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., 80827-80830 [2015-32537]

Download as PDF Federal Register / Vol. 80, No. 248 / Monday, December 28, 2015 / Notices business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–EDGX– 2015–64, and should be submitted on or before January 19, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Brent J. Fields, Secretary. [FR Doc. 2015–32523 Filed 12–24–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–76709; File No. SR–BATS– 2015–115] 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. mstockstill on DSK4VPTVN1PROD with NOTICES December 21, 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 December 17, 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. 25 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 1 15 VerDate Sep<11>2014 13:31 Dec 24, 2015 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend the Market Data section of its fee schedule to: (i) Adopt definitions for the terms ‘‘Non-Display Usage’’ and ‘‘Trading Platforms’’; and (ii) amend the fees for TCP Depth and Multicast Depth data products,5 also known as BZX Depth, to increase the Internal Distributor fee and adopt a new fee for Non-Display Usage. 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 the Market Data section of its fee schedule to: (i) adopt definitions for the terms ‘‘Non-Display Usage’’ and ‘‘Trading Platforms’’; and (ii) amend the fees for BZX Depth to increase the Internal Distributor fee and adopt a new fee for Non-Display Usage. Definitions The Exchange proposes to adopt definitions for the terms ‘‘Non-Display Usage’’ and ‘‘Trading Platforms’’. The proposed definitions are designed to provide greater transparency with regard to how the Exchange assesses fees for market data. Non-Display Usage would be defined as ‘‘any method of accessing a Market Data product that involves access or use by a machine or automated device without access or use of a display by a natural person or persons.’’ 6 The term Trading Platform 5 See Exchange Rule 11.22(a) and (c). proposed definition of Non-Display Usage is substantially similar to Nasdaq Stock Market LLC 6 The Jkt 238001 PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 80827 would be defined as ‘‘any execution platform operated as or by a registered National Securities Exchange (as defined in Section 3(a)(1) of the Exchange Act), an Alternative Trading System (as defined in Rule 300(a) of Regulation ATS), or an Electronic Communications Network (as defined in Rule 600(b)(23) of Regulation NMS).’’ 7 BZX Depth Fees BZX Depth is an uncompressed market data feed that provides depth-ofbook quotations and execution information based on equity orders entered into the System.8 Internal Distributor Fee. Currently, the Exchange charges fees for both internal and external distribution of BZX Depth. The cost of BZX Depth for an Internal Distributor 9 is currently $1,000 per month. The Exchange also separately charges an External Distributor 10 of BZX Depth a flat fee of $5,000 per month. The Exchange does not charge Internal and External Distributors separate display User 11 fees. The Exchange now proposes to increase the fee for Internal Distributors from $1,000 per month to $1,500 per month. The Exchange does not proposes to amend its fees for External Distributors. Non-Display Usage Fee. The Exchange also proposes to adopt a new fee for Non-Display Usage by Trading Platforms, which is similar to fees currently being charged by Nasdaq and the New York Stock Exchange, Inc. (‘‘NYSE’’).12 As proposed, subscribers to (‘‘Nasdaq’’) Rule 7023(a)(2)(B), which defines NonDisplay Usage as ‘‘any method of accessing Depthof-Book data that involves access or use by a machine or automated device without access or use of a display by a natural person or persons. 7 The proposed definition of Trading Platform is identical the definition of Trading Platform under Nasdaq Rule 7023(a)(7). 8 See Exchange Rule 11.22(a) and (c). 9 An ‘‘Internal Distributor’’ is 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.’’ See the Exchange Fee Schedule available at https://batstrading.com/support/fee_schedule/bzx/. A ‘‘Distributor’’ is defined as ‘‘any entity that receives the Exchange Market Data product directly from the Exchange or indirectly through another entity and then distributes it internally or externally to a third party.’’ Id. 10 An ‘‘External Distributor’’ is 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.’’ Id. 11 A ‘‘User’’ is 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.’’ Id. 12 See Nasdaq Rule 7023(d) (setting forth a Trading Platform Fee of $5,000 per trading platform up to a maximum of three trading platforms for depth-of-book data). See also NYSE Market Data E:\FR\FM\28DEN1.SGM Continued 28DEN1 80828 Federal Register / Vol. 80, No. 248 / Monday, December 28, 2015 / Notices BZX Depth would pay a fee of $5,000 per month for Non-Display Usage of BZX Depth by its Trading Platforms. Trading Platforms, as defined above, include registered National Securities Exchanges, Alternative Trading Systems (‘‘ATSs’’), and Electronic Communications Networks (‘‘ECNs’’) as those terms are defined in the Exchange Act and regulations and rules thereunder. The fee would be assessed in addition to existing Distributor fees. The fee of $,5000 per month would represent the maximum charge per subscriber regardless of the number of Trading Platforms the subscriber operates and receive the data for NonDisplay Usage. For example, if a subscriber operates three Trading Platforms that receives BZX Depth for Non-Displayed Usage, that subscriber would continue to pay a total fee of $5,000 per month, rather than paying $15,000 per month for its three Trading Platforms ($5,000 for each Trading Platform). Implementation Date The Exchange proposes to implement the proposed changes to its fee schedule on January 4, 2016. mstockstill on DSK4VPTVN1PROD with NOTICES 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,13 in general, and furthers the objectives of Section 6(b)(4),14 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 of Exchange data. The Exchange also believes that the proposed rule change is consistent with Section 11(A) of the Act 15 in that it supports (i) fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange Fees, November 2015 (providing a monthly fee for non-display usage of $5,000 for NYSE OpenBook). 13 15 U.S.C. 78f. 14 15 U.S.C. 78f(b)(4). 15 15 U.S.C. 78k–1. VerDate Sep<11>2014 13:31 Dec 24, 2015 Jkt 238001 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,16 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. In addition, the proposed fees would not permit unfair discrimination because all of the Exchange’s subscribers will be subject to the proposed fees on an equivalent basis. BZX Depth 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 BZX Depth further ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when 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 BZX Depth, prospective Users likely would not subscribe to, or would cease subscribing to, BZX Depth. 16 See PO 00000 17 CFR 242.603. Frm 00084 Fmt 4703 Sfmt 4703 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.17 The proposed amendment to the Internal Distributor fee for BZX Depth is also equitable and reasonable as, despite the increase, the fee proposed continues to be less than similar fees currently charged by Nasdaq and NYSE for their depth-of-book data products.18 In addition, the proposed Non-Display Usage fee by Trading Platforms for BZX Depth is equitable and reasonable as the fees proposed are equal to, and in some cases less than, similar fees currently charged by Nasdaq for its depth-of-book data. Like as proposed by the Exchange, Nasdaq charges subscribers to its depthof-book data utilized by trading platforms on a non-displayed basis $5,000 per month.19 However, unlike the Exchange, a subscriber utilizing Nasdaq depth-of-book data on more than one Trading Platform would pay 17 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). 18 See Nasdaq Rule 7023(c) (providing for fees of $25,000 to $500,000 to internal distributors of Nasdaq Depth-of-Book products). See also NYSE Market Data Fees, November 2015 (providing a $5,000 per month access fee for NYSE OpenBook). 19 See Nasdaq Rule 7023(d). See also NYSE Market Data Fees, November 2015 (providing a monthly fee for non-display usage of $5,000 for NYSE OpenBook). E:\FR\FM\28DEN1.SGM 28DEN1 Federal Register / Vol. 80, No. 248 / Monday, December 28, 2015 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES $5,000 per month for each up to a maximum fee of $15,000. The Exchange proposes to charge the same rate regardless of the number of Trading Platforms receiving the data for NonDisplay Usage operated by that subscriber. The Trading Platform fee is also equitable and reasonable in that it ensures that heavy users of the BZX Depth pay an equitable share of the total fees. Currently, External Distributors pay higher fees than Internal Distributors based upon their assumed higher usage levels. The Exchange believes that Trading Platforms are generally high users of the data, using it to power a matching engine for millions or even billions of trading messages per day. Lastly, the Exchange believes that the proposed definitions are reasonable because they are designed to provide greater transparency to Members with regard to how the Exchange would assess the proposed fee for Non-Display Usage of BZX Depth by Trading Platforms. The Exchange believes that Members would benefit from clear guidance in its fee schedule describing the manner in which is assess fees. These definitions are 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. Lastly, the proposed definitions are based on existing rules of Nasdaq.20 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. The Exchange’s ability to price BZX Depth 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 20 Nasdaq Rules 7023(a)(2)(B) and (a)(7). VerDate Sep<11>2014 13:31 Dec 24, 2015 Jkt 238001 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, BZX Depth competes with a number of alternative products. For instance, BZX Depth does not provide a complete picture of all trading activity in a security. Rather, the other national securities exchanges, the several TRFs of FINRA, and ECNs that produce proprietary data all produce trades and trade reports. Each is currently permitted to produce depthof-book information products, and many currently do, including Nasdaq and 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 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 BZX Depth, 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 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. The Exchange believes the proposed increase to the Internal Distributor fee and adoption of the fee for Non-Display Usage by Trading Platforms for BZX Depth would increase competition amongst the exchanges that offer depthof-book products. The Exchange notes PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 80829 that, despite the proposed increase, the Internal Distribution fee for BZX Depth continues to be less than similar fees currently charged by Nasdaq and NYSE for its depth-of-book data.21 In addition, the proposed Non-Display Usage fee by Trading Platforms is equal to, and in some cases less than, similar fees currently charged by Nasdaq for its Depth-of-Book data.22 Lastly, the proposed definitions will not result in any burden on competition. The Exchange believes that Members would benefit from clear guidance in its fee schedule describing the manner in which is assess fees. 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 23 and paragraph (f) of Rule 19b–4 thereunder.24 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: 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–2015–115 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange 21 See supra note 18. supra note 19. 23 15 U.S.C. 78s(b)(3)(A). 24 17 CFR 240.19b–4(f). 22 See E:\FR\FM\28DEN1.SGM 28DEN1 80830 Federal Register / Vol. 80, No. 248 / Monday, December 28, 2015 / Notices Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BATS–2015–115. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer o File Number SR–BATS– 2015–115, and should be submitted on or before January 19, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Brent J. Fields, Secretary. [FR Doc. 2015–32537 Filed 12–24–15; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION mstockstill on DSK4VPTVN1PROD with NOTICES [Release No. 34–76716; File No. SR–MIAX– 2015–72] Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule December 21, 2015. Pursuant to the provisions of Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b-4 25 17 1 15 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). VerDate Sep<11>2014 13:31 Dec 24, 2015 Jkt 238001 thereunder,2 notice is hereby given that on December 11, 2015, Miami International Securities Exchange LLC (‘‘MIAX’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) a 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange is filing a proposal to amend the MIAX Options Fee Schedule (the ‘‘Fee Schedule’’). The text of the proposed rule change is available on the Exchange’s Web site at https://www.miaxoptions.com/filter/ wotitle/rule_filing, at MIAX’s principal office, 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 Exchange proposes to amend its Fee Schedule to: (i) Reduce the transaction fee for options overlying EEM, GLD, IWM, QQQ, and SPY executed by non-MIAX Market Makers; and (ii) modify the transaction fee for options overlying EEM, GLD, IWM, QQQ and SPY assessed to non-MIAX Market Makers that achieve certain Priority Customer Rebate Program 3 volume tiers.4 The Exchange proposes to decrease the per contract transaction fee for nonMIAX Market Makers for options overlying EEM, GLD, IWM, QQQ, and 2 17 CFR 240.19b–4. Fee Schedule, Section (1)(a)(ii). 4 See Securities Act Release No. 73850 (December 16, 2014), 79 FR 76424 (December 22, 2014) (SR– MIAX–2014–63). 3 See PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 SPY from $0.55 to $0.50. The Exchange notes that the transaction fees for nonMIAX Market Makers in all other options classes will not change and thus will continue to be charged the same amount for non-Penny Pilot options classes and Penny Pilot options classes as they do today. The Exchange proposes to continue to offer non-MIAX Market Makers the opportunity to reduce transaction fees by $0.02 per contract in standard options in EEM, GLD, IWM, QQQ, and SPY. Specifically, any Member or its affiliates of at least 75% common ownership between the firms as reflected on each firm’s Form BD, Schedule A, that qualifies for Priority Customer Rebate Program volume tiers 3 or 4 and is a non-MIAX Market Maker will be assessed a reduced transaction fee of $0.48 per contract for standard options in EEM, GLD, IWM, QQQ, and SPY. The Exchange believes that these incentives will encourage non-MIAX Market Makers to transact a greater number of orders on the Exchange. The Exchange believes that the proposed fee reduction for non-MIAX Market Makers in EEM, GLD, IWM, QQQ, and SPY will benefit these market participants and encourage them to send greater order flow to the Exchange. The proposed changes to the Fee Schedule will be operative as of January 1, 2016. 2. Statutory Basis The Exchange believes that its proposal to amend its Fee Schedule is consistent with Section 6(b) of the Act 5 in general, and furthers the objectives of Section 6(b)(4) of the Act 6 in particular, in that it is an equitable allocation of reasonable fees and other charges among Exchange members and issuers and other persons using its facilities. The Exchange’s proposed decrease in transaction fees for non-MIAX Market Makers in EEM, GLD, IWM, QQQ and SPY is reasonable because the lower fees should encourage these market participants to send additional order flow to the Exchange and the additional order flow should benefit all market participants. The instant proposal is equitable and not unfairly discriminatory because the fee applies equally to all non-MIAX Market Makers. The Exchange’s continued higher transaction fee for non-MIAX Market Makers compared to that for MIAX Market Markers is equitable and not unfairly discriminatory because MIAX Market Markers have enhanced quoting obligations measured in both quantity 5 15 6 15 E:\FR\FM\28DEN1.SGM U.S.C. 78f(b). U.S.C. 78f(b)(4). 28DEN1

Agencies

[Federal Register Volume 80, Number 248 (Monday, December 28, 2015)]
[Notices]
[Pages 80827-80830]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32537]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76709; File No. SR-BATS-2015-115]


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.

December 21, 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 December 17, 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 Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the Market Data section of 
its fee schedule to: (i) Adopt definitions for the terms ``Non-Display 
Usage'' and ``Trading Platforms''; and (ii) amend the fees for TCP 
Depth and Multicast Depth data products,\5\ also known as BZX Depth, to 
increase the Internal Distributor fee and adopt a new fee for Non-
Display Usage.
---------------------------------------------------------------------------

    \5\ See Exchange Rule 11.22(a) and (c).
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    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 the Market Data section of its fee 
schedule to: (i) adopt definitions for the terms ``Non-Display Usage'' 
and ``Trading Platforms''; and (ii) amend the fees for BZX Depth to 
increase the Internal Distributor fee and adopt a new fee for Non-
Display Usage.
Definitions
    The Exchange proposes to adopt definitions for the terms ``Non-
Display Usage'' and ``Trading Platforms''. The proposed definitions are 
designed to provide greater transparency with regard to how the 
Exchange assesses fees for market data. Non-Display Usage would be 
defined as ``any method of accessing a Market Data product that 
involves access or use by a machine or automated device without access 
or use of a display by a natural person or persons.'' \6\ The term 
Trading Platform would be defined as ``any execution platform operated 
as or by a registered National Securities Exchange (as defined in 
Section 3(a)(1) of the Exchange Act), an Alternative Trading System (as 
defined in Rule 300(a) of Regulation ATS), or an Electronic 
Communications Network (as defined in Rule 600(b)(23) of Regulation 
NMS).'' \7\
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    \6\ The proposed definition of Non-Display Usage is 
substantially similar to Nasdaq Stock Market LLC (``Nasdaq'') Rule 
7023(a)(2)(B), which defines Non-Display Usage as ``any method of 
accessing Depth-of-Book data that involves access or use by a 
machine or automated device without access or use of a display by a 
natural person or persons.
    \7\ The proposed definition of Trading Platform is identical the 
definition of Trading Platform under Nasdaq Rule 7023(a)(7).
---------------------------------------------------------------------------

BZX Depth Fees
    BZX Depth is an uncompressed market data feed that provides depth-
of-book quotations and execution information based on equity orders 
entered into the System.\8\
---------------------------------------------------------------------------

    \8\ See Exchange Rule 11.22(a) and (c).
---------------------------------------------------------------------------

    Internal Distributor Fee. Currently, the Exchange charges fees for 
both internal and external distribution of BZX Depth. The cost of BZX 
Depth for an Internal Distributor \9\ is currently $1,000 per month. 
The Exchange also separately charges an External Distributor \10\ of 
BZX Depth a flat fee of $5,000 per month. The Exchange does not charge 
Internal and External Distributors separate display User \11\ fees. The 
Exchange now proposes to increase the fee for Internal Distributors 
from $1,000 per month to $1,500 per month. The Exchange does not 
proposes to amend its fees for External Distributors.
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    \9\ An ``Internal Distributor'' is 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.'' See the Exchange Fee Schedule available at https://batstrading.com/support/fee_schedule/bzx/. A ``Distributor'' is 
defined as ``any entity that receives the Exchange Market Data 
product directly from the Exchange or indirectly through another 
entity and then distributes it internally or externally to a third 
party.'' Id.
    \10\ An ``External Distributor'' is 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.'' Id.
    \11\ A ``User'' is 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.'' Id.
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    Non-Display Usage Fee. The Exchange also proposes to adopt a new 
fee for Non-Display Usage by Trading Platforms, which is similar to 
fees currently being charged by Nasdaq and the New York Stock Exchange, 
Inc. (``NYSE'').\12\ As proposed, subscribers to

[[Page 80828]]

BZX Depth would pay a fee of $5,000 per month for Non-Display Usage of 
BZX Depth by its Trading Platforms. Trading Platforms, as defined 
above, include registered National Securities Exchanges, Alternative 
Trading Systems (``ATSs''), and Electronic Communications Networks 
(``ECNs'') as those terms are defined in the Exchange Act and 
regulations and rules thereunder. The fee would be assessed in addition 
to existing Distributor fees. The fee of $,5000 per month would 
represent the maximum charge per subscriber regardless of the number of 
Trading Platforms the subscriber operates and receive the data for Non-
Display Usage. For example, if a subscriber operates three Trading 
Platforms that receives BZX Depth for Non-Displayed Usage, that 
subscriber would continue to pay a total fee of $5,000 per month, 
rather than paying $15,000 per month for its three Trading Platforms 
($5,000 for each Trading Platform).
---------------------------------------------------------------------------

    \12\ See Nasdaq Rule 7023(d) (setting forth a Trading Platform 
Fee of $5,000 per trading platform up to a maximum of three trading 
platforms for depth-of-book data). See also NYSE Market Data Fees, 
November 2015 (providing a monthly fee for non-display usage of 
$5,000 for NYSE OpenBook).
---------------------------------------------------------------------------

Implementation Date
    The Exchange proposes to implement the proposed changes to its fee 
schedule on January 4, 2016.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\13\ in general, and 
furthers the objectives of Section 6(b)(4),\14\ 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 of 
Exchange data.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f.
    \14\ 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 \15\ 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,\16\ 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.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78k-1.
    \16\ See 17 CFR 242.603.
---------------------------------------------------------------------------

    In addition, the proposed fees would not permit unfair 
discrimination because all of the Exchange's subscribers will be 
subject to the proposed fees on an equivalent basis. BZX Depth 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 
BZX Depth further ensures that the Exchange cannot set unreasonable 
fees, or fees that are unreasonably discriminatory, when 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 BZX Depth, prospective Users 
likely would not subscribe to, or would cease subscribing to, BZX 
Depth.
    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.\17\
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    \17\ 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).
---------------------------------------------------------------------------

    The proposed amendment to the Internal Distributor fee for BZX 
Depth is also equitable and reasonable as, despite the increase, the 
fee proposed continues to be less than similar fees currently charged 
by Nasdaq and NYSE for their depth-of-book data products.\18\ In 
addition, the proposed Non-Display Usage fee by Trading Platforms for 
BZX Depth is equitable and reasonable as the fees proposed are equal 
to, and in some cases less than, similar fees currently charged by 
Nasdaq for its depth-of-book data. Like as proposed by the Exchange, 
Nasdaq charges subscribers to its depth-of-book data utilized by 
trading platforms on a non-displayed basis $5,000 per month.\19\ 
However, unlike the Exchange, a subscriber utilizing Nasdaq depth-of-
book data on more than one Trading Platform would pay

[[Page 80829]]

$5,000 per month for each up to a maximum fee of $15,000. The Exchange 
proposes to charge the same rate regardless of the number of Trading 
Platforms receiving the data for Non-Display Usage operated by that 
subscriber.
---------------------------------------------------------------------------

    \18\ See Nasdaq Rule 7023(c) (providing for fees of $25,000 to 
$500,000 to internal distributors of Nasdaq Depth-of-Book products). 
See also NYSE Market Data Fees, November 2015 (providing a $5,000 
per month access fee for NYSE OpenBook).
    \19\ See Nasdaq Rule 7023(d). See also NYSE Market Data Fees, 
November 2015 (providing a monthly fee for non-display usage of 
$5,000 for NYSE OpenBook).
---------------------------------------------------------------------------

    The Trading Platform fee is also equitable and reasonable in that 
it ensures that heavy users of the BZX Depth pay an equitable share of 
the total fees. Currently, External Distributors pay higher fees than 
Internal Distributors based upon their assumed higher usage levels. The 
Exchange believes that Trading Platforms are generally high users of 
the data, using it to power a matching engine for millions or even 
billions of trading messages per day.
    Lastly, the Exchange believes that the proposed definitions are 
reasonable because they are designed to provide greater transparency to 
Members with regard to how the Exchange would assess the proposed fee 
for Non-Display Usage of BZX Depth by Trading Platforms. The Exchange 
believes that Members would benefit from clear guidance in its fee 
schedule describing the manner in which is assess fees. These 
definitions are 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. Lastly, the proposed 
definitions are based on existing rules of Nasdaq.\20\
---------------------------------------------------------------------------

    \20\ Nasdaq Rules 7023(a)(2)(B) and (a)(7).
---------------------------------------------------------------------------

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. The 
Exchange's ability to price BZX Depth 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, BZX Depth competes with a number of alternative 
products. For instance, BZX Depth does not provide a complete picture 
of all trading activity in a security. Rather, the other national 
securities exchanges, the several TRFs of FINRA, and ECNs that produce 
proprietary data all produce trades and trade reports. Each is 
currently permitted to produce depth-of-book information products, and 
many currently do, including Nasdaq and 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 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 BZX Depth, 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 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.
    The Exchange believes the proposed increase to the Internal 
Distributor fee and adoption of the fee for Non-Display Usage by 
Trading Platforms for BZX Depth would increase competition amongst the 
exchanges that offer depth-of-book products. The Exchange notes that, 
despite the proposed increase, the Internal Distribution fee for BZX 
Depth continues to be less than similar fees currently charged by 
Nasdaq and NYSE for its depth-of-book data.\21\ In addition, the 
proposed Non-Display Usage fee by Trading Platforms is equal to, and in 
some cases less than, similar fees currently charged by Nasdaq for its 
Depth-of-Book data.\22\
---------------------------------------------------------------------------

    \21\ See supra note 18.
    \22\ See supra note 19.
---------------------------------------------------------------------------

    Lastly, the proposed definitions will not result in any burden on 
competition. The Exchange believes that Members would benefit from 
clear guidance in its fee schedule describing the manner in which is 
assess fees. 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 \23\ and paragraph (f) of Rule 19b-4 
thereunder.\24\ 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.
---------------------------------------------------------------------------

    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 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-2015-115 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange

[[Page 80830]]

Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-BATS-2015-115. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer o File Number SR-BATS-2015-115, and should be 
submitted on or before January 19, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
---------------------------------------------------------------------------

    \25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-32537 Filed 12-24-15; 8:45 am]
 BILLING CODE 8011-01-P
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