Daily Rules, Proposed Rules, and Notices of the Federal Government
The Exchange proposes [sic] amend the fee schedule applicable to Members
The text of the proposed rule change is available at the Exchange's Web site at
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.
The Exchange proposes to modify the "Options Pricing" section of its fee schedule to: (i) Adopt a definition for average daily volume, or "ADV"; (ii) introduce a tiered pricing structure applicable to the fees for removing liquidity from the BATS options market ("BATS Options"); (iii) expand and modify the program that provides a rebate specifically for orders that set either the national best bid (the "NBB") or the national best offer (the "NBO") subject to average daily volume requirements; and (iv) make clarifying changes to the standard routing section of the fee schedule.
In order to accommodate certain changes described below, the Exchange proposes to adopt a definition of average daily volume, or ADV, for purposes of the fee schedule. The Exchange is not proposing any substantive change to its calculation of ADV, which is currently applicable only to the NBBO Setter Rebate, as described below. Instead, the Exchange is proposing the definition to provide more clarity and for ease of reference throughout the fee schedule. As proposed, ADV will mean average daily volume calculated as the number of contracts added or removed, combined, per day on a monthly basis. The Exchange proposes to make clear in the definition of ADV that routed contracts are not included in the Exchange's calculation of ADV, but rather, only volume executed on the Exchange counts towards a Member's ADV.
The Exchange currently charges $0.25 per contract for customer orders and $0.35 per contract for Firm and Market Maker orders that remove liquidity from BATS Options. The Exchange proposes to increase the standard fee for removing liquidity to $0.28 per contract for customer orders and $0.38 per contract for Firm and Market Maker orders. The Exchange also proposes to adopt two tiers through which Members can realize lower liquidity removal fees, as further described below.
First, the Exchange proposes to charge $0.25 per contract for a Customer order and $0.35 per contract for a Firm or Market Maker order that removes liquidity from the BATS Options order book where the Member has an ADV of 50,000 or more contracts. Accordingly, the Exchange is not proposing to change the charge to remove liquidity from BATS Options for Members with an ADV of 50,000 or more.
Second, the Exchange proposes to charge $0.27 per contract for a Customer order and $0.37 per contract for a Firm or Market Maker order that removes liquidity from the BATS Options order book where the Member has an ADV of 15,000 or more, but fewer than 50,000 contracts. Thus, for Members with ADV of between 15,000 and 49,999 contracts, Members will be charged $0.02 more per contract for their orders than such Members are charged today.
The Exchange currently offers a rebate upon execution for all orders that add liquidity that sets either the NBB or NBO (the "NBBO Setter Rebate")
Currently, the BATS Options fees for Standard Best Execution Routing or Destination Specific Order routing fees are dependent on the venues at which such orders are executed. Certain venues offer pricing that the Exchange has defined as "Make/Take" in certain issues and then pricing under a more traditional pricing structure (hereafter, "Classic" pricing). As defined on the fee schedule, Make/Take pricing refers to executions at the identified Exchange under which "Post Liquidity" or "Maker" rebates ("Make") are credited by that exchange and "Take Liquidity" or "Taker" fees ("Take") are charged by that exchange. The Exchange proposes certain changes to its routing schedule in order to further delineate between executions in Make/Take issues and Classic issues at the options exchanges that maintain both types of pricing, specifically, NYSE Arca, the International Stock Exchange, and NASDAQ OMX PHLX. The Exchange is not proposing any changes to the pricing of its standard routing or destination specific routing strategies. In addition to these changes, the Exchange is proposing to add an additional page break to its fee schedule and to indicate that the options pricing section continues onto page three of the version of the fee schedule maintained on its Web site.
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.
The changes to Exchange execution fees and rebates proposed by this filing are intended to attract order flow to BATS Options by offering competitive pricing, especially for those who add liquidity that sets the NBB or NBO. As a general matter, the Exchange believes that the NBBO Setter Program benefits all Members with the potential of increased and aggressively priced liquidity at the Exchange. The expansion of the NBBO Setter Program to Members with a lower ADV threshold (albeit with a lower rebate) will result in increased payments that will benefit some Members due to the increased revenue those Members will receive. With the increase to the current threshold of 20,000 contracts ADV to 50,000 contracts ADV, some Members will no longer qualify for the highest potential rebate, though they will still receive a higher rebate than otherwise offered by the Exchange. The Exchange believes that the NBBO Setter Rebate is
The Exchange also believes that its proposed use of a volume threshold to qualify for the NBBO Setter Rebate and to qualify for lower liquidity removal fees is analogous to tiered pricing structures that are in place at other exchanges.
The Exchange does not believe that the proposed rule change imposes any burden on competition.
No written comments were solicited or received.
Pursuant to Section 19(b)(3)(A)(ii) of the Act
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.
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 (
* Send an e-mail to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.