[Federal Register Volume 75, Number 207 (Wednesday, October 27, 2010)]
[Notices]
[Pages 66180-66183]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-27144]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63149; File No. SR-BYX-2010-004]
Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Related to
Fees for Use of BATS Y-Exchange, Inc.
October 21, 2010.
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 October 14, 2010, BATS Y-Exchange, Inc. (the ``Exchange'' or
``BYX'') 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
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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to modify its fee schedule applicable to
Members \3\ of the Exchange pursuant to BYX Rules 15.1(a) and (c).
While changes to the fee schedule pursuant to this proposal will be
effective upon filing, the changes will become operative on October 15,
2010.
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\3\ A Member is any registered broker or dealer that has been
admitted to membership in the Exchange.
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The text of the proposed rule change is available at the Exchange's
Web site at http://www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to implement a fee schedule applicable to use
of the Exchange commencing on the date it begins operating as a
national securities exchange. The Exchange currently intends to
commence operations on October 15, 2010. Please find below a
description of the fees and rebates that the Exchange intends to impose
under the initial, proposed fee schedule.
The Exchange does not propose to charge different fees or grant
different rebates depending on the amount of orders submitted to, and/
or trades executed on or through, the Exchange. Accordingly, all fees
and rebates
[[Page 66181]]
described below are applicable to all Members, regardless of the
overall volume of their trading activities on the Exchange.
Furthermore, the proposed fees are different but structurally similar
to those of the Exchange's affiliated exchange, BATS Exchange, Inc.
(``BATS Exchange'' or ``BATS''), though the Exchange has omitted fees
that are not currently proposed to be charged by the Exchange or that
are not pertinent to the Exchange's planned business.
(i) Standard Order Execution Fees--Removing Liquidity
The Exchange is proposing to rebate $0.0003 per share for
executions that remove liquidity from the Exchange, with the exception
of executions involving securities priced under $1.00 per share. With
respect to securities priced under $1.00 per share that remove
liquidity from the Exchange's book, the Exchange proposes to charge a
fee of 0.10% of the total dollar value of the execution.
(ii) Standard Order Execution Fees--Adding Liquidity
The Exchange proposes to establish a no charge and no rebate
structure for adding displayed liquidity to the BYX order book in
securities priced $1.00 and above and for adding any liquidity
(displayed or non-displayed) to the BYX order book securities priced
below $1.00. The Exchange proposes charging $0.0005 per share that adds
non-displayed liquidity to the BYX order book in securities priced
$1.00 and above. As defined on the proposed fee schedule, the reference
to ``non-displayed liquidity'' for purposes of the fee schedule
includes liquidity resulting from all forms of Pegged Orders,\4\ Mid-
Point Peg Orders,\5\ and Non-Displayed Orders,\6\ but does not include
liquidity resulting from Reserve Orders \7\ or Discretionary Orders.\8\
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\4\ As defined in BYX Rule 11.9(c)(8).
\5\ As defined in BYX Rule 11.9(c)(9).
\6\ As defined in BYX Rule 11.9(c)(11).
\7\ As defined in BYX Rule 11.9(c)(1).
\8\ As defined in BYX Rule 11.9(c)(10).
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(iii) Standard Routing Pricing--Best Execution Routing
The Exchange proposes to charge the routing charges described
below. All charges by the Exchange for routing are applicable only in
the event that an order is executed. In other words, there is no charge
for orders that are routed away from the Exchange but are not filled.
The best execution routing fees proposed by this filing are identical
to those charged by the Exchange's affiliated exchange, BATS Exchange
(for identical best execution routing strategies). The standard best
execution routing strategies offered by the Exchange include Parallel
D, Parallel 2D, Parallel T, CYCLE, RECYCLE and DRT.
The Exchange proposes to offer the Parallel D, Parallel 2D, CYCLE
and RECYCLE routing strategies at a charge of $0.0028 per share for
executions that occur at other trading venues as a result of such
strategies. The Exchange proposes to offer its Parallel T routing
strategy with a charge of $0.0033 per share for executions that occur
at other trading venues via Parallel T.
With respect to securities priced under $1.00 per share, the
Exchange proposes to charge 0.28% of the total dollar value of the
execution of an order that is routed away from the Exchange through
Parallel D or Parallel 2D. Similarly, and based on the charge of
$0.0033 per share for Parallel T routing, the Exchange proposes to
charge 0.33% of the total dollar value of the execution for any
security priced under $1.00 per share that is routed away from the
Exchange through Parallel T.
In addition, consistent with the fees charged by BATS Exchange, BYX
proposes to offer its DRT routing strategy to Members with a fee of
$0.0020 per share executed at a dark liquidity venue. This lower fee is
based on the fact that various dark liquidity venues to which the
Exchange routes provide the possibility of executions at reduced rates.
Finally, as BATS Exchange does on its fee schedule, BYX proposes to
note that the current default best execution routing strategy used by
the Exchange is to route through DRT to dark liquidity venues and then
to other market centers through Parallel D.
(iv) Destination Specific Routing Pricing
The Exchange proposes to charge a consistent, discounted fee for
Destination Specific Orders routed to certain of the largest market
centers measured by volume (NYSE, NYSE Arca and NASDAQ) (referred to by
the Exchange as ``One Under'' pricing). The One Under pricing proposed
by BYX is identical to One Under pricing offered by BYX's affiliated
exchange, BATS Exchange, and in each instance the execution fee will be
$0.0001 less per share for orders routed to such market centers by the
Exchange than such market centers currently charge for removing
liquidity. Specifically, the Exchange proposes to charge: (a) $0.0020
per share for BYX + NYSE Destination Specific Orders executed at NYSE;
(b) $0.0027 per share for BYX + NYSE ARCA Destination Specific Orders
executed at NYSE Arca in Tape B securities; and (c) $0.0029 per share
for BYX + NASDAQ Destination Specific Orders executed at NASDAQ or BYX
+ NYSE ARCA Destination Specific Orders executed at NYSE Arca in Tape A
or Tape C securities, while such market centers currently charge
removal rates, respectively, of: (x) $0.0021 per share; (y) $0.0028 per
share; and (z) $0.0030 per share.
In conjunction with this proposal, the Exchange proposes to set
forth these fees under a separate heading in order to make clear the
order types to which ``One Under'' pricing applies. All other
Destination Specific Order fees (i.e., to BATS Exchange or other market
centers, as described below) can be found under the heading for ``Other
Non-Standard Routing Options.''
The Exchange also proposes to adopt pricing for a Destination
Specific Order \9\ routed to and executed by its affiliated exchange,
BATS Exchange. The Exchange proposes to refer to this routing as
``B2B'' routing, and proposes to charge $0.0025 per share for B2B
orders routed to and executed by BATS Exchange. This charge is the same
charge a Member would incur if it routed an order to BATS Exchange
directly. In addition, the Exchange proposes to adopt a charge of
$0.0030 per share for Destination Specific Orders sent to and executed
by any market center other than the NYSE, NYSE Arca, NASDAQ or BATS
Exchange that displays a Protected Quotation \10\ (each a ``Protected
Market Center''). Additionally, the Exchange proposes to charge $0.0020
per share for executions that occur at a dark liquidity venue through a
BYX + DRT Destination Specific Order.
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\9\ As defined in BATS Rule 11.9(c)(12).
\10\ As defined in BATS Rule 1.5(t).
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(v) Other Non-Standard Routing Options
In addition to non-standard routing options described elsewhere in
this filing, the Exchange also proposes to charge certain other fees
identical to those charged by its affiliated exchange, BATS Exchange.
Specifically, the Exchange proposes to charge $0.0033 per share for
Directed ISO's.\11\ The Exchange also proposes not to charge for
Modified Destination Specific Orders \12\ routed to and executed by a
dark liquidity venue through its ``Dark Scan'' routing strategy.
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\11\ As defined in BYX Rule 11.9(d)(2).
\12\ As defined in BATS Rule 11.9(c)(13).
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(vi) TRIM Routing Pricing
The Exchange proposes to adopt pricing for its new TRIM order
routing strategy, which strategy is focused on
[[Page 66182]]
seeking execution of orders while minimizing execution costs by routing
only to certain low cost execution venues on the Exchange's System
routing table. The Exchange proposes to charge Members $0.0025 per
share for TRIM orders routed to and executed by its affiliated
exchange, BATS Exchange, which is the same rebate to be offered by BATS
to market participants that route directly to and execute at BATS. For
executions through TRIM routing that occur at a dark liquidity venue
(identified by the Exchange as a ``DRT'' venue) or the NYSE, the
Exchange proposes to charge $0.0020 per share. Finally, to the extent
an order routed through TRIM executes at a low-priced venue other than
BATS, a DRT venue or NYSE, the Exchange proposes neither to charge the
Member any fee nor to pay any rebate for such execution.
(vii) SLIM Routing Pricing
The Exchange proposes to adopt pricing for its new SLIM order
routing strategy, which, similar to TRIM, is focused on seeking
execution of orders while minimizing execution costs by routing to
certain low cost execution venues on the Exchange's System routing
table. The primary distinction between TRIM and SLIM is that SLIM will
route first to low cost execution venues but will ultimately route to
all venues on the Exchange's System routing table, whereas TRIM only
routes to low cost execution venues. As with TRIM, the Exchange
proposes to charge Members $0.0025 per share for SLIM orders routed to
and executed by its affiliated exchange, BATS. For executions through
SLIM routing that occur at the NYSE, the Exchange proposes to charge
$0.0020 per share. Finally, to the extent an order routed through SLIM
executes at any other venue, including any DRT venue, the Exchange
proposes to charge $0.0026 per share.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the requirements of the Act and the rules and regulations
thereunder that are applicable to a national securities exchange, and,
in particular, with the requirements of Section 6 of the Act.
Specifically, the Exchange believes that the proposed rule change is
consistent with Section 6(b)(4) of the Act, in that it provides for the
equitable allocation of reasonable dues, fees and other charges among
members and other persons using any facility or system which the
Exchange operates or controls.
The various routing fees proposed by this filing, including fees
for order execution and routing strategies offered by the Exchange, are
intended to attract order flow to BYX by offering competitive and easy
to understand rates to Exchange Members. All fees are structured in a
manner comparable to corresponding fees of the Exchange's affiliate,
BATS Exchange, and are set at levels equal to or lower than the levels
of the comparable BATS Exchange fees. The differences between the fees
charged for routing to specific market centers and routing of specific
order types described above are due to different cost structures at the
various market centers to which orders may be routed and other factors.
For instance, lower transaction fees at NYSE allow the Exchange to
charge lower routing fees for BATS + NYSE Destination Specific Orders
than Destination Specific Orders routed elsewhere (i.e., to NASDAQ and
other protected market centers). Similarly, lower transaction fees at
dark liquidity venues permit the Exchange to charge lower routing fees
for orders routed to such venues. Because the Exchange incurs
additional costs and performs additional services in connection with
certain routing services, such as the routing of Directed ISOs and
Parallel T routing, it proposes to charge a higher routing fee for such
orders. Finally, because the Exchange believes that a uniform routing
fee for all other orders routed away from the Exchange through its best
execution routing strategies provides Members with certainty as to
transaction costs, it proposes to charge standard routing fees for such
orders, rather than further differentiating routing fees that it
charges to Members.
The Exchange 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.
Also, although routing services offered by the Exchange are available
to all Members, Members are not required to use the Exchange's routing
services, but instead, the Exchange's routing services are completely
optional. Members can manage their own routing practices or can utilize
a myriad of other routing solutions that are available to market
participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change imposes
any burden on competition.
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 proposed rule change has been designated as a fee
change pursuant to Section 19(b)(3)(A)(ii) of the Act \13\ and Rule
19b-4(f)(2) thereunder,\14\ because it establishes or changes a due,
fee or other charge imposed on members by the Exchange. Accordingly,
the proposal is effective upon filing with the Commission.
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\13\ 15 U.S.C. 78s(b)(3)(A)(ii).
\14\ 17 CFR 240.19b-4(f)(2).
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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 e-mail to [email protected]. Please include
File Number SR-BYX-2010-004 on the subject line.
Paper Comments
Send paper comments in triplicate to Elizabeth M. Murphy,
Secretary, Securities and Exchange Commission, 100 F Street, NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-BYX-2010-004. This file
number should be included on the subject line if e-mail 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
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submission,\15\ 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, on official business days between
the hours of 10 a.m. and 3 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-BYX-
2010-004 and should be submitted on or before November 17, 2010.
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\15\ The text of the proposed rule change is available on the
Commission's Web site at http://www.sec.gov/rules/sro.shtml.
\16\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-27144 Filed 10-26-10; 8:45 am]
BILLING CODE 8011-01-P