Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees, 54640-54643 [2016-19444]

Download as PDF 54640 Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices Participants Fund Maintenance Fee is approximately $5 million. Participant Impact The proposed rule change will impose the Participants Fund Maintenance Fee on all Participants. The Participants Fund Maintenance Fee is a monthly fee based ratably upon the amount of the Participant’s daily Actual Participants Fund Deposit; it is applicable when the monthly rate of return on investment of the Participants Fund is equal to or greater than 0.25%. Because the Participants Fund Maintenance Fee per Participant is proportional to the average monthly Actual Participants Fund Deposit, Participants that, based on their usage of DTC’s settlement service, place a greater demand on the settlement system will generally be subject to a higher fee, because such Participants are required to maintain higher deposits to the Participants Fund pursuant to the Rules. DTC views the proposed implementation of the Participants Fund Maintenance Fee as a prudent way to minimize the magnitude of, and mitigate the need for, potential future increases in other fees. The proposed change will take effect on August 1, 2016. asabaliauskas on DSK3SPTVN1PROD with NOTICES 2. Statutory Basis Section 17A(b)(3)(D) of the Act 7 requires that DTC’s Rules provide for the equitable allocation of reasonable dues, fees, and other charges among its participants. The proposed fee is equitably allocated among Participants because it is based on each Participant’s utilization of DTC’s settlement service, as measured by their deposits to the Participants Fund. In addition, DTC believes that the proposed fee is reasonable because it will enable DTC to better align its revenue with the costs and expenses required for DTC to provide services to its Participants with a nominal impact on Participants. Therefore, DTC believes the proposed rule change is consistent with section 17A(b)(3)(D).8 (B) Clearing Agency’s Statement on Burden on Competition DTC does not believe that the proposed rule change will impose a burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, because the proposed fee will be equitably allocated among Participants as described above. That is, a Participant that, based on its usage of DTC’s settlement service, places a greater demand on the settlement system will generally be subject to a higher fee, because such a Participant is required to maintain higher deposits to the Participants Fund pursuant to the Rules. Participants that place a lesser demand on the settlement system will pay less. (C) Clearing Agency’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others DTC has not received or solicited any written comments relating to this proposal. DTC will notify the Commission of any written comments received by DTC. 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) 9 of the Act and paragraph (f) of Rule 19b–4 10 thereunder. 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: 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 DTC and on DTCC’s Web site (https://dtcc.com/legal/sec-rulefilings.aspx). 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–DTC– 2016–006 and should be submitted on or before September 6, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–19440 Filed 8–15–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION 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– DTC–2016–006 on the subject line. [Release No. 34–78535; File No. SR– BatsEDGX–2016–42] Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549. All submissions should refer to File Number SR–DTC–2016–006. 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 August 10, 2016. Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees 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 August 5, 2016, Bats EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) 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 11 17 7 15 U.S.C. 78q–1(b)(3)(D). U.S.C. 78s(b)(3)(A). 10 17 CFR 240.19b–4(f). 8 Id. VerDate Sep<11>2014 18:36 Aug 15, 2016 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 9 15 Jkt 238001 PO 00000 Frm 00091 Fmt 4703 1 15 Sfmt 4703 E:\FR\FM\16AUN1.SGM 16AUN1 Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices 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 the fee schedule applicable to Members 5 and non-Members of the Exchange pursuant to EDGX Rules 15.1(a) and (c). 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its fee schedule to: (i) Adopt a new tier called the Cross-Asset Tier under footnote 1; and (ii) modify the billing policy for the logical port fees. asabaliauskas on DSK3SPTVN1PROD with NOTICES Logical Port Fees The Exchange proposes to amend its fee schedule to modify the billing policy for the logical port fees. The Exchange currently charges for logical ports (including Multicast PITCH Spin Server and GRP ports) $500 per port per month. A logical port represents a port 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 5 The term ‘‘Member’’ is defined as ‘‘any registered broker or dealer that has been admitted to membership in the Exchange.’’ See Exchange Rule 1.5(n). VerDate Sep<11>2014 18:36 Aug 15, 2016 Jkt 238001 established by the Exchange within the Exchange’s system for trading and billing purposes. Each logical port established is specific to a Member or non-Member and grants that Member or non-Member the ability to operate a specific application, such as FIX order entry or PITCH data receipt. The Exchange’s Multicast PITCH data feed is available from two primary feeds, identified as the ‘‘A feed’’ and the ‘‘C feed’’, which contain the same information but differ only in the way such feeds are received. The Exchange also offers two redundant feeds, identified as the ‘‘B feed’’ and the ‘‘D feed’’. Logical port fees are limited to logical ports in the Exchange’s primary data center and no logical port fees are assessed for redundant secondary data center ports. The Exchange assesses the monthly per logical port fees to all Member’s and non-Member’s logical ports. The Exchange proposes to clarify within its fee schedule how monthly fees for logical ports may be pro-rated. As proposed, new requests will be prorated for the first month of service. Cancellation requests are billed in full month increments as firms are required to pay for the service for the remainder of the month, unless the session is terminated within the first month of service. Proposed Cross-Asset Tier The Exchange determines the liquidity adding rebate that it will provide to Members using the Exchange’s tiered pricing structure. Currently, the Exchange provides various rebates under Footnote 1 of the fee schedule for a Member dependent on the Member’s ADV 6 as a percentage of the TCV 7 for orders that yield fee codes B, V, Y, 3, 4 and ZA. The Exchange currently has eight Add Volume Tiers. Under such pricing structure, a Member will receive a rebate of anywhere between $0.0025 and $0.0033 per share executed, depending on the volume tier for which such Member qualifies. The Exchange now proposes to amend the Add Volume Tiers to adopt a new tier called the Cross-Asset Tier. Under the proposed tier, a Member would receive an enhanced rebate of $0.0028 per share where that: (i) Member has on the Exchange’s equity options trading platform (‘‘EDGX Options’’) an ADV 8 in 6 As defined in the Exchange’s fee schedule available at https://batstrading.com/support/fee_ schedule/edgx/. 7 Id. 8 As defined in the EDGX Options’ fee schedule available at https://www.batsoptions.com/support/ fee_schedule/edgx/. PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 54641 Firm 9 orders equal to or greater than 0.10% of average TCV; and (2) Member has an ADAV 10 equal to or greater than 0.12% of average TCV. To accommodate this proposed change in its fee schedule, the Exchange proposes adding an additional row to the Add Volume Tier table under footnote 1 to list the CrossAsset Tier. The Exchange proposes no changes to the criteria for the existing Add Volume Tiers. In connection with adopting the above tier, the Exchange proposes to incorporate a definition of ADAV within the definition of ADV in its fee schedule.11 ADAV would be defined as the average daily added volume calculated as the number of shares added per day. Like ADV, ADAV would be calculated on a monthly basis. Also like ADV, the Exchange will exclude from its calculation of ADAV shares added, removed, or routed on any day that the Exchange’s system experiences a disruption that lasts for more than 60 minutes during Regular Trading Hours (‘‘Exchange System Disruption’’), on any day with a scheduled early market close, and on the last Friday in June (the ‘‘Russell Reconstitution Day’’). Lastly, with prior notice to the Exchange, a Member may aggregate ADAV with other Members that control, are controlled by, or are under common control with such Member (as evidenced on such Member’s Form BD) just like it may for ADV today. Implementation Date The Exchange proposes to implement this amendment to its fee schedule effective immediately.12 2. Statutory Basis Logical Port Fee The Exchange believes that the proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6 of the Act.13 Specifically, the Exchange believes that the proposed rule change is consistent 9 Id. 10 As defined in the Exchange’s fee schedule available at https://batstrading.com/support/fee_ schedule/edgx/. 11 The proposed definition of ADAV is substantially similar and functionally identical to the definition of ADAV included in the EDGX Options fee schedule. See the EDGX Options’ fee schedule available at https://www.batsoptions.com/ support/fee_schedule/edgx/. 12 The Exchange initially filed the proposed fee change on July 29, 2016 (SR–BatsEDGX–2016–38). On August 5, 2016, the Exchange withdrew SR– BatsEDGX–2016–38 and submitted this filing. 13 15 U.S.C. 78f. E:\FR\FM\16AUN1.SGM 16AUN1 54642 Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices with Section 6(b)(4) of the Act,14 in that it provides for the equitable allocation of reasonable dues, fees and other charges among members and other persons using any facility or system which the Exchange operates or controls. The proposed rule change seeks to provide clarity to subscribers regarding the Exchange’s pro-rata billing policy for logical ports by describing how logical port fees may be pro-rated for a new request and upon cancellation. The Exchange believes that the proposed pro-rata billing of fees for logical ports is equitable and reasonable in that it is similar to how port fees are pro-rated by the Nasdaq Stock Market LLC (‘‘Nasdaq’’).15 The Exchange operates in a highly competitive market in which exchanges offer connectivity services as a means to facilitate the trading activities of members and other participants. Accordingly, fees charged for connectivity are constrained by the active competition for the order flow of such participants as well as demand for market data from the Exchange. If a particular exchange charges excessive fees for connectivity, affected members will opt to terminate their connectivity arrangements with that exchange, and adopt a possible range of alternative strategies, including routing to the applicable exchange through another participant or market center or taking that exchange’s data indirectly. Accordingly, an exchange charging excessive fees would stand to lose not only connectivity revenues, but also revenues associated with the execution of orders routed to it by affected members, and, to the extent applicable, market data revenues. The Exchange believes that this competitive dynamic imposes powerful restraints on the ability of any exchange to charge unreasonable and unequitable fees for connectivity. asabaliauskas on DSK3SPTVN1PROD with NOTICES Cross-Asset Tier The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,16 in general, and furthers the objectives of Section 6(b)(4),17 in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its Members and 14 15 U.S.C. 78f(b)(4). Nasdaq Price List—Trade Connectivity available at https://www.nasdaqtrader.com/ Trader.aspx?id=PriceListTrading2#connectivity. The Exchange notes that, unlike as proposed by the Exchange, Nasdaq does not pro-rate where the session is terminated within the first month of service. 16 15 U.S.C. 78f. 17 15 U.S.C. 78f(b)(4). 15 See VerDate Sep<11>2014 18:36 Aug 15, 2016 Jkt 238001 other persons using its facilities. The Exchange also notes that it operates in a highly-competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive. The proposed rule changes reflect a competitive pricing structure designed to incent market participants to direct their order flow to the Exchange. The Exchange believes that the proposed amendments to the Add Volume Tier are equitable and nondiscriminatory in they would apply uniformly to all Members. The Exchange believes the rate remains competitive with those charged by other venues and is, therefore, reasonable. Volume-based rebates such as that proposed herein have been widely adopted by exchanges, including the Exchange, and are equitable because they are open to all Members on an equal basis and provide additional benefits or discounts that are reasonably related to: (i) The value to an exchange’s market quality; (ii) associated higher levels of market activity, such as higher levels of liquidity provision and/or growth patterns; and (iii) introduction of higher volumes of orders into the price and volume discovery processes. The Exchange believes that the proposal is a reasonable, fair and equitable, and not unfairly discriminatory allocation of fees and rebates because it will provide Members with an additional incentive to reach certain thresholds on the Exchange. In particular, the Exchange believes the addition of the proposed Cross-Asset Tier is a reasonable means to encourage Members to increase the liquidity they provide on the Exchange. The addition of the tier merely incentivizes a Member to provide even greater liquidity. Currently, the Exchange’s incentives to add such liquidity are separated by asset class. The proposed Cross-Asset Tier will incentivize Members to provide liquidity in two asset classes, both in EDGX equities and EDGX Options. The Exchange further believes that the amendment to the Add Volume Tiers represents an equitable allocation of reasonable dues, fees, and other charges because the thresholds necessary to achieve the tier continue to encourage Members to add displayed liquidity to the EDGX Book 18 and the EDGX Options Book 19 each month. The increased liquidity benefits all investors by deepening EDGX’s liquidity pool, 18 The EDGX Book is the System’s electronic file of orders. See Exchange Rule 1.5(d). 19 The EDGX Options Book is the electronic book of options orders maintained by the Trading System. See Exchange Rule 16.1(a)(9). PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 offering additional flexibility for all investors to enjoy cost savings, supporting the quality of price discovery, promoting market transparency and improving investor protection. Such pricing programs thereby reward a Member’s growth pattern on the Exchange and such increased volume increases potential revenue to the Exchange, and will allow the Exchange to continue to provide and potentially expand the incentive programs operated by the Exchange. To the extent a Member participates on the Exchange but not on EDGX Options, the Exchange does believe that the proposal is still reasonable, equitably allocated and nondiscriminatory with respect to such Member based on the overall benefit to the Exchange resulting from the success of EDGX Options. As noted above, such success allows the Exchange to continue to provide and potentially expand its existing incentive programs to the benefit of all participants on the Exchange, whether they participate on EDGX Options or not. The proposed pricing program is also fair and equitable in that membership in EDGX Options is available to all market participants which would provide them with access to the benefits on EDGX Options provided by the proposed changes, as described above, even where a member of EDGX Options is not necessarily eligible for the proposed increased rebates on the Exchange. Further, the proposed changes will result in Members receiving either the same or an increased rebate than they would currently receive. Lastly, the Exchange believes the proposed definition of ADAV is also consistent with the Act as it is substantially similar and functionally identical to the definition of ADAV included in the EDGX Options fee schedule.20 B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe its proposed amendment to its fee schedule would impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange does not believe that the proposed change represents a significant departure from previous pricing offered by the Exchange or pricing offered by the Exchange’s competitors. Additionally, Members may opt to disfavor the Exchange’s pricing if they believe that 20 See the EDGX Options’ fee schedule available at https://www.batsoptions.com/support/fee_ schedule/edgx/. E:\FR\FM\16AUN1.SGM 16AUN1 Federal Register / Vol. 81, No. 158 / Tuesday, August 16, 2016 / Notices alternatives offer them better value. The Exchange does not believe that the proposed additional tier would burden competition, but instead, enhances competition, as it is intended to increase the competitiveness of and draw additional volume to the Exchange. The Exchange does not believe the amended tier would burden intramarket competition as it would apply to all Members uniformly. Accordingly, the Exchange does not believe that the proposed change will impair the ability of Members or competing venues to maintain their competitive standing in the financial markets. With regard to the proposed logical port fee amendment, the Exchange believes that fees for connectivity are constrained by the robust competition for order flow among exchanges and non-exchange markets. Further, excessive fees for connectivity, including logical port fees, would serve to impair an exchange’s ability to compete for order flow rather than burdening competition. The Exchange also does not believe the proposed rule change would impact intramarket competition as it would apply to all Members and non-Members equally. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from Members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action asabaliauskas on DSK3SPTVN1PROD with NOTICES The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 21 and paragraph (f) of Rule 19b–4 thereunder.22 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: SECURITIES AND EXCHANGE COMMISSION Electronic Comments [Release No. 34–78531; File No. SR–CBOE– 2016–046] • 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– BatsEDGX–2016–42 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–BatsEDGX–2016–42. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Internet Web site (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room, 100 F Street NE., Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR– BatsEDGX–2016–42, and should be submitted on or before September 6, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–19444 Filed 8–15–16; 8:45 am] BILLING CODE 8011–01–P U.S.C. 78s(b)(3)(A). 22 17 CFR 240.19b–4(f). 21 15 VerDate Sep<11>2014 18:36 Aug 15, 2016 23 17 Jkt 238001 54643 PO 00000 CFR 200.30–3(a)(12). Frm 00094 Fmt 4703 Sfmt 4703 Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Order Approving a Proposed Rule Change To Expand the Nonstandard Expirations Pilot Program To Include Monday Expirations August 10, 2016. I. Introduction On June 14, 2016, Chicago Board Options Exchange, Incorporated (‘‘CBOE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change to expand the End of Week/End of Month Pilot Program to permit P.M.-settled options on broad-based indexes to expire on any Monday of the month. The proposed rule change was published for comment in the Federal Register on June 28, 2016.3 The Commission received no comments on the proposal. This order approves the proposed rule change. II. Description of the Proposal CBOE proposes to expand its existing Nonstandard Expirations Pilot Program (the ‘‘Pilot’’).4 Under the terms of the current Pilot, the Exchange is permitted to list P.M.-settled options on broadbased indexes to expire on (a) any Friday of the month, other than the third Friday-of-the-month (‘‘EOW’’), (b) the last trading day of the month (‘‘EOM’’), and (c) any Wednesday of the month, other than a Wednesday that coincides with an EOM (‘‘WED’’).5 Under the proposal, the Exchange will expand the Pilot to permit P.M.-settled options on broad-based indexes to 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 78132 (June 22, 2016), 81 FR 42018 (June 28, 2016) (‘‘Notice’’). 4 See Securities Exchange Act Release No. 62911 (September 14, 2010), 75 FR 57539 (September 21, 2010) (order approving SR–CBOE–2009–075) (‘‘Pilot Approval Order’’). See also Securities Exchange Act Release No. 76909 (January 14, 2016), 81 FR 3512 (January 21, 2016) (SR–CBOE–2015– 106) (order approving an expansion and extension of the Pilot) (‘‘WED Approval Order’’). The Pilot is currently set to expire on May 3, 2017. See id. 5 EOWs, EOMs, and WEDs are permitted on any broad-based index that is eligible for regular options trading. EOWs, EOMs, and WEDs are cash-settled expirations with European-style exercise, and are subject to the same rules that govern the trading of standard index options. See CBOE Rule 24.9(e). 2 17 E:\FR\FM\16AUN1.SGM 16AUN1

Agencies

[Federal Register Volume 81, Number 158 (Tuesday, August 16, 2016)]
[Notices]
[Pages 54640-54643]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-19444]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-78535; File No. SR-BatsEDGX-2016-42]


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

August 10, 2016.
    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 August 5, 2016, Bats EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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

[[Page 54641]]

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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the fee schedule applicable 
to Members \5\ and non-Members of the Exchange pursuant to EDGX Rules 
15.1(a) and (c).
---------------------------------------------------------------------------

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

    The text of the proposed rule change is available at the Exchange's 
Web site at 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its fee schedule to: (i) Adopt a new 
tier called the Cross-Asset Tier under footnote 1; and (ii) modify the 
billing policy for the logical port fees.
Logical Port Fees
    The Exchange proposes to amend its fee schedule to modify the 
billing policy for the logical port fees. The Exchange currently 
charges for logical ports (including Multicast PITCH Spin Server and 
GRP ports) $500 per port per month. A logical port represents a port 
established by the Exchange within the Exchange's system for trading 
and billing purposes. Each logical port established is specific to a 
Member or non-Member and grants that Member or non-Member the ability 
to operate a specific application, such as FIX order entry or PITCH 
data receipt. The Exchange's Multicast PITCH data feed is available 
from two primary feeds, identified as the ``A feed'' and the ``C 
feed'', which contain the same information but differ only in the way 
such feeds are received. The Exchange also offers two redundant feeds, 
identified as the ``B feed'' and the ``D feed''. Logical port fees are 
limited to logical ports in the Exchange's primary data center and no 
logical port fees are assessed for redundant secondary data center 
ports. The Exchange assesses the monthly per logical port fees to all 
Member's and non-Member's logical ports.
    The Exchange proposes to clarify within its fee schedule how 
monthly fees for logical ports may be pro-rated. As proposed, new 
requests will be pro-rated for the first month of service. Cancellation 
requests are billed in full month increments as firms are required to 
pay for the service for the remainder of the month, unless the session 
is terminated within the first month of service.
Proposed Cross-Asset Tier
    The Exchange determines the liquidity adding rebate that it will 
provide to Members using the Exchange's tiered pricing structure. 
Currently, the Exchange provides various rebates under Footnote 1 of 
the fee schedule for a Member dependent on the Member's ADV \6\ as a 
percentage of the TCV \7\ for orders that yield fee codes B, V, Y, 3, 4 
and ZA. The Exchange currently has eight Add Volume Tiers. Under such 
pricing structure, a Member will receive a rebate of anywhere between 
$0.0025 and $0.0033 per share executed, depending on the volume tier 
for which such Member qualifies.
---------------------------------------------------------------------------

    \6\ As defined in the Exchange's fee schedule available at 
https://batstrading.com/support/fee_schedule/edgx/.
    \7\ Id.
---------------------------------------------------------------------------

    The Exchange now proposes to amend the Add Volume Tiers to adopt a 
new tier called the Cross-Asset Tier. Under the proposed tier, a Member 
would receive an enhanced rebate of $0.0028 per share where that: (i) 
Member has on the Exchange's equity options trading platform (``EDGX 
Options'') an ADV \8\ in Firm \9\ orders equal to or greater than 0.10% 
of average TCV; and (2) Member has an ADAV \10\ equal to or greater 
than 0.12% of average TCV. To accommodate this proposed change in its 
fee schedule, the Exchange proposes adding an additional row to the Add 
Volume Tier table under footnote 1 to list the Cross-Asset Tier. The 
Exchange proposes no changes to the criteria for the existing Add 
Volume Tiers.
---------------------------------------------------------------------------

    \8\ As defined in the EDGX Options' fee schedule available at 
https://www.batsoptions.com/support/fee_schedule/edgx/.
    \9\ Id.
    \10\ As defined in the Exchange's fee schedule available at 
https://batstrading.com/support/fee_schedule/edgx/.
---------------------------------------------------------------------------

    In connection with adopting the above tier, the Exchange proposes 
to incorporate a definition of ADAV within the definition of ADV in its 
fee schedule.\11\ ADAV would be defined as the average daily added 
volume calculated as the number of shares added per day. Like ADV, ADAV 
would be calculated on a monthly basis. Also like ADV, the Exchange 
will exclude from its calculation of ADAV shares added, removed, or 
routed on any day that the Exchange's system experiences a disruption 
that lasts for more than 60 minutes during Regular Trading Hours 
(``Exchange System Disruption''), on any day with a scheduled early 
market close, and on the last Friday in June (the ``Russell 
Reconstitution Day''). Lastly, with prior notice to the Exchange, a 
Member may aggregate ADAV with other Members that control, are 
controlled by, or are under common control with such Member (as 
evidenced on such Member's Form BD) just like it may for ADV today.
---------------------------------------------------------------------------

    \11\ The proposed definition of ADAV is substantially similar 
and functionally identical to the definition of ADAV included in the 
EDGX Options fee schedule. See the EDGX Options' fee schedule 
available at https://www.batsoptions.com/support/fee_schedule/edgx/.
---------------------------------------------------------------------------

Implementation Date
    The Exchange proposes to implement this amendment to its fee 
schedule effective immediately.\12\
---------------------------------------------------------------------------

    \12\ The Exchange initially filed the proposed fee change on 
July 29, 2016 (SR-BatsEDGX-2016-38). On August 5, 2016, the Exchange 
withdrew SR-BatsEDGX-2016-38 and submitted this filing.
---------------------------------------------------------------------------

2. Statutory Basis
Logical Port Fee
    The Exchange believes that the proposed rule change is consistent 
with the requirements of the Act and the rules and regulations 
thereunder that are applicable to a national securities exchange, and, 
in particular, with the requirements of Section 6 of the Act.\13\ 
Specifically, the Exchange believes that the proposed rule change is 
consistent

[[Page 54642]]

with Section 6(b)(4) of the Act,\14\ in that it provides for the 
equitable allocation of reasonable dues, fees and other charges among 
members and other persons using any facility or system which the 
Exchange operates or controls. The proposed rule change seeks to 
provide clarity to subscribers regarding the Exchange's pro-rata 
billing policy for logical ports by describing how logical port fees 
may be pro-rated for a new request and upon cancellation. The Exchange 
believes that the proposed pro-rata billing of fees for logical ports 
is equitable and reasonable in that it is similar to how port fees are 
pro-rated by the Nasdaq Stock Market LLC (``Nasdaq'').\15\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
    \15\ See Nasdaq Price List--Trade Connectivity available at 
https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2#connectivity. The Exchange notes 
that, unlike as proposed by the Exchange, Nasdaq does not pro-rate 
where the session is terminated within the first month of service.
---------------------------------------------------------------------------

    The Exchange operates in a highly competitive market in which 
exchanges offer connectivity services as a means to facilitate the 
trading activities of members and other participants. Accordingly, fees 
charged for connectivity are constrained by the active competition for 
the order flow of such participants as well as demand for market data 
from the Exchange. If a particular exchange charges excessive fees for 
connectivity, affected members will opt to terminate their connectivity 
arrangements with that exchange, and adopt a possible range of 
alternative strategies, including routing to the applicable exchange 
through another participant or market center or taking that exchange's 
data indirectly. Accordingly, an exchange charging excessive fees would 
stand to lose not only connectivity revenues, but also revenues 
associated with the execution of orders routed to it by affected 
members, and, to the extent applicable, market data revenues. The 
Exchange believes that this competitive dynamic imposes powerful 
restraints on the ability of any exchange to charge unreasonable and 
unequitable fees for connectivity.
Cross-Asset Tier
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\16\ in general, and 
furthers the objectives of Section 6(b)(4),\17\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and other persons using its 
facilities. The Exchange also notes that it operates in a highly-
competitive market in which market participants can readily direct 
order flow to competing venues if they deem fee levels at a particular 
venue to be excessive. The proposed rule changes reflect a competitive 
pricing structure designed to incent market participants to direct 
their order flow to the Exchange. The Exchange believes that the 
proposed amendments to the Add Volume Tier are equitable and non-
discriminatory in they would apply uniformly to all Members. The 
Exchange believes the rate remains competitive with those charged by 
other venues and is, therefore, reasonable.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    Volume-based rebates such as that proposed herein have been widely 
adopted by exchanges, including the Exchange, and are equitable because 
they are open to all Members on an equal basis and provide additional 
benefits or discounts that are reasonably related to: (i) The value to 
an exchange's market quality; (ii) associated higher levels of market 
activity, such as higher levels of liquidity provision and/or growth 
patterns; and (iii) introduction of higher volumes of orders into the 
price and volume discovery processes. The Exchange believes that the 
proposal is a reasonable, fair and equitable, and not unfairly 
discriminatory allocation of fees and rebates because it will provide 
Members with an additional incentive to reach certain thresholds on the 
Exchange.
    In particular, the Exchange believes the addition of the proposed 
Cross-Asset Tier is a reasonable means to encourage Members to increase 
the liquidity they provide on the Exchange. The addition of the tier 
merely incentivizes a Member to provide even greater liquidity. 
Currently, the Exchange's incentives to add such liquidity are 
separated by asset class. The proposed Cross-Asset Tier will 
incentivize Members to provide liquidity in two asset classes, both in 
EDGX equities and EDGX Options. The Exchange further believes that the 
amendment to the Add Volume Tiers represents an equitable allocation of 
reasonable dues, fees, and other charges because the thresholds 
necessary to achieve the tier continue to encourage Members to add 
displayed liquidity to the EDGX Book \18\ and the EDGX Options Book 
\19\ each month. The increased liquidity benefits all investors by 
deepening EDGX's liquidity pool, offering additional flexibility for 
all investors to enjoy cost savings, supporting the quality of price 
discovery, promoting market transparency and improving investor 
protection.
---------------------------------------------------------------------------

    \18\ The EDGX Book is the System's electronic file of orders. 
See Exchange Rule 1.5(d).
    \19\ The EDGX Options Book is the electronic book of options 
orders maintained by the Trading System. See Exchange Rule 
16.1(a)(9).
---------------------------------------------------------------------------

    Such pricing programs thereby reward a Member's growth pattern on 
the Exchange and such increased volume increases potential revenue to 
the Exchange, and will allow the Exchange to continue to provide and 
potentially expand the incentive programs operated by the Exchange. To 
the extent a Member participates on the Exchange but not on EDGX 
Options, the Exchange does believe that the proposal is still 
reasonable, equitably allocated and non-discriminatory with respect to 
such Member based on the overall benefit to the Exchange resulting from 
the success of EDGX Options. As noted above, such success allows the 
Exchange to continue to provide and potentially expand its existing 
incentive programs to the benefit of all participants on the Exchange, 
whether they participate on EDGX Options or not. The proposed pricing 
program is also fair and equitable in that membership in EDGX Options 
is available to all market participants which would provide them with 
access to the benefits on EDGX Options provided by the proposed 
changes, as described above, even where a member of EDGX Options is not 
necessarily eligible for the proposed increased rebates on the 
Exchange. Further, the proposed changes will result in Members 
receiving either the same or an increased rebate than they would 
currently receive.
    Lastly, the Exchange believes the proposed definition of ADAV is 
also consistent with the Act as it is substantially similar and 
functionally identical to the definition of ADAV included in the EDGX 
Options fee schedule.\20\
---------------------------------------------------------------------------

    \20\ See the EDGX Options' fee schedule available at https://www.batsoptions.com/support/fee_schedule/edgx/.
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe its proposed amendment to its fee 
schedule would impose any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act. The Exchange 
does not believe that the proposed change represents a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. Additionally, Members may opt to 
disfavor the Exchange's pricing if they believe that

[[Page 54643]]

alternatives offer them better value. The Exchange does not believe 
that the proposed additional tier would burden competition, but 
instead, enhances competition, as it is intended to increase the 
competitiveness of and draw additional volume to the Exchange. The 
Exchange does not believe the amended tier would burden intramarket 
competition as it would apply to all Members uniformly. Accordingly, 
the Exchange does not believe that the proposed change will impair the 
ability of Members or competing venues to maintain their competitive 
standing in the financial markets.
    With regard to the proposed logical port fee amendment, the 
Exchange believes that fees for connectivity are constrained by the 
robust competition for order flow among exchanges and non-exchange 
markets. Further, excessive fees for connectivity, including logical 
port fees, would serve to impair an exchange's ability to compete for 
order flow rather than burdening competition. The Exchange also does 
not believe the proposed rule change would impact intramarket 
competition as it would apply to all Members and non-Members equally.

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

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

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \21\ and paragraph (f) of Rule 19b-4 
thereunder.\22\ 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.
---------------------------------------------------------------------------

    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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-BatsEDGX-2016-42 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-BatsEDGX-2016-42. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-BatsEDGX-2016-42, and should 
be submitted on or before September 6, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-19444 Filed 8-15-16; 8:45 am]
BILLING CODE 8011-01-P
This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.