Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Market Data Section of Its Fee Schedule To Adopt Fees for a New Market Data Product Called the ETF Implied Liquidity Feed, 25389-25393 [2017-11254]

Download as PDF Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices 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: • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– C2–2017–018 on the subject line. Paper Comments mstockstill on DSK30JT082PROD with NOTICES • 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–C2–2017–018. 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 (http://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–C2– 2017–018 and should be submitted on or before June 22, 2017. 18:32 May 31, 2017 [FR Doc. 2017–11374 Filed 5–31–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Electronic Comments VerDate Sep<11>2014 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.31 Eduardo A. Aleman, Assistant Secretary. Jkt 241001 [Release No. 34–80772; File No. SR– BatsBZX–2017–36] Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Market Data Section of Its Fee Schedule To Adopt Fees for a New Market Data Product Called the ETF Implied Liquidity Feed May 25, 2017. 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 May 17, 2017, Bats BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (the ‘‘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 Market Data section of its fee schedule to adopt fees for a new market data product called the ETF Implied Liquidity Feed. 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. 31 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 1 15 PO 00000 Frm 00166 Fmt 4703 Sfmt 4703 25389 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the Market Data section of its fee schedule to adopt fees for a new market data product called the ETF Implied Liquidity Feed. The ETF Implied Liquidity feed is an optional data feed that would provide the Exchange’s proprietary calculation of the implied liquidity and the aggregate best bid and offer (‘‘BBO’’) of all displayed orders on the Exchange and its affiliated exchanges 5 for all standard, nonleveraged U.S. equity Exchange Traded Funds (‘‘ETFs’’) 6 traded on the System.7 An ETF’s implied liquidity disseminated via the proposed feed would consist of the ETF’s implied BBO (including the implied size) calculated via a proprietary methodology based on the national best bid and offer (‘‘NBBO’’), the number of shares of securities underlying one creation unit of the ETF, and the estimated cash included in one creation unit of the ETF. The Exchange intends to begin to offer the ETF Implied Liquidity Feed on June 1, 2017.8 5 The Exchange’s affiliates are Bats EDGA Exchange, Inc., (‘‘EDGA’’), Bats EDGX Exchange, Inc. (‘‘EDGX’’), and Bats BYX Exchange, Inc. (‘‘BYX’’) (‘‘collectively, the ‘‘Bats Exchanges’’). 6 The securities underlying each of the U.S. equity ETFs included in the proposed feed must be considered NMS Securities as defined under Rule 600(b)(46) of Regulation NMS. 17 CFR 242.600(b)(46). 7 See Exchange Rule 11.22(n). See also Securities Exchange Act Release No. 80580 (May 3, 2017) (SR– BatsBZX–2017–25) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend Rule 11.22, Data Products, to Adopt a New Market Data Product Known as the ETF Implied Liquidity Feed) (filed April 28, 2017). 8 See Bats to Introduce ETF Implied Liquidity Feed Effective June 1, 2017, http:// cdn.batstrading.com/resources/market_data/2017/ Bats-to-Introduce-ETF-Implied-Liquidity-FeedEffective-June-1-2017.pdf. E:\FR\FM\01JNN1.SGM 01JNN1 25390 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices mstockstill on DSK30JT082PROD with NOTICES The Exchange now proposes to amend its fee schedule to adopt fees for the ETF Implied Liquidity Feed. The proposed fees include the following, each of which are described in detail below: (i) Distribution Fees for both Internal and External Distributors; 9 (ii) Usage Fees for both Professional 10 and NonProfessional 11 Users; and (iii) a Data Consolidation fee. Distribution Fees. As proposed, each Internal and External Distributor that receives the ETF Implied Liquidity Feed shall pay a fee of $5,000 per month.12 The Exchange proposes to waive certain fees for Distributors that also receive the Bats One Feed.13 The ETF Implied Liquidity Feed and the Bats One Feed are similar in that both include the aggregate BBO for all displayed orders 9 A ‘‘Distributor’’ is defined as ‘‘any entity that receives the Exchange Market Data product directly from the Exchange or indirectly through another entity and then distributes it internally or externally to a third party.’’ See the Exchange’s fee schedule available at http://www.bats.com/us/equities/ membership/fee_schedule/bzx/. An ‘‘Internal Distributor’’ is defined as ‘‘a Distributor that receives the Exchange Market Data product and then distributes that data to one or more Users within the Distributor’s own entity.’’ Id. An ‘‘External Distributor’’ is defined as ‘‘a Distributor that receives the Exchange Market Data product and then distributes that data to a third party or one or more Users outside the Distributor’s own entity.’’ Id.’’ 10 A ‘‘Professional User’’ is defined as ‘‘any User other than a Non-Professional User.’’ See the Exchange’s fee schedule available at http:// www.bats.com/us/equities/membership/fee_ schedule/bzx/. 11 A ‘‘Non-Professional User’’ is defined as ‘‘a natural person who is not: (i) Registered or qualified in any capacity with the Commission, the Commodity Futures Trading Commission, any state securities agency, any securities exchange or association, or any commodities or futures contract market or association; (ii) engaged as an ‘‘investment adviser’’ as that term is defined in Section 202(a)(11) of the Investment Advisers Act of 1940 (whether or not registered or qualified under that Act); or (iii) employed by a bank or other organization exempt from registration under federal or state securities laws to perform functions that would require registration or qualification if such functions were performed for an organization not so exempt.’’ Id. 12 A Distributor that acts as both an Internal Distributor and an External Distributor of the ETF Implied Liquidity Feed will be subject to both the Internal Distribution Fee and the External Distribution Fee. 13 The Bats One Feed is a data feed that disseminates, on a real-time basis, the aggregate BBO for securities traded on each of the Bats Exchanges. The Bats One Feed also contains the individual last sale information for the Bats Exchanges (collectively with the aggregate BBO, the ‘‘Bats One Summary Feed’’). See Exchange Rule 11.22(j). See also Securities Exchange Act Release No. 73918 (December 23, 2014), 79 FR 78920 (December 31, 2014) (File Nos. SR–EDGX–2014–25; SR–EDGA–2014–25; SR–BATS–2014–055; SR– BYX–2014–030) (Notice of Amendment No. 2 and Order Granting Accelerated Approval to Proposed Rule Changes, as Modified by Amendments Nos. 1 and 2, to Establish a New Market Data Product called the Bats One Feed) (‘‘Bats One Approval Order’’). VerDate Sep<11>2014 18:32 May 31, 2017 Jkt 241001 on the Bats Exchanges. The key difference here is that the ETF Implied Liquidity Feed also contains the Exchange’s proprietary calculation of the ETF’s implied liquidity. As such, the Exchange believes it is reasonable to waive certain charges for those Distributors that receive both products. First, the Exchange proposes to waive the Distributor fee for External Distributors of the ETF Implied Liquidity Feed where that External Distributor also receives and is charged the External Distributor fee for the Bats One Feed. The Exchange notes that the proposed External Distribution fee for the ETF Implied Liquidity Feed of $5,000 per month equals that charged for Bats One Summary. The External Distribution fee for Bats One Premium is higher at $12,500 per month. Second, the Exchange proposes to waive the related Logical Port fee of $550 per port per month for both Internal and External Distributors of the ETF Implied Liquidity Feed where they also receive and are charged a Logical Port fee for the Bats One Feed. Distributors would continue to pay the Logical Port fee to receive the Bats One Feed. Lastly, as described below, the Exchange proposes to waive the Data Consolidation fee for External Distributors of the ETF Implied Liquidity Feed where that External Distributor also receives and is charged the Data Consolidation fee for the Bats One Feed. The Exchange believes waiving the above fees would avoid overlapping charges for Distributors that also receive the Bats One Feed, as both feeds include the aggregated BBO of the Bats Exchanges as a core part of their offering. These Distributors would continue to pay these fees for receipt of the Bats One Feed and are liable for the User fees to be charged for the ETF Implied Liquidity Feed described below. User Fees. The Exchange proposes to charge External Distributors that redistribute the ETF Implied Liquidity Feed different fees for their Professional Users and Non-Professional Users. The Exchange will assess a monthly fee for Professional Users of $25.00 per User. Non-Professional Users will be assessed a monthly fee of $1.00 per User. The Exchange does not propose to charge per User fees to Internal Distributors that receive the ETF Implied Liquidity Feed. External Distributors that receive the ETF Implied Liquidity Feed will be required to count every Professional User and Non-Professional User to which they provide the ETF Implied Liquidity Feed, the requirements for which are identical to that currently in place for other market data products PO 00000 Frm 00167 Fmt 4703 Sfmt 4703 offered by the Exchange.14 Thus, the External Distributor’s count will include every person and device that accesses the data regardless of the purpose for which the individual or device uses the data. External Distributors must report all Professional and Non-Professional Users in accordance with the following: • In connection with an External Distributor’s distribution of the ETF Implied Liquidity Feed, the External Distributor must count as one User each unique User that the External Distributor has entitled to have access to the ETF Implied Liquidity Feed. However, where a device is dedicated specifically to a single individual, the External Distributor must count only the individual and need not count the device. • The External Distributor must identify and report each unique User. If a User uses the same unique method to gain access to the ETF Implied Liquidity Feed, the External Distributor must count that as one User. However, if a unique User uses multiple methods to gain access to the ETF Implied Liquidity Feed (e.g., a single User has multiple passwords and user identifications), the External Distributor must report each of those methods as an individual User. • External Distributors must report each unique individual person who receives access through multiple devices as one User so long as each device is dedicated specifically to that individual. • If an External Distributor entitles one or more individuals to use the same device, the Distributor must include only the individuals, and not the device, in the count. Data Consolidation Fee. The Exchange also proposes to charge External Distributors of the ETF Implied Liquidity Feed a separate Data Consolidation Fee of $500 per month, which reflects the value of the aggregation and consolidation function the Exchange performs in creating the portion of the feed that includes the aggregated BBO of all displayed orders on the Exchange and its affiliated exchanges. The Exchange would provide the aggregate BBO disseminated via the Bats One Feed as part of the ETF 14 See Securities Exchange Act Release Nos. 74285 (February 18, 2015); 80 FR 9828 (February 24, 2015) (SR–BATS–2015–11) (proposing fees for the Bats One Feed); 75406 (July 9, 2015), 80 FR 41522 (July 15, 2015) (SR–BATS–2015–48) (proposing user fees for the BZX Top and Last Sale data feeds); 75785 (August 28, 2015), 80 FR 53360 (September 3, 2015) (SR–BATS–2015–64) (proposing fees for BZX Book Viewer); and 79636 (December 21, 2016), 81 FR 95693 (December 28, 2016) (SR–BatsBZX–2016–87) (proposing fees for BZX Summary Depth). E:\FR\FM\01JNN1.SGM 01JNN1 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices Implied Liquidity feed.15 The Exchange creates the Bats One Feed, including the aggregated BBO of the Bats Exchanges, by aggregating data derived from the EDGX Depth, EDGA Depth, BYX Depth, and BZX Depth.16 The Exchange proposes to waive the Data Consolidation fee for External Distributors of the ETF Implied Liquidity Feed where that External Distributor also receives and is charged the Data Consolidation fee for the Bats One Feed. As stated above, the Exchange believes waiving this fee would avoid overlapping charges for Distributors that also receive the Bats One Feed, as both feeds include the aggregated BBO of the Bats Exchanges. In such case, the External Distributor is being charged a $1,000 Data Consolidation fee for the Bats One Feed, which covers the consolidation function already being performed by the Exchange in constructing the aggregated BBO for the Bats Exchanges. The Exchange, therefore, believes it is reasonable to not charge External Distributors an additional Data Consolidation fee for the same aggregation function performed for the Bats One Feed. Implementation Date The Exchange intends to implement the proposed fees on June 1, 2017. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,17 in general, and furthers the objectives of Section 6(b)(4),18 in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its members and other recipients of Exchange data. The Exchange believes that the proposed rates are equitable and nondiscriminatory in that they apply uniformly to all recipients of Exchange data. The Exchange believes the proposed fees are competitive with those charged by other venues and, therefore, reasonable and equitably allocated to recipients. The Exchange believes that the proposed rule change is consistent with 15 See Bats One Approval Order, supra note 13. EDGA Rule 13.8, EDGX Rule 13.8, BZX Rule 11.22(a) and (c), and BYX Rule 11.22 (a) and (c) for a description of the depth of book feeds offered by each of the Bats Exchanges. Rather than these depth-of-book feeds, the Exchange notes that a vendor seeking to build a competing product to the proposed ETF Implied Liquidity feed could simply utilize the top-of-book data feeds from each of the Bats Exchange’s to create an aggregated BBO. 17 15 U.S.C. 78f. 18 15 U.S.C. 78f(b)(4). mstockstill on DSK30JT082PROD with NOTICES 16 See VerDate Sep<11>2014 18:32 May 31, 2017 Jkt 241001 Section 11(A) of the Act 19 in that it supports (i) fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets and (ii) the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities. Furthermore, the proposed rule change is consistent with Rule 603 of Regulation NMS,20 which provides that any national securities exchange that distributes information with respect to quotations for or transactions in an NMS stock do so on terms that are not unreasonably discriminatory. In adopting Regulation NMS, the Commission granted self-regulatory organizations and broker-dealers increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also spur innovation and competition for the provision of market data. In addition, the proposed fees would not permit unfair discrimination because all of the Exchange’s customers and market data vendors who subscribe to the ETF Implied Liquidity Feed will be subject to the proposed fees. The ETF Implied Liquidity Feed would be distributed and purchased on a voluntary basis, in that neither the Exchange nor market data distributors are required by any rule or regulation to make this data available. Accordingly, Distributors and Users can discontinue use at any time and for any reason, including due to an assessment of the reasonableness of fees charged. Firms have a wide variety of alternative market data products from which to choose, such as similar proprietary data products offered by other exchanges and consolidated data. Moreover, the Exchange is not required to make any proprietary data products available or to offer any specific pricing alternatives to any customers. In addition, the fees that are the subject of this rule filing are constrained by competition. As explained below in the Exchange’s Statement on Burden on Competition, the existence of alternatives to the ETF Implied Liquidity Feed further ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can elect such alternatives. That is, the Exchange competes with other exchanges (and their affiliates) that provide similar market data 19 15 20 17 PO 00000 U.S.C. 78k–1. CFR 242.603. Frm 00168 Fmt 4703 25391 products. For example, the ETF Implied Liquidity Feed provides investors with alternative market data and competes with similar market data product currently offered by other exchanges.21 If another exchange (or its affiliate) were to charge less to distribute its similar product than the Exchange charges to create the ETF Implied Liquidity Feed, prospective Users likely would not subscribe to, or would cease subscribing to the ETF Implied Liquidity Feed. The Exchange notes that the Commission is not required to undertake a cost-of-service or ratemaking approach. The Exchange believes that, even if it were possible as a matter of economic theory, cost-based pricing for non-core market data would be so complicated that it could not be done practically.22 21 See Nasdaq Stock Market LLC’s (‘‘Nasdaq’’) Global Index Data Service (‘‘GIDS’’) available at http://business.nasdaq.com/intel/indexes/indexdata/index.html#!/tcm:5044-12151 (providing on a real-time basis intraday portfolio values, daily valuation information, such as NAV per Share, estimated cash per Share, estimated cash per creation unit, total cash per creation unit and total shares outstanding of the fund and ETF directory messages designed to provide the symbols of the ETF valuations). See footnote 28 of Securities Exchange Act Release No. 77714 (April 26, 2016), 81 FR 26281 (May 2, 2016) (describing Nasdaq’s GIDS within the order approving SR–Nasdaq–2016– 028). See also footnote 29 of Securities Exchange Act Release No. 78592 (August 16, 2016), 81 FR 56729 (August 22, 2016) (describing Nasdaq’s GIDS within the order approving SR–Nasdaq–2016–061). See, e.g., the NYSE Arca, Inc.’s (‘‘NYSE Arca’’) EOD ETF Report available at http://www.nyxdata.com/ Data-Products/NYSE-Arca-EOD-ETF-Report (providing information such as the ETF’s closing trades and quotes at different key points during the trading day, as well referential information such as shares outstanding, the primary market, and NAV). 22 The Exchange believes that cost-based pricing would be impractical because it would create enormous administrative burdens for all parties, including the Commission, to cost-regulate a large number of participants and standardize and analyze extraordinary amounts of information, accounts, and reports. In addition, it is impossible to regulate market data prices in isolation from prices charged by markets for other services that are joint products. Cost-based rate regulation would also lead to litigation and may distort incentives, including those to minimize costs and to innovate, leading to further waste. Under cost-based pricing, the Commission would be burdened with determining a fair rate of return, and the industry could experience frequent rate increases based on escalating expense levels. Even in industries historically subject to utility regulation, cost-based ratemaking has been discredited. As such, the Exchange believes that cost-based ratemaking would be inappropriate for proprietary market data and inconsistent with Congress’s direction that the Commission use its authority to foster the development of the national market system, and that market forces will continue to provide appropriate pricing discipline. See Appendix C to NYSE’s comments to the Commission’s 2000 Concept Release on the Regulation of Market Information Fees and Revenues, which can be found on the Commission’s Web site at http:// www.sec.gov/rules/concept/s72899/buck1.htm. See also Securities Exchange Act Release No. 73816 Continued Sfmt 4703 E:\FR\FM\01JNN1.SGM 01JNN1 mstockstill on DSK30JT082PROD with NOTICES 25392 Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices Distribution Fee. The Exchange believes that the proposed Distribution Fee is reasonable and equitably allocated in light of alternatives offered by other market centers. The Exchange believes it is reasonable to waive certain charges for those Distributors that receive both the ETF Implied Liquidity Feed and the Bats One Feed as both include the aggregate BBO for all displayed orders on the Bats Exchanges. The key difference here is that the ETF Implied Liquidity Feed also contains the Exchange’s proprietary calculation of the ETF’s implied liquidity. Waiver of the Distributor fee for External Distributors that also receive and pay the External Distributor for the Bats One Feed is equitable and reasonable because those External Distributors are being charged the External Distributor fees for Bats One, which are currently $5,000 per month for Bats One Summary and $12,500 per month for Bats One Premium. The fee waiver here is equitable due to both products providing the same key data element— the aggregated BBO of the Bats Exchanges. While the ETF Implied Liquidity Feed also includes the Exchange’s proprietary calculation of an ETF’s implied liquidity, the Exchange notes that External Distributors of the ETF Implied Liquidity Feed would continue to be subject to the per User fees. Therefore, the Exchange believes it is equitable and reasonable to waive the External Distributor fees in such case. The Exchange further believes that not extending this waiver to Internal Distributors is not unfairly discriminatory as Internal Distributors of the Bats One Feed are not charged User fees like External Distributors. The Exchange also believes it is equitable and reasonable to waive the related Logical Port fee for both Internal and External Distributors of the ETF Implied Liquidity Feed that also receive and are charged a Logical Port fee for the Bats One Feed. As stated above, both the Bats One Feed and the ETF Implied Liquidity Feed contain the same key data element—the aggregated BBO of the Bats Exchange. The Exchange believes not charging a Logical Port Fee in order to obtain the Exchange’s proprietary calculation of the ETF’s implied liquidity where that Member is currently paying a Logical Port fee to obtain the aggregated BBO of the Bats Exchanges via the Bats One Feed is reasonable. Such Distributors would (December 11, 2014), 79 FR 75200 (December 17, 2014) (SR–NYSE–2014–64) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Establish an Access Fee for the NYSE Best Quote and Trades Data Feed, Operative December 1, 2014). VerDate Sep<11>2014 18:32 May 31, 2017 Jkt 241001 continue to pay the Logical Port of $550 per port to receive the Bats One Feed as set forth in the Exchange’s fee schedule. User Fees. The Exchange believes that implementing the Professional and NonProfessional User fees for the ETF Implied Liquidity Feed are equitable and reasonable because they will result in greater availability to Professional and Non-Professional Users. Moreover, introducing a modest Non-Professional User fee for the ETF Implied Liquidity Feed is reasonable because it provides an additional method for retail investors to access the ETF Implied Liquidity Feed data by providing the same data that is available to Professional Users. The Exchange believes that the proposed fees are equitable and not unfairly discriminatory because they will be charged uniformly to recipient firms and Users. The Exchange also believes it is not unfairly discriminatory to only charge User fees to External Distributor of the ETF Implied Liquidity Feed as it is those Distributors that redistribute the data to their subscribers for a fee. The fee structure of differentiated Professional and Non-Professional fees is utilized by the Exchange for the Bats One Feed and has long been used by other exchanges for their proprietary data products, and by the Nasdaq UTP and the CTA and CQ Plans in order to reduce the price of data to retail investors and make it more broadly available.23 Offering the ETF Implied Liquidity Feed to Non-Professional Users with the same data available to Professional Users results in greater equity among data recipients. Data Consolidation Fee. The Exchange believes that the proposed $500 per month Data Consolidation Fee charged to External Distributors who receive the ETF Implied Liquidity Feed is reasonable because it represents the value of the data aggregation and consolidation function that the Exchange performs. The Exchange also believes it is equitable and reasonable to waive the Data Consolidation fee for External Distributors of the ETF Implied Liquidity Feed where that External Distributor also receives and is charged the Data Consolidation fee for the Bats One Feed. In such case, the External 23 See Securities Exchange Act Release Nos. 74285 (February 18, 2015), 80 FR 9828 (February 24, 2015) (SR–BATS–2015–11); 74283 (February 18, 2015), 80 FR 9809 (February 24, 2015) (SR–EDGA– 2015–09); 74282 (February 17, 2015), 80 FR 9487 (February 23, 2015) (SR–EDGX–2015–09); and 74284 (February 18, 2015), 80 FR 9792 (February 24, 2015) (SR–BYX–2015–09) (‘‘Initial BATS One Feed Fee Filings’’). See also, e.g., Securities Exchange Act Release No. 20002, File No. S7–433 (July 22, 1983) (establishing nonprofessional fees for CTA data); and Nasdaq Rules 7023(b) and 7047. PO 00000 Frm 00169 Fmt 4703 Sfmt 4703 Distributor is being charged a $1,000 Data Consolidation fee for the Bats One Feed, which covers the consolidation function already being performed by the Exchange in constructing the aggregated BBO for the Bats Exchanges. Therefore, the Exchange believes it is equitable and reasonable to not charge an External Distributor two separate fees for the same function. The Exchange further believes the proposed Data Consolidation Fee is not designed to permit unfair discrimination because all External Distributor who subscribe to the ETF Implied Liquidity Feed will be charged the same fee. The Exchange believes it is reasonable and not unfairly discriminatory to not charge Internal Distributor a separate Data Consolidation Fee as instituting such a fee is designed to ensure that a vendor to create a competing product to the Exchange’s ETF Implied Liquidity Feed on the same price basis as the Exchange. The proposed fee structure ensures the prices charged for the external distribution of the ETF Implied Liquidity Feed are not lower than the cost a vendor would incur to create a competing product. Therefore, the Exchange believes the proposed application of the Data Consolidation Fee is reasonable would not permit unfair discrimination. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. The Exchange’s ability to price the ETF Implied Liquidity Feed is constrained by: (i) Competition among exchanges, other trading platforms, and Trade Reporting Facilities (‘‘TRF’’) that compete with each other in a variety of dimensions; (ii) the existence of inexpensive real-time consolidated data and market-specific data and free delayed data; and (iii) the inherent contestability of the market for proprietary data. The Exchange and its market data products are subject to significant competitive forces and the proposed fees represent responses to that competition. To start, the Exchange competes intensely for order flow. It competes with the other national securities exchanges that currently trade equities, with electronic communication networks, with quotes posted in FINRA’s Alternative Display Facility, with alternative trading systems, and with securities firms that primarily E:\FR\FM\01JNN1.SGM 01JNN1 mstockstill on DSK30JT082PROD with NOTICES Federal Register / Vol. 82, No. 104 / Thursday, June 1, 2017 / Notices trade as principal with their customer order flow. In addition, when establishing the proposed fees, the Exchange considered the competitiveness of the market for proprietary data and all of the implications of that competition. The Exchange believes that it has considered all relevant factors and has not considered irrelevant factors in order to establish fair, reasonable, and not unreasonably discriminatory fees and an equitable allocation of fees among all Users. The existence of alternatives to the ETF Implied Liquidity Feed ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can elect these alternatives or choose not to purchase a specific proprietary data product if its cost to purchase is not justified by the returns any particular vendor or subscriber would achieve through the purchase. Lastly, the Exchange represents that the proposed pricing of the ETF Implied Liquidity Feed provides investors with alternative market data and competes with similar market data product currently offered by other exchanges.24 In addition, the pricing is designed to ensure that a vendor to create a competing product to the ETF Implied Liquidity Feed on the same price basis as the Exchange. As stated above, the Exchange notes that a vendor seeking to build a competing product to the proposed ETF Implied Liquidity feed could simply utilize the top-of-book data feeds from each of the Bats Exchange’s to create an aggregated BBO.25 These top-of-book feeds are EDGA Top, EDGX Top, BYX Top and BZX Top. The Exchange represents that a competing vendor could obtain these top-of-book data feeds from each of the Bats Exchanges on the same latency basis as the system that performs the aggregation and consolidation of the Bats One Summary Feed. While the proposed ETF Implied Liquidity feed does not separately provide the ETF’s NBBO, the number of shares of securities underlying one creation unit of the ETF, or the estimated cash included in one creation unit of the ETF, a vendor could obtain this information from the securities information processors and other publicly available sources to perform its own calculation of an ETF’s implied liquidity to include as part of a competing product. Therefore, a vendor could create a product to compete with the proposed ETF Implied Liquidity feed on the same terms as the Exchange. The Exchange designed the pricing of this product to enable a vendor to create a competing product to the ETF Implied Liquidity Feed on the same cost basis as the Exchange. The offering of certain fee waivers described herein continues to enable vendors to compete on price as the waivers are only granted where the Distributor is receiving the Bats One Feed and paying the required fees for External Distribution, Logical Ports, and Data Consolidation. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 26 and paragraph (f) of Rule 19b–4 thereunder.27 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s Internet comment form (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– BatsBZX–2017–36 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number SR–BatsBZX–2017–36. 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 (http://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– BatsBZX–2017–36 and should be submitted on or before June 22, 2017. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2017–11254 Filed 5–31–17; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–80779; File No. SR–MIAX– 2017–22] Self-Regulatory Organizations; Miami International Securities Exchange LLC; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend MIAX Options Rule 515A, MIAX Price Improvement Mechanism (‘‘PRIME’’) and PRIME Solicitation Mechanism May 26, 2017. Pursuant to the provisions of 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 May 17, 2017, Miami International Securities Exchange, LLC (‘‘MIAX Options’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission 28 17 24 See supra note 21. 25 See supra note 16. VerDate Sep<11>2014 18:32 May 31, 2017 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 26 15 U.S.C. 78s(b)(3)(A). 27 17 CFR 240.19b–4(f). Jkt 241001 PO 00000 Frm 00170 Fmt 4703 1 15 Sfmt 4703 25393 E:\FR\FM\01JNN1.SGM 01JNN1

Agencies

[Federal Register Volume 82, Number 104 (Thursday, June 1, 2017)]
[Notices]
[Pages 25389-25393]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-11254]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-80772; File No. SR-BatsBZX-2017-36]


Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Market Data Section of Its Fee Schedule To Adopt Fees for a New 
Market Data Product Called the ETF Implied Liquidity Feed

May 25, 2017.
    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 May 17, 2017, Bats BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission (the 
``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 Market Data section of 
its fee schedule to adopt fees for a new market data product called the 
ETF Implied Liquidity Feed.
    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 amend the Market Data section of its fee 
schedule to adopt fees for a new market data product called the ETF 
Implied Liquidity Feed. The ETF Implied Liquidity feed is an optional 
data feed that would provide the Exchange's proprietary calculation of 
the implied liquidity and the aggregate best bid and offer (``BBO'') of 
all displayed orders on the Exchange and its affiliated exchanges \5\ 
for all standard, non-leveraged U.S. equity Exchange Traded Funds 
(``ETFs'') \6\ traded on the System.\7\ An ETF's implied liquidity 
disseminated via the proposed feed would consist of the ETF's implied 
BBO (including the implied size) calculated via a proprietary 
methodology based on the national best bid and offer (``NBBO''), the 
number of shares of securities underlying one creation unit of the ETF, 
and the estimated cash included in one creation unit of the ETF. The 
Exchange intends to begin to offer the ETF Implied Liquidity Feed on 
June 1, 2017.\8\
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    \5\ The Exchange's affiliates are Bats EDGA Exchange, Inc., 
(``EDGA''), Bats EDGX Exchange, Inc. (``EDGX''), and Bats BYX 
Exchange, Inc. (``BYX'') (``collectively, the ``Bats Exchanges'').
    \6\ The securities underlying each of the U.S. equity ETFs 
included in the proposed feed must be considered NMS Securities as 
defined under Rule 600(b)(46) of Regulation NMS. 17 CFR 
242.600(b)(46).
    \7\ See Exchange Rule 11.22(n). See also Securities Exchange Act 
Release No. 80580 (May 3, 2017) (SR-BatsBZX-2017-25) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to 
Amend Rule 11.22, Data Products, to Adopt a New Market Data Product 
Known as the ETF Implied Liquidity Feed) (filed April 28, 2017).
    \8\ See Bats to Introduce ETF Implied Liquidity Feed Effective 
June 1, 2017, http://cdn.batstrading.com/resources/market_data/2017/Bats-to-Introduce-ETF-Implied-Liquidity-Feed-Effective-June-1-2017.pdf.

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[[Page 25390]]

    The Exchange now proposes to amend its fee schedule to adopt fees 
for the ETF Implied Liquidity Feed. The proposed fees include the 
following, each of which are described in detail below: (i) 
Distribution Fees for both Internal and External Distributors; \9\ (ii) 
Usage Fees for both Professional \10\ and Non-Professional \11\ Users; 
and (iii) a Data Consolidation fee.
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    \9\ A ``Distributor'' is defined as ``any entity that receives 
the Exchange Market Data product directly from the Exchange or 
indirectly through another entity and then distributes it internally 
or externally to a third party.'' See the Exchange's fee schedule 
available at http://www.bats.com/us/equities/membership/fee_schedule/bzx/. An ``Internal Distributor'' is defined as ``a 
Distributor that receives the Exchange Market Data product and then 
distributes that data to one or more Users within the Distributor's 
own entity.'' Id. An ``External Distributor'' is defined as ``a 
Distributor that receives the Exchange Market Data product and then 
distributes that data to a third party or one or more Users outside 
the Distributor's own entity.'' Id.''
    \10\ A ``Professional User'' is defined as ``any User other than 
a Non-Professional User.'' See the Exchange's fee schedule available 
at http://www.bats.com/us/equities/membership/fee_schedule/bzx/.
    \11\ A ``Non-Professional User'' is defined as ``a natural 
person who is not: (i) Registered or qualified in any capacity with 
the Commission, the Commodity Futures Trading Commission, any state 
securities agency, any securities exchange or association, or any 
commodities or futures contract market or association; (ii) engaged 
as an ``investment adviser'' as that term is defined in Section 
202(a)(11) of the Investment Advisers Act of 1940 (whether or not 
registered or qualified under that Act); or (iii) employed by a bank 
or other organization exempt from registration under federal or 
state securities laws to perform functions that would require 
registration or qualification if such functions were performed for 
an organization not so exempt.'' Id.
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    Distribution Fees. As proposed, each Internal and External 
Distributor that receives the ETF Implied Liquidity Feed shall pay a 
fee of $5,000 per month.\12\ The Exchange proposes to waive certain 
fees for Distributors that also receive the Bats One Feed.\13\ The ETF 
Implied Liquidity Feed and the Bats One Feed are similar in that both 
include the aggregate BBO for all displayed orders on the Bats 
Exchanges. The key difference here is that the ETF Implied Liquidity 
Feed also contains the Exchange's proprietary calculation of the ETF's 
implied liquidity. As such, the Exchange believes it is reasonable to 
waive certain charges for those Distributors that receive both 
products. First, the Exchange proposes to waive the Distributor fee for 
External Distributors of the ETF Implied Liquidity Feed where that 
External Distributor also receives and is charged the External 
Distributor fee for the Bats One Feed. The Exchange notes that the 
proposed External Distribution fee for the ETF Implied Liquidity Feed 
of $5,000 per month equals that charged for Bats One Summary. The 
External Distribution fee for Bats One Premium is higher at $12,500 per 
month. Second, the Exchange proposes to waive the related Logical Port 
fee of $550 per port per month for both Internal and External 
Distributors of the ETF Implied Liquidity Feed where they also receive 
and are charged a Logical Port fee for the Bats One Feed. Distributors 
would continue to pay the Logical Port fee to receive the Bats One 
Feed. Lastly, as described below, the Exchange proposes to waive the 
Data Consolidation fee for External Distributors of the ETF Implied 
Liquidity Feed where that External Distributor also receives and is 
charged the Data Consolidation fee for the Bats One Feed. The Exchange 
believes waiving the above fees would avoid overlapping charges for 
Distributors that also receive the Bats One Feed, as both feeds include 
the aggregated BBO of the Bats Exchanges as a core part of their 
offering. These Distributors would continue to pay these fees for 
receipt of the Bats One Feed and are liable for the User fees to be 
charged for the ETF Implied Liquidity Feed described below.
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    \12\ A Distributor that acts as both an Internal Distributor and 
an External Distributor of the ETF Implied Liquidity Feed will be 
subject to both the Internal Distribution Fee and the External 
Distribution Fee.
    \13\ The Bats One Feed is a data feed that disseminates, on a 
real-time basis, the aggregate BBO for securities traded on each of 
the Bats Exchanges. The Bats One Feed also contains the individual 
last sale information for the Bats Exchanges (collectively with the 
aggregate BBO, the ``Bats One Summary Feed''). See Exchange Rule 
11.22(j). See also Securities Exchange Act Release No. 73918 
(December 23, 2014), 79 FR 78920 (December 31, 2014) (File Nos. SR-
EDGX-2014-25; SR-EDGA-2014-25; SR-BATS-2014-055; SR-BYX-2014-030) 
(Notice of Amendment No. 2 and Order Granting Accelerated Approval 
to Proposed Rule Changes, as Modified by Amendments Nos. 1 and 2, to 
Establish a New Market Data Product called the Bats One Feed) 
(``Bats One Approval Order'').
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    User Fees. The Exchange proposes to charge External Distributors 
that redistribute the ETF Implied Liquidity Feed different fees for 
their Professional Users and Non-Professional Users. The Exchange will 
assess a monthly fee for Professional Users of $25.00 per User. Non-
Professional Users will be assessed a monthly fee of $1.00 per User. 
The Exchange does not propose to charge per User fees to Internal 
Distributors that receive the ETF Implied Liquidity Feed.
    External Distributors that receive the ETF Implied Liquidity Feed 
will be required to count every Professional User and Non-Professional 
User to which they provide the ETF Implied Liquidity Feed, the 
requirements for which are identical to that currently in place for 
other market data products offered by the Exchange.\14\ Thus, the 
External Distributor's count will include every person and device that 
accesses the data regardless of the purpose for which the individual or 
device uses the data. External Distributors must report all 
Professional and Non-Professional Users in accordance with the 
following:
---------------------------------------------------------------------------

    \14\ See Securities Exchange Act Release Nos. 74285 (February 
18, 2015); 80 FR 9828 (February 24, 2015) (SR-BATS-2015-11) 
(proposing fees for the Bats One Feed); 75406 (July 9, 2015), 80 FR 
41522 (July 15, 2015) (SR-BATS-2015-48) (proposing user fees for the 
BZX Top and Last Sale data feeds); 75785 (August 28, 2015), 80 FR 
53360 (September 3, 2015) (SR-BATS-2015-64) (proposing fees for BZX 
Book Viewer); and 79636 (December 21, 2016), 81 FR 95693 (December 
28, 2016) (SR-BatsBZX-2016-87) (proposing fees for BZX Summary 
Depth).
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     In connection with an External Distributor's distribution 
of the ETF Implied Liquidity Feed, the External Distributor must count 
as one User each unique User that the External Distributor has entitled 
to have access to the ETF Implied Liquidity Feed. However, where a 
device is dedicated specifically to a single individual, the External 
Distributor must count only the individual and need not count the 
device.
     The External Distributor must identify and report each 
unique User. If a User uses the same unique method to gain access to 
the ETF Implied Liquidity Feed, the External Distributor must count 
that as one User. However, if a unique User uses multiple methods to 
gain access to the ETF Implied Liquidity Feed (e.g., a single User has 
multiple passwords and user identifications), the External Distributor 
must report each of those methods as an individual User.
     External Distributors must report each unique individual 
person who receives access through multiple devices as one User so long 
as each device is dedicated specifically to that individual.
     If an External Distributor entitles one or more 
individuals to use the same device, the Distributor must include only 
the individuals, and not the device, in the count.
    Data Consolidation Fee. The Exchange also proposes to charge 
External Distributors of the ETF Implied Liquidity Feed a separate Data 
Consolidation Fee of $500 per month, which reflects the value of the 
aggregation and consolidation function the Exchange performs in 
creating the portion of the feed that includes the aggregated BBO of 
all displayed orders on the Exchange and its affiliated exchanges. The 
Exchange would provide the aggregate BBO disseminated via the Bats One 
Feed as part of the ETF

[[Page 25391]]

Implied Liquidity feed.\15\ The Exchange creates the Bats One Feed, 
including the aggregated BBO of the Bats Exchanges, by aggregating data 
derived from the EDGX Depth, EDGA Depth, BYX Depth, and BZX Depth.\16\ 
The Exchange proposes to waive the Data Consolidation fee for External 
Distributors of the ETF Implied Liquidity Feed where that External 
Distributor also receives and is charged the Data Consolidation fee for 
the Bats One Feed. As stated above, the Exchange believes waiving this 
fee would avoid overlapping charges for Distributors that also receive 
the Bats One Feed, as both feeds include the aggregated BBO of the Bats 
Exchanges. In such case, the External Distributor is being charged a 
$1,000 Data Consolidation fee for the Bats One Feed, which covers the 
consolidation function already being performed by the Exchange in 
constructing the aggregated BBO for the Bats Exchanges. The Exchange, 
therefore, believes it is reasonable to not charge External 
Distributors an additional Data Consolidation fee for the same 
aggregation function performed for the Bats One Feed.
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    \15\ See Bats One Approval Order, supra note 13.
    \16\ See EDGA Rule 13.8, EDGX Rule 13.8, BZX Rule 11.22(a) and 
(c), and BYX Rule 11.22 (a) and (c) for a description of the depth 
of book feeds offered by each of the Bats Exchanges. Rather than 
these depth-of-book feeds, the Exchange notes that a vendor seeking 
to build a competing product to the proposed ETF Implied Liquidity 
feed could simply utilize the top-of-book data feeds from each of 
the Bats Exchange's to create an aggregated BBO.
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Implementation Date
    The Exchange intends to implement the proposed fees on June 1, 
2017.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\17\ in general, and 
furthers the objectives of Section 6(b)(4),\18\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its members and other recipients of 
Exchange data. The Exchange believes that the proposed rates are 
equitable and non-discriminatory in that they apply uniformly to all 
recipients of Exchange data. The Exchange believes the proposed fees 
are competitive with those charged by other venues and, therefore, 
reasonable and equitably allocated to recipients.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed rule change is consistent 
with Section 11(A) of the Act \19\ in that it supports (i) fair 
competition among brokers and dealers, among exchange markets, and 
between exchange markets and markets other than exchange markets and 
(ii) the availability to brokers, dealers, and investors of information 
with respect to quotations for and transactions in securities. 
Furthermore, the proposed rule change is consistent with Rule 603 of 
Regulation NMS,\20\ which provides that any national securities 
exchange that distributes information with respect to quotations for or 
transactions in an NMS stock do so on terms that are not unreasonably 
discriminatory. In adopting Regulation NMS, the Commission granted 
self-regulatory organizations and broker-dealers increased authority 
and flexibility to offer new and unique market data to the public. It 
was believed that this authority would expand the amount of data 
available to consumers, and also spur innovation and competition for 
the provision of market data.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78k-1.
    \20\ 17 CFR 242.603.
---------------------------------------------------------------------------

    In addition, the proposed fees would not permit unfair 
discrimination because all of the Exchange's customers and market data 
vendors who subscribe to the ETF Implied Liquidity Feed will be subject 
to the proposed fees. The ETF Implied Liquidity Feed would be 
distributed and purchased on a voluntary basis, in that neither the 
Exchange nor market data distributors are required by any rule or 
regulation to make this data available. Accordingly, Distributors and 
Users can discontinue use at any time and for any reason, including due 
to an assessment of the reasonableness of fees charged. Firms have a 
wide variety of alternative market data products from which to choose, 
such as similar proprietary data products offered by other exchanges 
and consolidated data. Moreover, the Exchange is not required to make 
any proprietary data products available or to offer any specific 
pricing alternatives to any customers.
    In addition, the fees that are the subject of this rule filing are 
constrained by competition. As explained below in the Exchange's 
Statement on Burden on Competition, the existence of alternatives to 
the ETF Implied Liquidity Feed further ensures that the Exchange cannot 
set unreasonable fees, or fees that are unreasonably discriminatory, 
when vendors and subscribers can elect such alternatives. That is, the 
Exchange competes with other exchanges (and their affiliates) that 
provide similar market data products. For example, the ETF Implied 
Liquidity Feed provides investors with alternative market data and 
competes with similar market data product currently offered by other 
exchanges.\21\ If another exchange (or its affiliate) were to charge 
less to distribute its similar product than the Exchange charges to 
create the ETF Implied Liquidity Feed, prospective Users likely would 
not subscribe to, or would cease subscribing to the ETF Implied 
Liquidity Feed.
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    \21\ See Nasdaq Stock Market LLC's (``Nasdaq'') Global Index 
Data Service (``GIDS'') available at http://business.nasdaq.com/intel/indexes/index-data/index.html#!/tcm:5044-12151 (providing on a 
real-time basis intraday portfolio values, daily valuation 
information, such as NAV per Share, estimated cash per Share, 
estimated cash per creation unit, total cash per creation unit and 
total shares outstanding of the fund and ETF directory messages 
designed to provide the symbols of the ETF valuations). See footnote 
28 of Securities Exchange Act Release No. 77714 (April 26, 2016), 81 
FR 26281 (May 2, 2016) (describing Nasdaq's GIDS within the order 
approving SR-Nasdaq-2016-028). See also footnote 29 of Securities 
Exchange Act Release No. 78592 (August 16, 2016), 81 FR 56729 
(August 22, 2016) (describing Nasdaq's GIDS within the order 
approving SR-Nasdaq-2016-061). See, e.g., the NYSE Arca, Inc.'s 
(``NYSE Arca'') EOD ETF Report available at http://www.nyxdata.com/Data-Products/NYSE-Arca-EOD-ETF-Report (providing information such 
as the ETF's closing trades and quotes at different key points 
during the trading day, as well referential information such as 
shares outstanding, the primary market, and NAV).
---------------------------------------------------------------------------

    The Exchange notes that the Commission is not required to undertake 
a cost-of-service or rate-making approach. The Exchange believes that, 
even if it were possible as a matter of economic theory, cost-based 
pricing for non-core market data would be so complicated that it could 
not be done practically.\22\
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    \22\ The Exchange believes that cost-based pricing would be 
impractical because it would create enormous administrative burdens 
for all parties, including the Commission, to cost-regulate a large 
number of participants and standardize and analyze extraordinary 
amounts of information, accounts, and reports. In addition, it is 
impossible to regulate market data prices in isolation from prices 
charged by markets for other services that are joint products. Cost-
based rate regulation would also lead to litigation and may distort 
incentives, including those to minimize costs and to innovate, 
leading to further waste. Under cost-based pricing, the Commission 
would be burdened with determining a fair rate of return, and the 
industry could experience frequent rate increases based on 
escalating expense levels. Even in industries historically subject 
to utility regulation, cost-based ratemaking has been discredited. 
As such, the Exchange believes that cost-based ratemaking would be 
inappropriate for proprietary market data and inconsistent with 
Congress's direction that the Commission use its authority to foster 
the development of the national market system, and that market 
forces will continue to provide appropriate pricing discipline. See 
Appendix C to NYSE's comments to the Commission's 2000 Concept 
Release on the Regulation of Market Information Fees and Revenues, 
which can be found on the Commission's Web site at http://www.sec.gov/rules/concept/s72899/buck1.htm. See also Securities 
Exchange Act Release No. 73816 (December 11, 2014), 79 FR 75200 
(December 17, 2014) (SR-NYSE-2014-64) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change to Establish an 
Access Fee for the NYSE Best Quote and Trades Data Feed, Operative 
December 1, 2014).

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[[Page 25392]]

    Distribution Fee. The Exchange believes that the proposed 
Distribution Fee is reasonable and equitably allocated in light of 
alternatives offered by other market centers. The Exchange believes it 
is reasonable to waive certain charges for those Distributors that 
receive both the ETF Implied Liquidity Feed and the Bats One Feed as 
both include the aggregate BBO for all displayed orders on the Bats 
Exchanges. The key difference here is that the ETF Implied Liquidity 
Feed also contains the Exchange's proprietary calculation of the ETF's 
implied liquidity. Waiver of the Distributor fee for External 
Distributors that also receive and pay the External Distributor for the 
Bats One Feed is equitable and reasonable because those External 
Distributors are being charged the External Distributor fees for Bats 
One, which are currently $5,000 per month for Bats One Summary and 
$12,500 per month for Bats One Premium. The fee waiver here is 
equitable due to both products providing the same key data element--the 
aggregated BBO of the Bats Exchanges. While the ETF Implied Liquidity 
Feed also includes the Exchange's proprietary calculation of an ETF's 
implied liquidity, the Exchange notes that External Distributors of the 
ETF Implied Liquidity Feed would continue to be subject to the per User 
fees. Therefore, the Exchange believes it is equitable and reasonable 
to waive the External Distributor fees in such case. The Exchange 
further believes that not extending this waiver to Internal 
Distributors is not unfairly discriminatory as Internal Distributors of 
the Bats One Feed are not charged User fees like External Distributors.
    The Exchange also believes it is equitable and reasonable to waive 
the related Logical Port fee for both Internal and External 
Distributors of the ETF Implied Liquidity Feed that also receive and 
are charged a Logical Port fee for the Bats One Feed. As stated above, 
both the Bats One Feed and the ETF Implied Liquidity Feed contain the 
same key data element--the aggregated BBO of the Bats Exchange. The 
Exchange believes not charging a Logical Port Fee in order to obtain 
the Exchange's proprietary calculation of the ETF's implied liquidity 
where that Member is currently paying a Logical Port fee to obtain the 
aggregated BBO of the Bats Exchanges via the Bats One Feed is 
reasonable. Such Distributors would continue to pay the Logical Port of 
$550 per port to receive the Bats One Feed as set forth in the 
Exchange's fee schedule.
    User Fees. The Exchange believes that implementing the Professional 
and Non-Professional User fees for the ETF Implied Liquidity Feed are 
equitable and reasonable because they will result in greater 
availability to Professional and Non-Professional Users. Moreover, 
introducing a modest Non-Professional User fee for the ETF Implied 
Liquidity Feed is reasonable because it provides an additional method 
for retail investors to access the ETF Implied Liquidity Feed data by 
providing the same data that is available to Professional Users. The 
Exchange believes that the proposed fees are equitable and not unfairly 
discriminatory because they will be charged uniformly to recipient 
firms and Users. The Exchange also believes it is not unfairly 
discriminatory to only charge User fees to External Distributor of the 
ETF Implied Liquidity Feed as it is those Distributors that 
redistribute the data to their subscribers for a fee.
    The fee structure of differentiated Professional and Non-
Professional fees is utilized by the Exchange for the Bats One Feed and 
has long been used by other exchanges for their proprietary data 
products, and by the Nasdaq UTP and the CTA and CQ Plans in order to 
reduce the price of data to retail investors and make it more broadly 
available.\23\ Offering the ETF Implied Liquidity Feed to Non-
Professional Users with the same data available to Professional Users 
results in greater equity among data recipients.
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    \23\ See Securities Exchange Act Release Nos. 74285 (February 
18, 2015), 80 FR 9828 (February 24, 2015) (SR-BATS-2015-11); 74283 
(February 18, 2015), 80 FR 9809 (February 24, 2015) (SR-EDGA-2015-
09); 74282 (February 17, 2015), 80 FR 9487 (February 23, 2015) (SR-
EDGX-2015-09); and 74284 (February 18, 2015), 80 FR 9792 (February 
24, 2015) (SR-BYX-2015-09) (``Initial BATS One Feed Fee Filings''). 
See also, e.g., Securities Exchange Act Release No. 20002, File No. 
S7-433 (July 22, 1983) (establishing nonprofessional fees for CTA 
data); and Nasdaq Rules 7023(b) and 7047.
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    Data Consolidation Fee. The Exchange believes that the proposed 
$500 per month Data Consolidation Fee charged to External Distributors 
who receive the ETF Implied Liquidity Feed is reasonable because it 
represents the value of the data aggregation and consolidation function 
that the Exchange performs. The Exchange also believes it is equitable 
and reasonable to waive the Data Consolidation fee for External 
Distributors of the ETF Implied Liquidity Feed where that External 
Distributor also receives and is charged the Data Consolidation fee for 
the Bats One Feed. In such case, the External Distributor is being 
charged a $1,000 Data Consolidation fee for the Bats One Feed, which 
covers the consolidation function already being performed by the 
Exchange in constructing the aggregated BBO for the Bats Exchanges. 
Therefore, the Exchange believes it is equitable and reasonable to not 
charge an External Distributor two separate fees for the same function.
    The Exchange further believes the proposed Data Consolidation Fee 
is not designed to permit unfair discrimination because all External 
Distributor who subscribe to the ETF Implied Liquidity Feed will be 
charged the same fee. The Exchange believes it is reasonable and not 
unfairly discriminatory to not charge Internal Distributor a separate 
Data Consolidation Fee as instituting such a fee is designed to ensure 
that a vendor to create a competing product to the Exchange's ETF 
Implied Liquidity Feed on the same price basis as the Exchange. The 
proposed fee structure ensures the prices charged for the external 
distribution of the ETF Implied Liquidity Feed are not lower than the 
cost a vendor would incur to create a competing product. Therefore, the 
Exchange believes the proposed application of the Data Consolidation 
Fee is reasonable would not permit unfair discrimination.

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. The 
Exchange's ability to price the ETF Implied Liquidity Feed is 
constrained by: (i) Competition among exchanges, other trading 
platforms, and Trade Reporting Facilities (``TRF'') that compete with 
each other in a variety of dimensions; (ii) the existence of 
inexpensive real-time consolidated data and market-specific data and 
free delayed data; and (iii) the inherent contestability of the market 
for proprietary data.
    The Exchange and its market data products are subject to 
significant competitive forces and the proposed fees represent 
responses to that competition. To start, the Exchange competes 
intensely for order flow. It competes with the other national 
securities exchanges that currently trade equities, with electronic 
communication networks, with quotes posted in FINRA's Alternative 
Display Facility, with alternative trading systems, and with securities 
firms that primarily

[[Page 25393]]

trade as principal with their customer order flow.
    In addition, when establishing the proposed fees, the Exchange 
considered the competitiveness of the market for proprietary data and 
all of the implications of that competition. The Exchange believes that 
it has considered all relevant factors and has not considered 
irrelevant factors in order to establish fair, reasonable, and not 
unreasonably discriminatory fees and an equitable allocation of fees 
among all Users. The existence of alternatives to the ETF Implied 
Liquidity Feed ensures that the Exchange cannot set unreasonable fees, 
or fees that are unreasonably discriminatory, when vendors and 
subscribers can elect these alternatives or choose not to purchase a 
specific proprietary data product if its cost to purchase is not 
justified by the returns any particular vendor or subscriber would 
achieve through the purchase.
    Lastly, the Exchange represents that the proposed pricing of the 
ETF Implied Liquidity Feed provides investors with alternative market 
data and competes with similar market data product currently offered by 
other exchanges.\24\ In addition, the pricing is designed to ensure 
that a vendor to create a competing product to the ETF Implied 
Liquidity Feed on the same price basis as the Exchange. As stated 
above, the Exchange notes that a vendor seeking to build a competing 
product to the proposed ETF Implied Liquidity feed could simply utilize 
the top-of-book data feeds from each of the Bats Exchange's to create 
an aggregated BBO.\25\ These top-of-book feeds are EDGA Top, EDGX Top, 
BYX Top and BZX Top. The Exchange represents that a competing vendor 
could obtain these top-of-book data feeds from each of the Bats 
Exchanges on the same latency basis as the system that performs the 
aggregation and consolidation of the Bats One Summary Feed. While the 
proposed ETF Implied Liquidity feed does not separately provide the 
ETF's NBBO, the number of shares of securities underlying one creation 
unit of the ETF, or the estimated cash included in one creation unit of 
the ETF, a vendor could obtain this information from the securities 
information processors and other publicly available sources to perform 
its own calculation of an ETF's implied liquidity to include as part of 
a competing product. Therefore, a vendor could create a product to 
compete with the proposed ETF Implied Liquidity feed on the same terms 
as the Exchange. The Exchange designed the pricing of this product to 
enable a vendor to create a competing product to the ETF Implied 
Liquidity Feed on the same cost basis as the Exchange. The offering of 
certain fee waivers described herein continues to enable vendors to 
compete on price as the waivers are only granted where the Distributor 
is receiving the Bats One Feed and paying the required fees for 
External Distribution, Logical Ports, and Data Consolidation.
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    \24\ See supra note 21.
    \25\ See supra note 16.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

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

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \26\ and paragraph (f) of Rule 19b-4 
thereunder.\27\ 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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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-BatsBZX-2017-36 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BatsBZX-2017-36. 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 (http://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-BatsBZX-2017-36 and should 
be submitted on or before June 22, 2017.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
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    \28\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-11254 Filed 5-31-17; 8:45 am]
BILLING CODE 8011-01-P