[Federal Register Volume 82, Number 104 (Thursday, June 1, 2017)]
[Notices]
[Pages 25389-25393]
[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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    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:
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    \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

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.
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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4).
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    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.
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    \19\ 15 U.S.C. 78k-1.
    \20\ 17 CFR 242.603.
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    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).
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    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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    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

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<EMAIL_ADDRESS>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