Self-Regulatory Organizations; Bats EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Modify Fees for Connectivity and Its Communication and Routing Service Known as Bats Connect, 5619-5622 [2017-00964]
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Federal Register / Vol. 82, No. 11 / Wednesday, January 18, 2017 / Notices
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BatsEDGX–2017–02 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.
mstockstill on DSK3G9T082PROD with NOTICES
All submissions should refer to File
Number SR–BatsEDGX–2017–02. 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–2017–02 and should be
submitted on or before February 8, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–00965 Filed 1–17–17; 8:45 am]
BILLING CODE 8011–01–P
21 17
CFR 200.30–3(a)(12).
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79773; File No. SR–
BatsEDGA–2017–01]
Self-Regulatory Organizations; Bats
EDGA Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Modify Fees
for Connectivity and Its
Communication and Routing Service
Known as Bats Connect
January 11, 2017.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January 5,
2017, Bats EDGA Exchange, Inc.
(‘‘Exchange’’ or ‘‘EDGA’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Exchange has designated the proposed
rule change as one establishing or
changing a member due, fee, or other
charge imposed by the Exchange under
Section 19(b)(3)(A)(ii) of the Act 3 and
Rule 19b–4(f)(2) thereunder,4 which
renders the proposed rule change
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of 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 EDGA Rules
15.1(a) and (c) to modify its fees for
physical ports, logical ports, and for the
use of a communication and routing
service known as Bats Connect.
The text of the proposed rule change
is available at the Exchange’s Web site
at www.bats.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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
5 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).
2 17
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5619
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 modify its
fees for physical ports, logical ports, and
for the use of a communication and
routing service known as Bats Connect.
Each of these proposed changes are
described below.
Physical Ports
A physical port is utilized by a
Member or non-Member to connect to
the Exchange at the data centers where
the Exchange’s servers are located. The
Exchange currently maintains a
presence in two third-party data centers:
(i) the primary data center where the
Exchange’s business is primarily
conducted on a daily basis, and (ii) a
secondary data center, which is
predominantly maintained for business
continuity purposes. The Exchange
currently assesses the following
physical connectivity fees for Members
and non-Members on a monthly basis:
$2,000 per physical port that connects
to the System 6 via 1 gigabyte circuit;
and $4,000 per physical port that
connects to the System via 10 gigabyte
circuit. The Exchange proposes to
increase the fee per physical port that
connects to the System via a 10 gigabyte
circuit from $4,000 per month to $6,000
per month in order to cover its
increased infrastructure costs associated
with establishing physical ports to
connect to the Exchange’s Systems and
enable it to continue to maintain and
improve its market technology and
services. The Exchange does not
propose to amend the fee for a 1
gigabyte circuit, which will remain
$2,000 per month.
Logical Ports
The Exchange currently charges for
logical ports (including Multicast PITCH
Spin Server and GRP ports) $500 per
port per month. A logical port
6 The term ‘‘System’’ is defined as ‘‘the electronic
communications and trading facility designated by
the Board through which securities orders of Users
are consolidated for ranking, execution and, when
applicable, routing away.’’ See Exchange Rule
1.5(cc).
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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.
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
Members’ and non-Members’ logical
ports. The Exchange now proposes to
increase charges for logical ports
(including Multicast PITCH Spin Server
and GRP ports) from $500 per port per
month to $550 per month. Like as for
the proposed fee increase for physical
ports described above, the proposed
increase in logical port fees is intended
to cover increased infrastructure costs
associated with establishing ports to
connect to the Exchange’s Systems and
to enable the Exchange to continue to
maintain and improve its market
technology and services.
Bats Connect
The Exchange proposes to increase
select fees related to the use of Bats
Connect. Bats Connect is offered by the
Exchange on a voluntary basis in a
capacity similar to a vendor.7 In sum,
Bats Connect is a communication
service that provides subscribers an
additional means to receive market data
from and route orders to any destination
connected to the Exchange’s network.
Bats Connect does not provide any
advantage to subscribers for connecting
to the Exchange’s affiliates 8 as
compared to other methods of
connectivity. The servers of the
subscriber need not be located in the
same facilities as the Exchange in order
to subscribe to Bats Connect.
Subscribers may also seek to utilize Bats
Connect in the event of a market
disruption where other alternative
connection methods become
unavailable.
The Exchange charges a monthly
connectivity fee to subscribers utilizing
Bats Connect to route orders to other
exchanges and broker-dealers that are
connected to the Exchange’s network
via unicast access. The amount of the
connectivity fee varies based solely on
the bandwidth selected by the
subscriber. Specifically, as set forth
under the Unicast Access—Order Entry
section of the fee schedule, the
Exchange charges $350 for 1 Mb, $700
for 5 Mb, $950 for 10 Mb, $1,500 for 25
Mb, $2,500 for 50 Mb, and $3,500 for
100 Mb. The Exchange proposes to
increase those fees as follows: $500 for
1 Mb, $1,000 for 5 Mb, and $1,250 for
10 Mb. The proposed increases are
designed to cover increased costs
related to hardware, installation, and
testing, as well as increased expenses
involved in maintaining and managing
the service. The Exchange does not
propose to increase the fees for the 25
Mb, 50 Mb and 100 Mb connections as
those fees will remain $1,500, $2,500,
and $3,500, respectively.
Bats Connect also allows subscribers
to receive market data feeds from the
exchanges connected to the Exchange’s
network. In such case, the subscriber
pays the Exchange a connectivity fee,
which are set forth under the Market
Data Connectivity section of the fee
schedule and vary based solely on the
amount of bandwidth required to
transmit the selected data product to the
subscriber.9 The proposed connectivity
fees currently range from no charge to
$11,500 based on the market data
product the subscriber selects. The
Exchange proposes to increase select
connectivity fees for market data as
follows:
Data feed
Current fee
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UQDF/UTDF/OMDF .................................................................................................................................................
CQS/CTS .................................................................................................................................................................
OPRA .......................................................................................................................................................................
Nasdaq TotalView ....................................................................................................................................................
Nasdaq BX TotalView ..............................................................................................................................................
Nasdaq PSX TotalView ...........................................................................................................................................
NYSE Integrated ......................................................................................................................................................
NYSE ArcaBook ......................................................................................................................................................
NYSE MKT OpenBook Ultra ...................................................................................................................................
NYSE Alerts .............................................................................................................................................................
NYSE Imbalances ....................................................................................................................................................
NYSE Arca Trades ..................................................................................................................................................
BBDS/TDDS ............................................................................................................................................................
The proposed increases are designed
to allow the Exchange to cover the
increased costs related to the amount of
bandwidth required to provide
connectivity to receive market data as
well as the costs of maintaining that
infrastructure.
The Exchange also charges a
discounted fee of $4,160 per month for
subscribers who purchase connectivity
to a bundle of select market data
products, known as the U.S. Equities
Select + SIP Bundle. The following
7 See
Exchange Rule 13.9.
Exchange’s affiliated exchanges are Bats
EDGX Exchange, Inc. (‘‘EDGX’’), Bats BYX
Exchange, Inc. (‘‘BYX’’), and Bats BZX Exchange,
Inc. (‘‘BZX’’).
8 The
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$650
1,000
3,500
1,300
650
350
11,500
1,000
150
250
100
250
100
Proposed fee
$1,200
1,400
4,500
1,500
1,000
750
14,500
1,250
500
500
500
500
500
market data products are included in
the bundle: UQDF/UTDF/OMDF, CQS/
CTS, Nasdaq TotalView, Nasdaq BX
TotalView, Nasdaq PSX TotalView,
NYSE ArcaBook, NYSE MKT OpenBook
Ultra, and BBDS/TDDS.10 Absent the
discount, a subscriber purchasing
connectivity through Bats Connect for
each of these market data products
would currently pay a total monthly fee
of $5,200. Instead, a subscriber who
purchases connectivity to each of the
above market data products is charged
a monthly fee of $4,160, which
represents a 20% discount. The
Exchange proposes to add NYSE
OpenBook Ultra to the bundle. Also, in
light of the proposed changes outlined
above, the Exchange proposes to
increase the discounted rate of the
bundle to $5,910 per month, which
would now represent a 40% discount
from the rate of $9,850 a subscriber
purchasing connectivity through Bats
Connect for each of these market data
9 Subscribers pays any fees charged by the
exchange providing the market data feed directly to
that exchange.
10 The Exchange also proposes to correct a
typographical error in referencing BBDS/TDDS in
its description of the U.S. Equity Select + SIP
bundle.
PO 00000
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Federal Register / Vol. 82, No. 11 / Wednesday, January 18, 2017 / Notices
products would be charged under the
proposed rule change.
Lastly, the Exchange proposes to
charge a discounted fee of $6,390 per
month for subscribers who purchase
connectivity to the OPRA, UQDF/
UTDF/OMDF, and CQS/CTS data feeds,
to be known as the OPRA + SIP Bundle.
Absent the discount, a subscriber
purchasing connectivity through Bats
Connect for each of these market data
products would pay a total monthly fee
of $7,100. Instead, a subscriber who
purchases connectivity to each of the
above market data products is charged
a monthly fee of $6,390, which
represents a 10% discount.
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Implementation Date
The Exchange proposes to implement
this amendment to its fee schedule on
January 3, 2017.11
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,12
in general, and furthers the objectives of
Section 6(b)(4),13 in particular, as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its Members and
other 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 change
reflects a competitive pricing structure
designed to incent market participants
to direct their order flow to the
Exchange. The Exchange believes that
the proposed rates are equitable and
non-discriminatory in that they apply
uniformly to all Members. The
Exchange believes the fees and credits
remain competitive with those charged
by other venues and therefore continue
to be reasonable and equitably allocated
to Members.
The Exchange believes that the
proposal represents an equitable
allocation of reasonable dues, fees, and
other charges as its fees for physical
connectivity are reasonably constrained
by competitive alternatives. If a
particular exchange charges excessive
fees for connectivity, affected Members
and non-Members may opt to terminate
their connectivity arrangements with
that exchange, and adopt a possible
11 The Exchange initially filed the proposed rule
change on December 27, 2016. (SR–BatsEDGA–
2016–33). On January 5, 2017, the Exchange
withdrew SR–BatsEDGA–2016–33 and submitted
this filing.
12 15 U.S.C. 78f.
13 15 U.S.C. 78f(b)(4).
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range of alternative strategies, including
routing to the applicable exchange
through another participant or market
center or taking that exchange’s data
indirectly. Accordingly, if the Exchange
charges excessive fees, it would stand to
lose not only connectivity revenues but
also revenues associated with the
execution of orders routed to it, 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 fees
for connectivity.
Furthermore, the proposed rule
change is also an equitable allocation of
reasonable dues, fees, and other charges
as the Exchange believes that the
increased fees obtained will enable it to
cover its increased infrastructure costs
associated with establishing physical
ports to connect to the Exchange’s
Systems. The additional revenue from
the increased fees will also enable the
Exchange to continue to maintain and
improve its market technology and
services.
Physical Ports
The Exchange believes that the
proposed fees for a 10 gigabyte circuit
of $6,000 per month is reasonable in
that they are less than analogous fees
charged by the Nasdaq Stock Market
LLC (‘‘Nasdaq’’) and NYSE Arca, Inc.
(‘‘Arca’’), which range from $10,000—
$15,000 per month for 10 gigabyte
circuits.14 The Exchange believes that
the proposed rates are equitable and
non-discriminatory in that they apply
uniformly to all Members and nonMembers. Members and non-Members
will continue to choose whether they
want more than one physical port and
choose the method of connectivity
based on their specific needs. All
Exchange Members that voluntarily
select various service options will be
charged the same amount for the same
services. As is true of all physical
connectivity, all Members and nonMembers have the option to select any
connectivity option, and there is no
differentiation with regard to the fees
charged for the service.
Logical Ports
The Exchange believes that the
increase of fees for logical ports
represents an equitable allocation of
reasonable dues, fees and other charges.
The Exchange believes that its proposed
changes to logical port fees are
reasonable in light of the benefits to
14 See Nasdaq Rule 7034(b) and the NYSE Arca
fee schedule available at https://www.nyse.com/
publicdocs/nyse/markets/nyse-arca/NYSE_Arca_
Marketplace_Fees.pdf (dated December 2, 2016).
PO 00000
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5621
Exchange participants of direct market
access and receipt of data. The
Exchange believes its proposed fees are
reasonable because Nasdaq and NYSE
Arca charge comparable rates for logical
ports to access such markets.15
Bats Connect
The Exchange also believes that its
proposed fees for Bats Connect provide
for the equitable allocation of reasonable
dues, fees and other charges among
members and other persons using its
facilities. First, the Exchange charges a
connectivity fee to subscribers utilizing
Bats Connect to route orders to other
exchanges and market centers that are
connected to the Exchange’s network,
which varies based solely on the
amount of bandwidth selected by the
subscriber. The proposed increased
connectivity fees remain reasonable and
competitive as compared to similar fees
charged by other exchanges. For
purposes of order routing, the Exchange
proposes to now charge $500 for 1 Mb,
$1,000 for 5 Mb, and $1,250 for 10 Mb.
The New York Stock Exchange, Inc.
(‘‘NYSE’’) currently charges $300 for 1
Mb, $700 for 5 Mb, and $900 for 10
Mb.16 In addition, the proposed rates
continue to be less than what a
subscriber would pay to connect
directly to another exchange.17 The
Exchange notes that, overall, the
connectivity fee for routing of orders to
other market centers proposed by the
Exchange is similar to that charged by
the NYSE.
Second, with regard to utilizing Bats
Connect to receive market data products
from other exchanges, the Exchange
only charges subscribers a connectivity
fee, the amount of which is based solely
on the amount of bandwidth required to
transmit that specific data product to
the subscribers. The Exchange believes
it is necessary to increase the rates for
select market data feeds as described
herein to address changes in bandwidth
necessary to receive such feeds. The
increased fees will also enable the
Exchange to continue to cover the
increased infrastructure costs while also
enabling it to continue to maintain and
improve the service.
15 See Nasdaq Rule 7015(b) (charging a fee of $575
per month for FIX Trading Ports) and the NYSE
Arca fee schedule available at https://
www.nyse.com/publicdocs/nyse/markets/nyse-arca/
NYSE_Arca_Marketplace_Fees.pdf (dated December
2, 2016) (charging a fee of $550 per month for ports
for order/quote entry).
16 See Section 3.6.1 of NYSE’s SFTI Americas
Product and Service List available at https://
www.nyxdata.com/docs/connectivity.
17 See e.g., Nasdaq Rule 7034(b) and the CoLocation section of the NYSE Arca fee schedule
available at https://www.nyse.com/publicdocs/
nyse/markets/nyse-arca/NYSE_Arca_Marketplace_
Fees.pdf (dated December 2, 2016).
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The amounts of the connectivity fees
continue to be reasonable as compared
to similar fees charged by other
exchanges. For example, for market data
connectivity, Nasdaq charges $1,412 per
month for CQS/CTS data feed, and the
Exchange proposes to charge $1,400 per
month connectivity for CQS/CTS data
feed.18
The Exchange believes it is reasonable
to offer such discounted pricing to
subscribers who purchase connectivity
to a bundle of market data products as
it would enable them to reduce their
overall connectivity costs for the receipt
of market data. The Exchange is not
required by any rule or regulation to
make Bats Connect available; nor are
subscribers required by any rule or
regulation to utilize Bats Connect.
Accordingly, subscribers can
discontinue use at any time and for any
reason, including due to an assessment
of the reasonableness of fees charged.
Moreover, the Exchange believes the
proposed fees are reasonable and
equitable because they continue to be
based on the Exchange’s costs to cover
the amount of bandwidth required to
provide connectivity to the select
bundle of data feeds. The proposed fees
will continue to allow the Exchange to
recoup this cost, while providing
subscribers with an alternative means to
connect to the select bundle of data
feeds at a discounted rate.
Lastly, the Exchange believes the
proposed fees are reasonable and
equitable because they are based on the
Exchange’s costs to cover hardware,
installation, testing and connection, as
well as expenses involved in
maintaining and managing the service.
The proposed fees allow the Exchange
to recoup these costs, while providing
subscribers with an alternative means to
connect to other exchange and market
centers. The Exchange believes that the
proposed fees are reasonable and
equitable in that they reflect the costs
and the benefit of providing alternative
connectivity.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act. As discussed
above, the Exchange believes that fees
for connectivity are constrained by the
robust competition for order flow among
exchanges and non-exchange markets.
The Exchange does not believe that the
18 See Nasdaq Rule 7034 (setting forth Nasdaq’s
connectivity fees for receipt of third party market
data products).
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proposed changes represent 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 alternatives offer them
better value. Further, excessive fees for
connectivity would serve to impair an
exchange’s ability to compete for order
flow rather than burdening competition.
Lastly, the Exchange does not believe
the proposed fees for Bats Connect will
result in any burden on competition.
The proposed rule change is designed to
provide subscribers with an alternative
means to access other market centers on
the Exchange’s network if they choose
or in the event of a market disruption
where other alternative connection
methods become unavailable. Bats
Connect is not the exclusive method to
connect to these market centers and
subscribers may utilize alternative
methods to connect to the product if
they believe the Exchange’s proposed
pricing is unreasonable or otherwise.
Therefore, the Exchange does not
believe the proposed rule change will
have any effect on competition.
(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 19 and paragraph (f) of Rule
19b–4 thereunder.20 At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is 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:
19 15
20 17
PO 00000
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
Frm 00101
Fmt 4703
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–
BatsEDGA–2017–01 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–BatsEDGA–2017–01. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of 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–
BatsEDGA–2017–01 and should be
submitted on or before February 8, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017–00964 Filed 1–17–17; 8:45 am]
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]]>Agencies
[Federal Register Volume 82, Number 11 (Wednesday, January 18, 2017)]
[Notices]
[Pages 5619-5622]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-00964]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-79773; File No. SR-BatsEDGA-2017-01]
Self-Regulatory Organizations; Bats EDGA Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Modify Fees for Connectivity and Its Communication and Routing Service
Known as Bats Connect
January 11, 2017.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on January 5, 2017, Bats EDGA Exchange, Inc. (``Exchange'' or ``EDGA'')
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.
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\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 fee schedule applicable
to Members \5\ and non-members of the Exchange pursuant to EDGA Rules
15.1(a) and (c) to modify its fees for physical ports, logical ports,
and for the use of a communication and routing service known as Bats
Connect.
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\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).
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The text of the proposed rule change is available at the Exchange's
Web site at www.bats.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 modify its fees for physical ports,
logical ports, and for the use of a communication and routing service
known as Bats Connect. Each of these proposed changes are described
below.
Physical Ports
A physical port is utilized by a Member or non-Member to connect to
the Exchange at the data centers where the Exchange's servers are
located. The Exchange currently maintains a presence in two third-party
data centers: (i) the primary data center where the Exchange's business
is primarily conducted on a daily basis, and (ii) a secondary data
center, which is predominantly maintained for business continuity
purposes. The Exchange currently assesses the following physical
connectivity fees for Members and non-Members on a monthly basis:
$2,000 per physical port that connects to the System \6\ via 1 gigabyte
circuit; and $4,000 per physical port that connects to the System via
10 gigabyte circuit. The Exchange proposes to increase the fee per
physical port that connects to the System via a 10 gigabyte circuit
from $4,000 per month to $6,000 per month in order to cover its
increased infrastructure costs associated with establishing physical
ports to connect to the Exchange's Systems and enable it to continue to
maintain and improve its market technology and services. The Exchange
does not propose to amend the fee for a 1 gigabyte circuit, which will
remain $2,000 per month.
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\6\ The term ``System'' is defined as ``the electronic
communications and trading facility designated by the Board through
which securities orders of Users are consolidated for ranking,
execution and, when applicable, routing away.'' See Exchange Rule
1.5(cc).
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Logical Ports
The Exchange currently charges for logical ports (including
Multicast PITCH Spin Server and GRP ports) $500 per port per month. A
logical port
[[Page 5620]]
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. 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 Members' and non-
Members' logical ports. The Exchange now proposes to increase charges
for logical ports (including Multicast PITCH Spin Server and GRP ports)
from $500 per port per month to $550 per month. Like as for the
proposed fee increase for physical ports described above, the proposed
increase in logical port fees is intended to cover increased
infrastructure costs associated with establishing ports to connect to
the Exchange's Systems and to enable the Exchange to continue to
maintain and improve its market technology and services.
Bats Connect
The Exchange proposes to increase select fees related to the use of
Bats Connect. Bats Connect is offered by the Exchange on a voluntary
basis in a capacity similar to a vendor.\7\ In sum, Bats Connect is a
communication service that provides subscribers an additional means to
receive market data from and route orders to any destination connected
to the Exchange's network. Bats Connect does not provide any advantage
to subscribers for connecting to the Exchange's affiliates \8\ as
compared to other methods of connectivity. The servers of the
subscriber need not be located in the same facilities as the Exchange
in order to subscribe to Bats Connect. Subscribers may also seek to
utilize Bats Connect in the event of a market disruption where other
alternative connection methods become unavailable.
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\7\ See Exchange Rule 13.9.
\8\ The Exchange's affiliated exchanges are Bats EDGX Exchange,
Inc. (``EDGX''), Bats BYX Exchange, Inc. (``BYX''), and Bats BZX
Exchange, Inc. (``BZX'').
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The Exchange charges a monthly connectivity fee to subscribers
utilizing Bats Connect to route orders to other exchanges and broker-
dealers that are connected to the Exchange's network via unicast
access. The amount of the connectivity fee varies based solely on the
bandwidth selected by the subscriber. Specifically, as set forth under
the Unicast Access--Order Entry section of the fee schedule, the
Exchange charges $350 for 1 Mb, $700 for 5 Mb, $950 for 10 Mb, $1,500
for 25 Mb, $2,500 for 50 Mb, and $3,500 for 100 Mb. The Exchange
proposes to increase those fees as follows: $500 for 1 Mb, $1,000 for 5
Mb, and $1,250 for 10 Mb. The proposed increases are designed to cover
increased costs related to hardware, installation, and testing, as well
as increased expenses involved in maintaining and managing the service.
The Exchange does not propose to increase the fees for the 25 Mb, 50 Mb
and 100 Mb connections as those fees will remain $1,500, $2,500, and
$3,500, respectively.
Bats Connect also allows subscribers to receive market data feeds
from the exchanges connected to the Exchange's network. In such case,
the subscriber pays the Exchange a connectivity fee, which are set
forth under the Market Data Connectivity section of the fee schedule
and vary based solely on the amount of bandwidth required to transmit
the selected data product to the subscriber.\9\ The proposed
connectivity fees currently range from no charge to $11,500 based on
the market data product the subscriber selects. The Exchange proposes
to increase select connectivity fees for market data as follows:
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\9\ Subscribers pays any fees charged by the exchange providing
the market data feed directly to that exchange.
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Data feed Current fee Proposed fee
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UQDF/UTDF/OMDF.......................... $650 $1,200
CQS/CTS................................. 1,000 1,400
OPRA.................................... 3,500 4,500
Nasdaq TotalView........................ 1,300 1,500
Nasdaq BX TotalView..................... 650 1,000
Nasdaq PSX TotalView.................... 350 750
NYSE Integrated......................... 11,500 14,500
NYSE ArcaBook........................... 1,000 1,250
NYSE MKT OpenBook Ultra................. 150 500
NYSE Alerts............................. 250 500
NYSE Imbalances......................... 100 500
NYSE Arca Trades........................ 250 500
BBDS/TDDS............................... 100 500
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The proposed increases are designed to allow the Exchange to cover
the increased costs related to the amount of bandwidth required to
provide connectivity to receive market data as well as the costs of
maintaining that infrastructure.
The Exchange also charges a discounted fee of $4,160 per month for
subscribers who purchase connectivity to a bundle of select market data
products, known as the U.S. Equities Select + SIP Bundle. The following
market data products are included in the bundle: UQDF/UTDF/OMDF, CQS/
CTS, Nasdaq TotalView, Nasdaq BX TotalView, Nasdaq PSX TotalView, NYSE
ArcaBook, NYSE MKT OpenBook Ultra, and BBDS/TDDS.\10\ Absent the
discount, a subscriber purchasing connectivity through Bats Connect for
each of these market data products would currently pay a total monthly
fee of $5,200. Instead, a subscriber who purchases connectivity to each
of the above market data products is charged a monthly fee of $4,160,
which represents a 20% discount. The Exchange proposes to add NYSE
OpenBook Ultra to the bundle. Also, in light of the proposed changes
outlined above, the Exchange proposes to increase the discounted rate
of the bundle to $5,910 per month, which would now represent a 40%
discount from the rate of $9,850 a subscriber purchasing connectivity
through Bats Connect for each of these market data
[[Page 5621]]
products would be charged under the proposed rule change.
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\10\ The Exchange also proposes to correct a typographical error
in referencing BBDS/TDDS in its description of the U.S. Equity
Select + SIP bundle.
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Lastly, the Exchange proposes to charge a discounted fee of $6,390
per month for subscribers who purchase connectivity to the OPRA, UQDF/
UTDF/OMDF, and CQS/CTS data feeds, to be known as the OPRA + SIP
Bundle. Absent the discount, a subscriber purchasing connectivity
through Bats Connect for each of these market data products would pay a
total monthly fee of $7,100. Instead, a subscriber who purchases
connectivity to each of the above market data products is charged a
monthly fee of $6,390, which represents a 10% discount.
Implementation Date
The Exchange proposes to implement this amendment to its fee
schedule on January 3, 2017.\11\
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\11\ The Exchange initially filed the proposed rule change on
December 27, 2016. (SR-BatsEDGA-2016-33). On January 5, 2017, the
Exchange withdrew SR-BatsEDGA-2016-33 and submitted this filing.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\12\ in general, and
furthers the objectives of Section 6(b)(4),\13\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its Members and other 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 change reflects a competitive
pricing structure designed to incent market participants to direct
their order flow to the Exchange. The Exchange believes that the
proposed rates are equitable and non-discriminatory in that they apply
uniformly to all Members. The Exchange believes the fees and credits
remain competitive with those charged by other venues and therefore
continue to be reasonable and equitably allocated to Members.
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\12\ 15 U.S.C. 78f.
\13\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposal represents an equitable
allocation of reasonable dues, fees, and other charges as its fees for
physical connectivity are reasonably constrained by competitive
alternatives. If a particular exchange charges excessive fees for
connectivity, affected Members and non-Members may 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, if the Exchange
charges excessive fees, it would stand to lose not only connectivity
revenues but also revenues associated with the execution of orders
routed to it, 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 fees
for connectivity.
Furthermore, the proposed rule change is also an equitable
allocation of reasonable dues, fees, and other charges as the Exchange
believes that the increased fees obtained will enable it to cover its
increased infrastructure costs associated with establishing physical
ports to connect to the Exchange's Systems. The additional revenue from
the increased fees will also enable the Exchange to continue to
maintain and improve its market technology and services.
Physical Ports
The Exchange believes that the proposed fees for a 10 gigabyte
circuit of $6,000 per month is reasonable in that they are less than
analogous fees charged by the Nasdaq Stock Market LLC (``Nasdaq'') and
NYSE Arca, Inc. (``Arca''), which range from $10,000--$15,000 per month
for 10 gigabyte circuits.\14\ The Exchange believes that the proposed
rates are equitable and non-discriminatory in that they apply uniformly
to all Members and non-Members. Members and non-Members will continue
to choose whether they want more than one physical port and choose the
method of connectivity based on their specific needs. All Exchange
Members that voluntarily select various service options will be charged
the same amount for the same services. As is true of all physical
connectivity, all Members and non-Members have the option to select any
connectivity option, and there is no differentiation with regard to the
fees charged for the service.
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\14\ See Nasdaq Rule 7034(b) and the NYSE Arca fee schedule
available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf (dated December 2, 2016).
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Logical Ports
The Exchange believes that the increase of fees for logical ports
represents an equitable allocation of reasonable dues, fees and other
charges. The Exchange believes that its proposed changes to logical
port fees are reasonable in light of the benefits to Exchange
participants of direct market access and receipt of data. The Exchange
believes its proposed fees are reasonable because Nasdaq and NYSE Arca
charge comparable rates for logical ports to access such markets.\15\
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\15\ See Nasdaq Rule 7015(b) (charging a fee of $575 per month
for FIX Trading Ports) and the NYSE Arca fee schedule available at
https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf (dated December 2, 2016) (charging a
fee of $550 per month for ports for order/quote entry).
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Bats Connect
The Exchange also believes that its proposed fees for Bats Connect
provide for the equitable allocation of reasonable dues, fees and other
charges among members and other persons using its facilities. First,
the Exchange charges a connectivity fee to subscribers utilizing Bats
Connect to route orders to other exchanges and market centers that are
connected to the Exchange's network, which varies based solely on the
amount of bandwidth selected by the subscriber. The proposed increased
connectivity fees remain reasonable and competitive as compared to
similar fees charged by other exchanges. For purposes of order routing,
the Exchange proposes to now charge $500 for 1 Mb, $1,000 for 5 Mb, and
$1,250 for 10 Mb. The New York Stock Exchange, Inc. (``NYSE'')
currently charges $300 for 1 Mb, $700 for 5 Mb, and $900 for 10 Mb.\16\
In addition, the proposed rates continue to be less than what a
subscriber would pay to connect directly to another exchange.\17\ The
Exchange notes that, overall, the connectivity fee for routing of
orders to other market centers proposed by the Exchange is similar to
that charged by the NYSE.
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\16\ See Section 3.6.1 of NYSE's SFTI Americas Product and
Service List available at https://www.nyxdata.com/docs/connectivity.
\17\ See e.g., Nasdaq Rule 7034(b) and the Co-Location section
of the NYSE Arca fee schedule available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf
(dated December 2, 2016).
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Second, with regard to utilizing Bats Connect to receive market
data products from other exchanges, the Exchange only charges
subscribers a connectivity fee, the amount of which is based solely on
the amount of bandwidth required to transmit that specific data product
to the subscribers. The Exchange believes it is necessary to increase
the rates for select market data feeds as described herein to address
changes in bandwidth necessary to receive such feeds. The increased
fees will also enable the Exchange to continue to cover the increased
infrastructure costs while also enabling it to continue to maintain and
improve the service.
[[Page 5622]]
The amounts of the connectivity fees continue to be reasonable as
compared to similar fees charged by other exchanges. For example, for
market data connectivity, Nasdaq charges $1,412 per month for CQS/CTS
data feed, and the Exchange proposes to charge $1,400 per month
connectivity for CQS/CTS data feed.\18\
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\18\ See Nasdaq Rule 7034 (setting forth Nasdaq's connectivity
fees for receipt of third party market data products).
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The Exchange believes it is reasonable to offer such discounted
pricing to subscribers who purchase connectivity to a bundle of market
data products as it would enable them to reduce their overall
connectivity costs for the receipt of market data. The Exchange is not
required by any rule or regulation to make Bats Connect available; nor
are subscribers required by any rule or regulation to utilize Bats
Connect. Accordingly, subscribers can discontinue use at any time and
for any reason, including due to an assessment of the reasonableness of
fees charged. Moreover, the Exchange believes the proposed fees are
reasonable and equitable because they continue to be based on the
Exchange's costs to cover the amount of bandwidth required to provide
connectivity to the select bundle of data feeds. The proposed fees will
continue to allow the Exchange to recoup this cost, while providing
subscribers with an alternative means to connect to the select bundle
of data feeds at a discounted rate.
Lastly, the Exchange believes the proposed fees are reasonable and
equitable because they are based on the Exchange's costs to cover
hardware, installation, testing and connection, as well as expenses
involved in maintaining and managing the service. The proposed fees
allow the Exchange to recoup these costs, while providing subscribers
with an alternative means to connect to other exchange and market
centers. The Exchange believes that the proposed fees are reasonable
and equitable in that they reflect the costs and the benefit of
providing alternative connectivity.
(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. As discussed above, the
Exchange believes that fees for connectivity are constrained by the
robust competition for order flow among exchanges and non-exchange
markets. The Exchange does not believe that the proposed changes
represent 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 alternatives offer them better value. Further,
excessive fees for connectivity would serve to impair an exchange's
ability to compete for order flow rather than burdening competition.
Lastly, the Exchange does not believe the proposed fees for Bats
Connect will result in any burden on competition. The proposed rule
change is designed to provide subscribers with an alternative means to
access other market centers on the Exchange's network if they choose or
in the event of a market disruption where other alternative connection
methods become unavailable. Bats Connect is not the exclusive method to
connect to these market centers and subscribers may utilize alternative
methods to connect to the product if they believe the Exchange's
proposed pricing is unreasonable or otherwise. Therefore, the Exchange
does not believe the proposed rule change will have any effect on
competition.
(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 \19\ and paragraph (f) of Rule 19b-4
thereunder.\20\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
such rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f).
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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-BatsEDGA-2017-01 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-BatsEDGA-2017-01. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of 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-BatsEDGA-2017-01 and should
be submitted on or before February 8, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-00964 Filed 1-17-17; 8:45 am]
BILLING CODE 8011-01-P
