of $3,500 per month for both Professional and Non-Professional Users. In addition, the Enterprise Fee proposed by the Exchange could result in a fee reduction for recipient firms with a large number of Professional and Non-Professional Users. If a recipient firm has a smaller number of Professional Users of the Multicast PITCH, then it may continue using the per User structure and benefit from the per User Fee reductions. By reducing prices for recipient firms with a large number of Professional and NonProfessional Users, the Exchange believes that more firms may choose to receive and to distribute the Multicast PITCH, thereby expanding the distribution of this market data for the benefit of investors. The Exchange further believes that the proposed Enterprise Fee is reasonable because it will simplify reporting for certain recipients that have large numbers of Professional and NonProfessional Users. Firms that pay the proposed Enterprise Fee will not have to report the number of Users on a monthly basis as they currently do, but rather will only have to count natural person users every six months, which is a significant reduction in administrative burden. Finally, the Exchange believes that it is equitable and not unfairly discriminatory to establish an Enterprise Fee because it reduces the Exchange’s costs and the Distributor’s administrative burdens in tracking and auditing large numbers of Users. Distributor Fee. The Exchange believes that the proposed Distributor Fees are also reasonable, equitably allocated, and not unreasonably discriminatory. The fees for Members and non-Members are uniform except with respect to reasonable distinctions between internal and external 18 See NYSE Market Data Pricing dated May 2015 available at https://www.nyxdata.com/. 19 Id. VerDate Sep<11>2014 21:16 Jul 01, 2015 Jkt 235001 distribution.20 The Exchange believes that the Distributor Fees for Multicast PITCH are reasonable and fair in light of alternatives offered by other market centers. For example, NYSE Arca charges an internal distribution fee of $3,000 per month and an external distribution fee of $2,000 per month for NYSE ArcaBook for Arca Options— Depth of Book,21 while the Exchange is proposing a monthly Distribution Fee of $1,500 per month for both Internal and External Distribution. Definitions Applicable to Market Data Fees The Exchange believes that the proposed definitions are consistent with section 6(b) of the Act,22 in general, and section 6(b)(4) of the Act,23 in particular, in that it provides for an equitable allocation of reasonable fees among recipients of the data and is not designed to permit unfair discrimination among customers, brokers, or dealers. The Exchange believes that the proposed definitions are reasonable because they are designed to provide greater transparency with regard to how the Exchange assesses fees for market data. The Exchange believes that recipients of Exchange data would benefit from clear guidance in its fee schedule that describes the manner in which the Exchange would assess fees. These definitions are intended to make the fee schedule clearer and less confusing for investors, 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. Lastly, the proposed definitions are based on existing definitions in fee schedules of the BATS Exchanges.24 20 The Exchange notes that distinctions based on external versus internal distribution have been previously filed with the Commission by Nasdaq, Nasdaq OMX BX, and Nasdaq OMX PSX. See BATS Exchange Fee Schedules, supra note 6. See also Nasdaq Rule 019(b); Securities Exchange Act Release No. 62876 (September 9, 2010), 75 FR 56624 (September 16, 2010) (SR–PHLX–2010–120); Securities Exchange Act Release No. 62907 (September 14, 2010), 75 FR 57314 (September 20, 2010) (SR–NASDAQ–2010–110); Securities Exchange Act Release No. 63442 (December 6, 2010), 75 FR 77029 (December 10, 2010) (SR–BX– 2010–081). 21 See NYSE Market Data Pricing dated May 2015 available at https://www.nyxdata.com/. 22 15 U.S.C. 78f. 23 15 U.S.C. 78f(b)(4). 24 See BATS Exchange Fee Schedules, supra note 6. PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 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. Multicast PITCH Fees 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. The Exchange’s ability to price Multicast PITCH is constrained by: (i) Competition among exchanges, other trading platforms, and Trade Reporting Facilities (‘‘TRF’’) that compete with each other in a variety of dimensions; (ii) the existence of inexpensive realtime consolidated data and marketspecific data and free delayed data; and (iii) the inherent contestability of the market for proprietary data. The Exchange and its market data products are subject to significant competitive forces and the proposed fees represent responses to that competition. To start, the Exchange competes intensely for order flow. It competes with the other national securities exchanges that currently trade equities, with electronic communication networks, with quotes posted in FINRA’s Alternative Display Facility, with alternative trading systems, and with securities firms that primarily trade as principal with their customer order flow. In addition, Multicast PITCH competes with a number of alternative products. For instance, Multicast PITCH does not provide a complete picture of all trading activity in a security. Rather, the other national securities exchanges, the Options Price Reporting Authority (‘‘OPRA’’), the several TRFs, and Electronic Communication Networks (‘‘ECN’’) that produce proprietary data all produce trades and trade reports. Each is currently permitted to produce similar data products, and many currently do, including the Nasdaq Stock Market LLC (‘‘Nasdaq’’) and the New York Stock Exchange, Inc. (‘‘NYSE’’). In sum, the availability of a variety of alternative sources of information imposes significant competitive pressures on Exchange data products and the Exchange’s compelling need to attract order flow imposes significant competitive pressure on the Exchange to act equitably, fairly, and reasonably in setting the proposed data product fees. The proposed data product fees are, in part, responses to that pressure. The E:\FR\FM\02JYN1.SGM 02JYN1 Federal Register / Vol. 80, No. 127 / Thursday, July 2, 2015 / Notices Exchange believes that the proposed fees would reflect an equitable allocation of its overall costs to users of its facilities. In addition, when establishing the proposed fees, the Exchange considered the competitiveness of the market for proprietary data and all of the implications of that competition. The Exchange believes that it has considered all relevant factors and has not considered irrelevant factors in order to establish fair, reasonable, and not unreasonably discriminatory fees and an equitable allocation of fees among all Users. The existence of alternatives to Multicast PITCH, including existing similar feeds by other exchanges, consolidated data, and proprietary data from other sources, ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can elect these alternatives or choose not to purchase a specific proprietary data product if its cost to purchase is not justified by the returns any particular vendor or subscriber would achieve through the purchase. Definitions Applicable to Market Data Fees The proposed definitions applicable to market data fees will not result in any burden on competition. The proposed definitions are not designed to amend any fee, nor alter the manner in which it assesses fees. The Exchange believes that recipients of Exchange data would benefit from clear guidance in its fee schedule that describes the manner in which the Exchange would assess fees for market data. These definitions are intended to make the Fee Schedule clearer and less confusing for investors and are not designed to have a competitive impact. asabaliauskas on DSK5VPTVN1PROD with NOTICES C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to section 19(b)(3)(A) of the Act 25 and paragraph (f)(2) of Rule 19b–4 thereunder.26 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if 25 15 U.S.C. 78s(b)(3)(A). 26 17 CFR 240.19b–4(f)(2). VerDate Sep<11>2014 21:16 Jul 01, 2015 Jkt 235001 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. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. 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–2015–46 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BATS–2015–46. 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 will also 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– PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 38251 2015–46 and should be submitted on or before July 23, 2015. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Robert W. Errett, Deputy Secretary. [FR Doc. 2015–16271 Filed 7–1–15; 8:45 am] BILLING CODE P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–75312; File No. SR–ISE– 2015–21] Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Extend the Penny Pilot Program June 26, 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 June 22, 2015, the International Securities Exchange, LLC (the ‘‘Exchange’’ or the ‘‘ISE’’) filed with the Securities and Exchange Commission the proposed rule change as described in Items I and II below, which items have been prepared by the self-regulatory organization. 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 Substance of the Proposed Rule Change The ISE proposes to amend its rules relating to a pilot program to quote and to trade certain options in pennies (‘‘Penny Pilot Program’’). The text of the proposed rule change is available on the Exchange’s Web site www.ise.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 self-regulatory organization 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. 27 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\02JYN1.SGM 02JYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 80, Number 127 (Thursday, July 2, 2015)]
[Notices]
[Pages 38247-38251]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-16271]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75313; File No. SR-BATS-2015-46]

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.

June 26, 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 June 19, 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 and
II 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 Substance
of the Proposed Rule Change

The Exchange filed a proposal to amend its fee schedule applicable
to its equity options platform to: (i) Establish fees for the Multicast
PITCH market data feed; and (ii) add definitions for terms that apply
to market data fees.
The text of the proposed rule change is available at the Exchange's
Web site at www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant parts of such
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

1. Purpose
The Exchange proposes to amend its fee schedule applicable to its
equity options platform to: (i) Establish fees for the Multicast PITCH
market data feed; and (ii) add definitions for terms that apply to
market data fees.

Definitions Applicable to Market Data Fees

The Exchange proposes to include in its fee schedule the following
defined terms that relate to the Exchange's

[[Page 38248]]

market data fees. The proposed definitions are designed to provide
greater transparency with regard to how the Exchange assesses fees for
market data.
First, the Exchange proposes to define a ``Distributor'' as ``any
entity that receives an Exchange Market Data product directly from the
Exchange or indirectly through another entity and then distributes it
internally or externally to a third party.'' \5\ In turn, an Internal
Distributor and External Distributor will be separately defined. An
Internal Distributor will be defined as a ``Distributor that receives
the Exchange Market Data product and then distributes that data to one
or more Users within the Distributor's own entity.'' \6\ An External
Distributor will be defined as a ``Distributor that receives the
Exchange Market Data product and then distributes that data to a third
party or one or more Users outside the Distributor's own entity.'' \7\
---------------------------------------------------------------------------

\5\ The proposed definition of ``Distributor'' is based on the
definition of Distributor in fee schedules of the BATS Exchange,
Inc. (``BATS Equities''), the BATS Y-Exchange, Inc. (``BYX''), the
EDGX Exchange, Inc. (``EDGX''), and the EDGA Exchange, Inc.
(``EDGA'' together with BATS Equities, BYX, and EDGX, the ``BATS
Exchanges''). See the BATS Equities fee schedule available at https://batstrading.com/support/fee_schedule/bzx/, BYX fee schedule
available at https://batstrading.com/support/fee_schedule/byx/, EDGX
fee schedule available at https://batstrading.com/support/fee_schedule/edgx/, and EDGA fee schedule available at https://batstrading.com/support/fee_schedule/edga/ (collectively, the ``BATS
Exchange Fee Schedules'').
\6\ The proposed definition of ``Internal Distributor'' is
similar to the definition of Internal Distributor in fee schedules
of the BATS Exchanges. Id.
\7\ The proposed definition of ``External Distributor'' is
similar to the definition of External Distributor in fee schedules
of the BATS Exchanges. Id.
---------------------------------------------------------------------------

Secondly, the Exchange proposes to add a definition of ``User'' to
its fee schedule. A User will be defined as a ``natural person, a
proprietorship, corporation, partnership, or entity, or device
(computer or other automated service), that is entitled to receive
Exchange data.'' For purposes of its market data fees, the Exchange
will distinguish between ``Non-Professional Users'' and ``Professional
Users.'' Specifically, a Non-Professional User will be defined as ``a
natural person who is not: (i) Registered or qualified in any capacity
with the Commission, the Commodity Futures Trading Commission, any
state securities agency, any securities exchange or association; any
commodities or futures contract market or association; (ii) engaged as
an ``investment adviser'' as that term is defined in section 202(a)(11)
of the Investment Advisers Act of 1940 (whether or not registered or
qualified under that Act); or (iii) employed by a bank or other
organization exempt from registration under federal or state securities
laws to perform functions that will require registration or
qualification if such functions were performed for an organization not
so exempt.'' \8\ A Professional User will be defined as ``any User
other than a Non-Professional User.'' \9\
---------------------------------------------------------------------------

\8\ The proposed definition of ``Professional User'' is similar
to the definition of Professional User in fee schedules of the BATS
Exchanges. Id.
\9\ The proposed definition of ``Non-Professional User'' is
similar to the definition of Professional User in fee schedules of
the BATS Exchanges. See BATS Exchange Fee Schedules, supra note 6.
---------------------------------------------------------------------------

Multicast PITCH Fees

Multicast PITCH is a market data feed that includes depth of book
quotations and execution information based on options orders traded on
the Exchange.\10\ Currently, the Exchange does not charge any fees for
receipt of Multicast PITCH. The Exchange now proposes to amend its fee
schedule to incorporate fees related to Multicast PITCH. These fees
include the following, each of which are described in detail below: (i)
A Distribution Fee; (ii) Usage Fees for both Professional and Non-
Professional Users; and (iii) an Enterprise Fee.
---------------------------------------------------------------------------

\10\ See Exchange Rule 21.15(a).
---------------------------------------------------------------------------

Distribution Fee. As proposed, each Distributor that receives
Multicast PITCH shall pay a fee of $1,500 per month. The proposed
Distribution Fee would apply equally to both Internal Distributors and
External Distributors.
User Fees. The Exchange proposes to charge those who receive
Multicast PITCH from either an Internal or External Distributor
different fees for both their Professional Users and Non-Professional
Users. The Exchange will assess a monthly fee for Professional Users of
$30.00 per User. Non-Professional Users will be assessed a monthly fee
of $1.00 per User.
Both Internal and External Distributors would be required to count
every Professional User and Non-Professional User to which they provide
Multicast PITCH, the requirements for which are similar to that
currently in place for the BATS One Feed.\11\ Thus, the Distributor's
count will include every person and device that accesses the data
regardless of the purpose for which the individual or device uses the
data. Distributors must report all Professional and Non-Professional
Users in accordance with the following:
---------------------------------------------------------------------------

\11\ See Securities Exchange Act Release Nos. 74285 (February
18, 2015), 80 FR 9828 (February 24, 2015) (SR-BATS-2015-11); 74283
(February 18, 2015), 80 FR 9809 (February 24, 2015) (SR-EDGA-2015-
09); 74282 (February 17, 2015), 80 FR 9487 (February 23, 2015) (SR-
EDGX-2015-09); and 74284 (February 18, 2015), 80 FR 9792 (February
24, 2015) (SR-BYX-2015-09) (``Initial BATS One Feed Fee Filings'').
The only difference is that the counting requirements proposed
herein would require the counting of Users receiving Multicast PITCH
through both internal and external distribution. Because Usage Fees
are solely charged to recipient firms who's Users receive the BATS
One Feed from an External Distributor and not through internal
distribution, the BATS One Feed counting requirements only require
the counting of Users by Distributors that disseminate the BATS One
Feed externally.
---------------------------------------------------------------------------

In connection with a Distributor's distribution of
Multicast PITCH, the Distributor should count as one User each unique
User that the Distributor has entitled to have access to Multicast
PITCH. However, where a device is dedicated specifically to a single
individual, the Distributor should count only the individual and need
not count the device.
The Distributor should identify and report each unique
User. If a User uses the same unique method to gain access to Multicast
PITCH, the Distributor should count that as one User. However, if a
unique User uses multiple methods to gain access to Multicast PITCH
(e.g., a single User has multiple passwords and user identifications),
the Distributor should report all of those methods as an individual
User.
Distributors should report each unique individual person
who receives access through multiple devices as one User so long as
each device is dedicated specifically to that individual.
If a Distributor entitles one or more individuals to use
the same device, the Distributor should include only the individuals,
and not the device, in the count.
Enterprise Fee. The Exchange also proposes to establish a $3,500
per month Enterprise Fee that will permit a recipient firm who receives
Multicast PITCH from a Distributor to receive the data for an unlimited
number of Professional and Non-Professional Users. For example, if a
recipient firm had 500 Professional Users who each receive Multicast
PITCH at $30.00 per month, then that recipient firm will pay $15,000
per month in Professional Users fees. Under the proposed Enterprise
Fee, the recipient firm will pay a flat fee of $3,500 per month for an
unlimited number of Professional and Non-Professional Users for
Multicast PITCH. A recipient firm must pay a separate Enterprise Fee
for each Distributor that controls display of Multicast PITCH if it
wishes such User to be covered by an Enterprise Fee rather than by per
User fees. A recipient firm that pays the Enterprise Fee will not have
to report its

[[Page 38249]]

number of Users on a monthly basis. However, every six months, a
recipient firm must provide the Exchange with a count of the total
number of natural person users of each product, including both
Professional and Non-Professional Users.

Implementation Date

The Exchange proposes to implement these amendments to its fee
schedule on July 1, 2015.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of section 6 of the Act,\12\ in general, and
furthers the objectives of section 6(b)(4),\13\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its members and other recipients of
Exchange data. The Exchange believes that the proposed rates are
equitable and non-discriminatory in that they apply uniformly to all
recipients of Exchange data. The Exchange believes the proposed fees
are competitive with those charged by other venues and, therefore,
reasonable and equitably allocated to recipients. Lastly, the Exchange
also believes that the proposed fees are reasonable and non-
discriminatory because they will apply uniformly to all recipients.
---------------------------------------------------------------------------

\12\ 15 U.S.C. 78f.
\13\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

The Exchange also believes that the proposed rule change is
consistent with section 11(A) of the Act \14\ in that it supports (i)
fair competition among brokers and dealers, among exchange markets, and
between exchange markets and markets other than exchange markets and
(ii) the availability to brokers, dealers, and investors of information
with respect to quotations for and transactions in securities.
Furthermore, the proposed rule change is consistent with Rule 603 of
Regulation NMS,\15\ which provides that any national securities
exchange that distributes information with respect to quotations for or
transactions in an NMS stock do so on terms that are not unreasonably
discriminatory. In adopting Regulation NMS, the Commission granted
self-regulatory organizations and broker-dealers increased authority
and flexibility to offer new and unique market data to the public. It
was believed that this authority would expand the amount of data
available to consumers, and also spur innovation and competition for
the provision of market data.
---------------------------------------------------------------------------

\14\ 15 U.S.C. 78k-1.
\15\ See 17 CFR 242.603.
---------------------------------------------------------------------------

In addition, the proposed fees would not permit unfair
discrimination because all of the Exchange's customers and market data
vendors will be subject to the proposed fees on an equivalent basis.
Multicast PITCH is distributed and purchased on a voluntary basis, in
that neither the Exchange nor market data distributors are required by
any rule or regulation to make this data available. Accordingly,
Distributors and Users can discontinue use at any time and for any
reason, including due to an assessment of the reasonableness of fees
charged. Firms have a wide variety of alternative market data products
from which to choose, such as similar proprietary data products offered
by other exchanges and consolidated data. Moreover, the Exchange is not
required to make any proprietary data products available or to offer
any specific pricing alternatives to any customers.
In addition, the fees that are the subject of this rule filing are
constrained by competition. As explained below in the Exchange's
Statement on Burden on Competition, the existence of alternatives to
Multicast PITCH further ensures that the Exchange cannot set
unreasonable fees, or fees that are unreasonably discriminatory, when
vendors and subscribers can elect such alternatives. That is, the
Exchange competes with other exchanges (and their affiliates) that
provide similar market data products. If another exchange (or its
affiliate) were to charge less to consolidate and distribute its
similar product than the Exchange charges to consolidate and distribute
Multicast PITCH, prospective Users likely would not subscribe to, or
would cease subscribing to, the Multicast PITCH.
The Exchange notes that the Commission is not required to undertake
a cost-of-service or rate-making approach. The Exchange believes that,
even if it were possible as a matter of economic theory, cost-based
pricing for non-core market data would be so complicated that it could
not be done practically.\16\
---------------------------------------------------------------------------

\16\ The Exchange believes that cost-based pricing would be
impractical because it would create enormous administrative burdens
for all parties, including the Commission, to cost-regulate a large
number of participants and standardize and analyze extraordinary
amounts of information, accounts, and reports. In addition, it is
impossible to regulate market data prices in isolation from prices
charged by markets for other services that are joint products. Cost-
based rate regulation would also lead to litigation and may distort
incentives, including those to minimize costs and to innovate,
leading to further waste. Under cost-based pricing, the Commission
would be burdened with determining a fair rate of return, and the
industry could experience frequent rate increases based on
escalating expense levels. Even in industries historically subject
to utility regulation, cost-based ratemaking has been discredited.
As such, the Exchange believes that cost-based ratemaking would be
inappropriate for proprietary market data and inconsistent with
Congress's direction that the Commission use its authority to foster
the development of the national market system, and that market
forces will continue to provide appropriate pricing discipline. See
Appendix C to NYSE's comments to the Commission's 2000 Concept
Release on the Regulation of Market Information Fees and Revenues,
which can be found on the Commission's Web site at https://www.sec.gov/rules/concept/s72899/buck1.htm. See also Securities
Exchange Act Release No. 73816 (December 11, 2014), 79 FR 75200
(December 17, 2014) (SR-NYSE-2014-64) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change to Establish an
Access Fee for the NYSE Best Quote and Trades Data Feed, Operative
December 1, 2014).
---------------------------------------------------------------------------

User Fees. The Exchange believes that implementing the Professional
and Non-Professional User fees for Multicast PITCH is equitable and
reasonable because it will result in greater availability to
Professional and Non-Professional Users. Moreover, introducing a modest
Non-Professional User fee for Multicast PITCH is reasonable because it
provides an additional method for retail investors to access Multicast
PITCH data by providing the same data that is available to Professional
Users. The Exchange believes that the proposed fees are equitable and
not unfairly discriminatory because they will be charged uniformly to
recipient firms and Users. The fee structure of differentiated
Professional and Non-Professional fees is utilized for by the Exchange
for the BATS One Feed and has long been used by other exchanges for
their proprietary data products, and by the Nasdaq UTP and the CTA and
CQ Plans in order to reduce the price of data to retail investors and
make it more broadly available.\17\ Offering Multicast PITCH to Non-
Professional Users with the same data available to Professional Users
results in greater equity among data recipients.
---------------------------------------------------------------------------

\17\ See the Initial BATS One Feed Fee Filings, supra note 12.
See also, e.g., Securities Exchange Act Release No. 20002, File No.
S7-433 (July 22, 1983) (establishing nonprofessional fees for CTA
data); Nasdaq Rules 7023(b), 7047.
---------------------------------------------------------------------------

In addition, the proposed fees are reasonable when compared to
similar fees for comparable products offered by the NYSE Arca, Inc.
(``NYSE Arca''). Specifically, NYSE Arca offers NYSE ArcaBook for Arca
Options--Depth of Book, which includes depth of book information for
options traded on NYSE Arca, for a monthly fee of $50.00 per
professional subscriber and $1.00 per

[[Page 38250]]

non-professional subscriber.\18\ The Exchange's proposed per User Fees
for Multicast PITCH is less than or equal to the NYSE Arca's fees for
NYSE ArcaBook for Arca Options--Depth of Book.
---------------------------------------------------------------------------

\18\ See NYSE Market Data Pricing dated May 2015 available at
https://www.nyxdata.com/.
---------------------------------------------------------------------------

Enterprise Fee. The proposed Enterprise Fee for Multicast PITCH is
equitable and reasonable as the fees proposed are less than the
enterprise fees currently charged for NYSE ArcaBook for Arca Options--
Depth of Book. NYSE Arca provides a fee cap $5,000 per month for NYSE
ArcaBook for Arca Options--Depth of Book for non-professional user
only,\19\ while the Exchange is proposing a monthly Enterprise Fee of
$3,500 per month for both Professional and Non-Professional Users. In
addition, the Enterprise Fee proposed by the Exchange could result in a
fee reduction for recipient firms with a large number of Professional
and Non-Professional Users. If a recipient firm has a smaller number of
Professional Users of the Multicast PITCH, then it may continue using
the per User structure and benefit from the per User Fee reductions. By
reducing prices for recipient firms with a large number of Professional
and Non-Professional Users, the Exchange believes that more firms may
choose to receive and to distribute the Multicast PITCH, thereby
expanding the distribution of this market data for the benefit of
investors.
---------------------------------------------------------------------------

\19\ Id.
---------------------------------------------------------------------------

The Exchange further believes that the proposed Enterprise Fee is
reasonable because it will simplify reporting for certain recipients
that have large numbers of Professional and Non-Professional Users.
Firms that pay the proposed Enterprise Fee will not have to report the
number of Users on a monthly basis as they currently do, but rather
will only have to count natural person users every six months, which is
a significant reduction in administrative burden. Finally, the Exchange
believes that it is equitable and not unfairly discriminatory to
establish an Enterprise Fee because it reduces the Exchange's costs and
the Distributor's administrative burdens in tracking and auditing large
numbers of Users.
Distributor Fee. The Exchange believes that the proposed
Distributor Fees are also reasonable, equitably allocated, and not
unreasonably discriminatory. The fees for Members and non-Members are
uniform except with respect to reasonable distinctions between internal
and external distribution.\20\ The Exchange believes that the
Distributor Fees for Multicast PITCH are reasonable and fair in light
of alternatives offered by other market centers. For example, NYSE Arca
charges an internal distribution fee of $3,000 per month and an
external distribution fee of $2,000 per month for NYSE ArcaBook for
Arca Options--Depth of Book,\21\ while the Exchange is proposing a
monthly Distribution Fee of $1,500 per month for both Internal and
External Distribution.
---------------------------------------------------------------------------

\20\ The Exchange notes that distinctions based on external
versus internal distribution have been previously filed with the
Commission by Nasdaq, Nasdaq OMX BX, and Nasdaq OMX PSX. See BATS
Exchange Fee Schedules, supra note 6. See also Nasdaq Rule 019(b);
Securities Exchange Act Release No. 62876 (September 9, 2010), 75 FR
56624 (September 16, 2010) (SR-PHLX-2010-120); Securities Exchange
Act Release No. 62907 (September 14, 2010), 75 FR 57314 (September
20, 2010) (SR-NASDAQ-2010-110); Securities Exchange Act Release No.
63442 (December 6, 2010), 75 FR 77029 (December 10, 2010) (SR-BX-
2010-081).
\21\ See NYSE Market Data Pricing dated May 2015 available at
https://www.nyxdata.com/.
---------------------------------------------------------------------------

Definitions Applicable to Market Data Fees

The Exchange believes that the proposed definitions are consistent
with section 6(b) of the Act,\22\ in general, and section 6(b)(4) of
the Act,\23\ in particular, in that it provides for an equitable
allocation of reasonable fees among recipients of the data and is not
designed to permit unfair discrimination among customers, brokers, or
dealers. The Exchange believes that the proposed definitions are
reasonable because they are designed to provide greater transparency
with regard to how the Exchange assesses fees for market data. The
Exchange believes that recipients of Exchange data would benefit from
clear guidance in its fee schedule that describes the manner in which
the Exchange would assess fees. These definitions are intended to make
the fee schedule clearer and less confusing for investors, 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. Lastly, the proposed definitions are
based on existing definitions in fee schedules of the BATS
Exchanges.\24\
---------------------------------------------------------------------------

\22\ 15 U.S.C. 78f.
\23\ 15 U.S.C. 78f(b)(4).
\24\ See BATS Exchange Fee Schedules, supra note 6.
---------------------------------------------------------------------------

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.

Multicast PITCH Fees

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. The
Exchange's ability to price Multicast PITCH is constrained by: (i)
Competition among exchanges, other trading platforms, and Trade
Reporting Facilities (``TRF'') that compete with each other in a
variety of dimensions; (ii) the existence of inexpensive real-time
consolidated data and market-specific data and free delayed data; and
(iii) the inherent contestability of the market for proprietary data.
The Exchange and its market data products are subject to
significant competitive forces and the proposed fees represent
responses to that competition. To start, the Exchange competes
intensely for order flow. It competes with the other national
securities exchanges that currently trade equities, with electronic
communication networks, with quotes posted in FINRA's Alternative
Display Facility, with alternative trading systems, and with securities
firms that primarily trade as principal with their customer order flow.
In addition, Multicast PITCH competes with a number of alternative
products. For instance, Multicast PITCH does not provide a complete
picture of all trading activity in a security. Rather, the other
national securities exchanges, the Options Price Reporting Authority
(``OPRA''), the several TRFs, and Electronic Communication Networks
(``ECN'') that produce proprietary data all produce trades and trade
reports. Each is currently permitted to produce similar data products,
and many currently do, including the Nasdaq Stock Market LLC
(``Nasdaq'') and the New York Stock Exchange, Inc. (``NYSE'').
In sum, the availability of a variety of alternative sources of
information imposes significant competitive pressures on Exchange data
products and the Exchange's compelling need to attract order flow
imposes significant competitive pressure on the Exchange to act
equitably, fairly, and reasonably in setting the proposed data product
fees. The proposed data product fees are, in part, responses to that
pressure. The

[[Page 38251]]

Exchange believes that the proposed fees would reflect an equitable
allocation of its overall costs to users of its facilities.
In addition, when establishing the proposed fees, the Exchange
considered the competitiveness of the market for proprietary data and
all of the implications of that competition. The Exchange believes that
it has considered all relevant factors and has not considered
irrelevant factors in order to establish fair, reasonable, and not
unreasonably discriminatory fees and an equitable allocation of fees
among all Users. The existence of alternatives to Multicast PITCH,
including existing similar feeds by other exchanges, consolidated data,
and proprietary data from other sources, ensures that the Exchange
cannot set unreasonable fees, or fees that are unreasonably
discriminatory, when vendors and subscribers can elect these
alternatives or choose not to purchase a specific proprietary data
product if its cost to purchase is not justified by the returns any
particular vendor or subscriber would achieve through the purchase.

Definitions Applicable to Market Data Fees

The proposed definitions applicable to market data fees will not
result in any burden on competition. The proposed definitions are not
designed to amend any fee, nor alter the manner in which it assesses
fees. The Exchange believes that recipients of Exchange data would
benefit from clear guidance in its fee schedule that describes the
manner in which the Exchange would assess fees for market data. These
definitions are intended to make the Fee Schedule clearer and less
confusing for investors and are not designed to have a competitive
impact.

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

The Exchange has neither solicited nor received written comments on
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

The foregoing rule change has become effective pursuant to section
19(b)(3)(A) of the Act \25\ and paragraph (f)(2) of Rule 19b-4
thereunder.\26\ 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. If
the Commission takes such action, the Commission shall institute
proceedings to determine whether the proposed rule should be approved
or disapproved.
---------------------------------------------------------------------------

\25\ 15 U.S.C. 78s(b)(3)(A).
\26\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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-2015-46 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BATS-2015-46. 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 will also 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-2015-46 and should be
submitted on or before July 23, 2015.
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\27\ 17 CFR 200.30-3(a)(12).

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-16271 Filed 7-1-15; 8:45 am]
BILLING CODE P

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