[Federal Register Volume 79, Number 148 (Friday, August 1, 2014)]
[Notices]
[Pages 44908-44917]
[FR Doc No: 2014-18127]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72692; File No. SR-BATS-2014-022]

Self-Regulatory Organizations; BATS Exchange, Inc.; Order
Granting Approval of a Proposed Rule Change To Amend the Competitive
Liquidity Provider Program

July 28, 2014.
    On June 3, 2014, BATS Exchange, Inc. (``Exchange'' or ``BATS'')
filed with the Securities and Exchange Commission (``SEC'' or
``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Act'' or ``Exchange Act'') \1\ and Rule 19b-4
thereunder,\2\ a proposed rule change to add Interpretation and Policy
.03 to Rule 11.8 to establish the Supplemental Competitive Liquidity
Provider Program (``Program'') for Exchange Traded Products (``ETPs'')
listed on the Exchange for a one year pilot period, and to amend
Interpretation and Policy .02 to Rule 11.8, which governs the existing
Competitive Liquidity Provider Program (``CLP Program''), to reflect
the transition for Exchange-listed ETPs from the existing CLP Program
to the proposed Program. The proposed rule change was published for
comment in the Federal Register on June 13, 2014.\3\ The Commission did
not receive any comment letters on the proposed rule change. This order
grants approval of the proposed rule change.\4\
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Securities Exchange Act Release No. 72346 (Jun. 9, 2014), 79
FR 33982 (``Notice'').
    \4\ Today the Commission also is granting exemptive relief from
Rule 102 under Regulation M concerning the Program. See Securities
Exchange Act Release No. 72693 (Jul. 28, 2014) (Order Granting a
Limited Exemption from Rule 102 of Regulation M Concerning the BATS
Exchange, Inc.'s Supplemental Competitive Liquidity Provider Program
Pilot Pursuant to Regulation M Rule 102(e)).
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I. Description of the Proposal

    As set forth in more detail in the Notice,\5\ the Exchange is
proposing to amend its rules to add Interpretation and Policy .03 to
Rule 11.8 to establish the Program, which seeks to incentivize certain
Market Makers registered with the Exchange (``Market Makers'') \6\ as
ETP Competitive Liquidity Providers (``ETP CLPs'') \7\ to enhance
liquidity on

the Exchange in certain Exchange-listed ETPs \8\ and thereby qualify to
receive part of a daily rebate pursuant to the Program (a ``CLP
Rebate'').\9\ As proposed, the Program will operate for a one year
pilot period beginning from the date of implementation of the
Program.\10\ The Exchange is also proposing to amend Interpretation and
Policy .02 to Rule 11.8 (Competitive Liquidity Provider Program) \11\
to reflect the transition for Exchange-listed ETPs from the existing
CLP Program to the proposed Program.
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    \5\ See Notice, supra note 3.
    \6\ As defined in BATS Rules, the term ``Market Maker'' means a
Member that acts as a market maker pursuant to Chapter XI of BATS
Rules.
    \7\ As defined in proposed Interpretation and Policy .03(b)(1)
to Rule 11.8, the term ``ETP CLP'' means a Member that
electronically enters proprietary orders into the systems and
facilities of the Exchange and is obligated to maintain a bid or an
offer at the NBBO in each assigned CLP Security in round lots
consistent with paragraph (i) of Interpretation and Policy .03 to
Rule 11.8.
    \8\ As proposed in Interpretation and Policy .03(b)(4) to Rule
11.8, the term ``ETP'' includes Portfolio Depository Receipts, Index
Fund Shares, Trust Issued Receipts, and Managed Fund Shares, which
are defined in Rule 14.11(b), 14.11(c), 14.11(f), and 14.11(i),
respectively.
    \9\ See Notice, supra note 3, 79 FR at 33982.
    \10\ See proposed Interpretation and Policy .03(p) to Rule 11.8.
    \11\ The Exchange currently operates the existing CLP Program,
which is designed to incentivize certain Market Makers registered
with the Exchange as Competitive Liquidity Providers to enhance
liquidity on the Exchange in all Exchange-listed securities,
including ETFs. See Securities Exchange Act Release No. 66307
(February 2, 2012), 77 FR 6608 (February 8, 2012) (SR-BATS-2011-051)
(order approving proposed rule change to implement the Competitive
Liquidity Provider Program). See also Securities Exchange Act
Release Nos. 66427 (February 21, 2012), 77 FR 11608 (February 27,
2012) (SR-BATS-2012-011) (Notice of filing and immediate
effectiveness of proposed rule change adopting rebates for the CLP
Program); 67854 (September 13, 2012), 77 FR 58198 (September 19,
2012) (SR-BATS-2012-036) (Notice of filing and immediate
effectiveness of proposed rule change related to fees applicable to
the CLP Program); 69190 (March 20, 2013), 78 FR 18384 (March 26,
2013) (SR-BATS-2013-005) (Order approving proposed rule change to
modify the CLP Program to, among other things, modify the
calculation of Size Event Tests); 69857 (June 25, 2013), 78 FR 39392
(July 1, 2013) (SR-BATS-2013-037) (Notice of filing and immediate
effectiveness of a proposed rule change to amend the requirements of
the CLP Program); 70865 (November 13, 2013), 78 FR 69509 (November
19, 2013) (SR-BATS-2013-057) (Notice of filing and immediate
effectiveness of a proposed rule change to amend the CLP Program);
and 71284 (January 10, 2014), 79 FR 2921 (January 16, 2014) (SR-
BATS-2014-002) (Notice of filing and immediate effectiveness of a
proposed rule change to extend the applicability of the CLP
Program).
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    The Exchange plans to implement the Program and the corresponding
amendments to existing Interpretation and Policy .02 to Rule 11.8 on a
date that will be circulated in a notice from the BATS Trade Desk.\12\
The Exchange proposes to maintain existing Interpretation and Policy
.02 in its current form until such implementation, and the Exchange
states that it will notify all interested parties of the implementation
date of these changes through a notice distributed to all Members of
the Exchange.\13\
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    \12\ See Notice, supra note 3, 79 FR at 33982.
    \13\ Id. The Exchange states that it is proposing to provide
notice of the implementation date through a notice rather than
implementing the changes to the rule immediately upon approval by
the Commission in order to provide the Exchange with the flexibility
necessary to ensure an uninterrupted transition from the CLP Program
to the Program. Id.
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Summary of the Program

    The Program is voluntary and is designed to promote market quality
in CLP Securities \14\ by allowing a CLP Company \15\ to list an
eligible CLP Security on the Exchange and, in addition to paying the
standard (non-CLP) listing fee as set forth in the fee schedule, a
Sponsor \16\ may pay a fee (a ``CLP Fee'') in order for the CLP
Company, on behalf of a CLP Security, to participate in the Program,
which will be credited to the BATS General Fund.\17\ The CLP Fee will
be used to incentivize one or more ETP CLPs to enhance the market
quality of the CLP Security.\18\ Subject to the conditions set forth in
the proposed rule, the Exchange will pay the CLP Rebate out of the BATS
General Fund to one or more ETP CLPs that make a market in the CLP
Security.\19\
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    \14\ As defined in proposed Interpretation and Policy .03(b)(3)
to Rule 11.8, the term ``CLP Security'' means an issue of or series
of ETP securities issued by a CLP Company that meets all of the
requirements to be listed on the Exchange as an ETP pursuant to Rule
14.11.
    \15\ As defined in proposed Interpretation and Policy .03(b)(2)
to Rule 11.8, the term ``CLP Company'' means the trust or company
housing the ETP or, if the ETP is not a series of a trust or
company, then the ETP itself.
    \16\ As defined in proposed Interpretation and Policy .03(b)(5)
to Rule 11.8, ``Sponsor'' means the registered investment adviser
that provides investment management services to a CLP Company or any
of such adviser's parents or subsidiaries.
    \17\ See proposed Interpretation and Policy .03(a) to Rule 11.8.
    \18\ Id.
    \19\ Id.
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Securities Eligible for the Program

    Under the proposal, for a CLP Company, on behalf of a CLP Security,
to be eligible to participate in the Program, the following conditions
must be satisfied: (i) The Exchange has accepted the Program
application of the CLP Company with respect to the CLP Security and the
Exchange has accepted the Program application of at least one ETP CLP
in the same CLP Security; (ii) the CLP Security meets all requirements
to be listed on the Exchange as an ETP; (iii) the CLP Security meets
all Exchange requirements for continued listing at all times the CLP
Security participates in the Program; and (iv) while the CLP Security
is participating in the Program, on a product-specific Web site, the
CLP Company must indicate that the product is in the Program and
provide a link to the Exchange's Program Web site.\20\ In addition, a
CLP Company, on behalf of a CLP Security, is eligible for the Program
unless and until such CLP Security has had a consolidated average daily
volume (``CADV'') of equal to or greater than one million shares for
three consecutive calendar months; however any CLP Security initially
listed on the Exchange shall be eligible for the Program for the first
six months that it is listed on the Exchange, regardless of the ETP's
CADV.\21\ Notwithstanding the foregoing, the Exchange proposes that an
ETP participating in the CLP Program under BATS Rule 11.8,
Interpretation and Policy .02, shall not be eligible for participation
in the Program until and unless such ETP is no longer participating in
the CLP Program.\22\
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    \20\ See proposed Interpretation and Policy .03(d)(1) to Rule
11.8.
    \21\ See proposed Interpretation and Policy .03(d)(3) to Rule
11.8.
    \22\ Id.
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Qualifications of ETP CLPs

    To qualify as an ETP CLP, a Member must be a registered Market
Maker in good standing with the Exchange consistent with Rules 11.5
through 11.8.\23\ Further, the Exchange will require each Member
seeking to qualify as an ETP CLP to have and maintain: (1) Adequate
technology to support electronic trading through the systems and
facilities of the Exchange; (2) one or more unique identifiers that
identify to the Exchange ETP CLP trading activity in assigned CLP
Securities; \24\ (3) adequate trading infrastructure to support ETP CLP
trading activity, which includes support staff to maintain operational
efficiencies in the Program and adequate administrative staff to manage
the Member's participation in the Program; (4) quoting and volume
performance that demonstrates an ability to meet the ETP CLP quoting
requirement in each assigned CLP Security on a daily and monthly basis;
and (5) a disciplinary history that is consistent with just and
equitable business practices.\25\
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    \23\ See proposed Interpretation and Policy .03(f) to Rule 11.8.
    \24\ A Member may not use such unique identifiers for trading
activity at the Exchange in assigned CLP Securities that is not ETP
CLP trading activity, but may use the same unique identifiers for
trading activity in securities not assigned to an ETP CLP. If a
Member does not identify to the Exchange the unique identifier to be
used for ETP CLP trading activity, the Member will not receive
credit for such ETP CLP trading. See proposed Interpretation and
Policy .03(f)(2) to Rule 11.8.
    \25\ See Proposed Interpretation and Policy .03(f) to Rule 11.8.

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Application

    Under the proposal, any entity that wishes to participate in the
Program must submit an application in the form prescribed by the
Exchange, including both CLP Companies on behalf of a CLP Security and
ETP CLPs.\26\
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    \26\ See Proposed Interpretation and Policy .03(c)(1) to Rule
11.8.
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    The proposed rule sets forth a specific application process for ETP
CLPs.\27\ To become an ETP CLP, a Member must submit an application
form with all supporting documentation to the Exchange.\28\ The
Exchange will determine whether an applicant is qualified to become an
ETP CLP based on the qualifications set forth in the rule, as described
above.\29\ After an applicant submits an ETP CLP application to the
Exchange, with supporting documentation, the Exchange shall notify the
applicant Member of its decision.\30\ If an applicant is approved by
the Exchange to receive ETP CLP status, such applicant must establish
connectivity with relevant Exchange systems before such applicant will
be permitted to trade as an ETP CLP on the Exchange.\31\ In the event
an applicant is disapproved by the Exchange, such applicant may seek
review under Chapter X of the Exchange's Rules governing adverse action
and/or reapply for ETP CLP status at least three (3) calendar months
following the month in which the applicant received the disapproval
notice from the Exchange.\32\
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    \27\ See Proposed Interpretation and Policy .03(g) to Rule 11.8.
    \28\ See Proposed Interpretation and Policy .03(g)(1) to Rule
11.8.
    \29\ See Proposed Interpretation and Policy .03(g)(2) to Rule
11.8.
    \30\ See Proposed Interpretation and Policy .03(g)(3) to Rule
11.8.
    \31\ See Proposed Interpretation and Policy .03(g)(4) to Rule
11.8.
    \32\ See Proposed Interpretation and Policy .03(g)(5) to Rule
11.8.
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Assignment of CLP Securities

    The Exchange, in its discretion, will assign to the ETP CLP one or
more CLP Securities for ETP CLP trading purposes.\33\ The Exchange
shall determine the number of CLP Securities assigned to each ETP
CLP.\34\ The Exchange, in its discretion, will assign one or more ETP
CLPs to each CLP Security subject to the Program, depending upon the
trading activity of the CLP Security.\35\
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    \33\ See proposed Interpretation and Policy .03(j)(1) to Rule
11.8.
    \34\ Id.
    \35\ See proposed Interpretation and Policy .03(j)(2) to Rule
11.8.
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ETP CLP Withdrawal & Reallocation

    An ETP CLP may withdraw from the status of an ETP CLP by providing
written notice to the Exchange. Such withdrawal shall become effective
when those CLP Securities assigned to the withdrawing ETP CLP are
reassigned to another ETP CLP. After the Exchange receives the notice
of withdrawal from the withdrawing ETP CLP, the Exchange will reassign
such CLP Securities as soon as practicable but no later than thirty
(30) days after the date said notice is received by the Exchange. In
the event the reassignment of CLP Securities takes longer than the 30-
day period, the withdrawing ETP CLP will have no obligations under
Interpretation and Policy .03 and will not be held responsible for any
matters concerning its previously assigned CLP Securities upon
termination of this 30-day period.\36\
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    \36\ See proposed Interpretation and Policy .03(h) to Rule 11.8.
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CLP Security Withdrawal & Renewal; Termination

    A CLP Company may, on behalf of a CLP Security, after being in the
Program for not less than two consecutive quarters, but less than one
year, voluntarily withdraw from the Program on a quarterly basis. The
CLP Company must notify the Exchange in writing, not less than one
month prior to withdrawing from the Program. The Exchange, however,
does retain discretion to allow a CLP Company to withdraw from the
Program earlier. In making such a determination, the Exchange may take
into account the volume and price movements in the CLP Security; the
liquidity, size quoted, and quality of the market in the CLP Security;
and any other relevant factors.\37\ After a CLP Company, on behalf of a
CLP Security, is in the Program for one year or more, it may
voluntarily withdraw from the Program on a monthly basis, so long as
the CLP Company notifies the Exchange in writing not less than one
month prior to withdrawing from the Program.\38\ After a CLP Company,
on behalf of a CLP Security, is in the Program for one year, the
Program and all obligations and requirements of the Program will
automatically continue on an annual basis unless: (1) The Exchange
terminates the Program by providing not less than one month prior
notice of intent to terminate or the pilot Program is not extended or
made permanent pursuant to a proposed rule change subject to filing
with or approval by the Commission; (2) the CLP Company withdraws from
the Program pursuant to the withdrawal rules described above; or (3)
the CLP Company is terminated from the Program pursuant to subsection
(n) of the proposal.\39\
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    \37\ See proposed Interpretation and Policy .03(c)(2)(A) to Rule
11.8.
    \38\ See proposed Interpretation and Policy .03(c)(2)(B) to Rule
11.8.
    \39\ See proposed Interpretation and Policy .03(c)(3) to Rule
11.8.
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    Interpretation and Policy .03(n) to Rule 11.8 states that the
Program will terminate with respect to a CLP Security under the
following circumstances: (a) A CLP Security sustains a CADV of one
million shares or more for three consecutive months; however, any CLP
Security initially listed on the Exchange shall be eligible for the
Program for the first six months that it is listed on the Exchange,
regardless of the CLP Security's CADV; (b) a CLP Company, on behalf of
a CLP Security, withdraws from the Program, is no longer eligible to be
in the Program pursuant to the proposed rule, or its Sponsor ceases to
make CLP Fee payments to the Exchange; (c) a CLP Security is delisted
or is no longer eligible for the Program; or (d) a CLP Security does
not, for two consecutive quarters, have at least one ETP CLP that is
eligible for CLP Rebate.\40\ The termination of a CLP Company, CLP
Security, or ETP CLP does not preclude the Exchange from allowing re-
entry into the Program where the Exchange deems such re-entry as
proper.\41\
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    \40\ See proposed Interpretation and Policy .03(n)(1) to Rule
11.8.
    \41\ See proposed Interpretation and Policy .03(n)(2) to Rule
11.8.
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Web Site Disclosures

    The Exchange will provide notification on its Web site regarding
the following: (i) Acceptance of a CLP Company, on behalf of a CLP
Security, and an ETP CLP into the Program; (ii) the total number of CLP
Securities that any one CLP Company may have in the Program; (iii) the
names of CLP Securities and the ETP CLP(s) in each CLP Security, the
dates that a CLP Company, on behalf of a CLP Security, commences
participation in and withdraws or is terminated from the Program, and
the name of each CLP Company and its associated CLP Security(ies); (iv)
a statement about the Program that sets forth a general description of
the Program as implemented on a pilot basis and a fair and balanced
summation of the potentially positive aspects of the Program (e.g.,
enhancement of liquidity and market quality in CLP Securities) as well
as the potentially negative aspects and risks of the Program (e.g.,
possible

lack of liquidity and negative price impact on CLP Securities that are
withdrawn or are terminated from the ETP CLP Program), and indicates
how interested parties can get additional information about CLP
Securities in the Program; and (v) the intent of a CLP Company, on
behalf of a CLP Security, or ETP CLP to withdraw from the Program, and
the date of actual withdrawal or termination from the Program.\42\
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    \42\ See proposed Interpretation and Policy .03(o) to Rule 11.8.
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    In addition, a CLP Company that, on behalf of a CLP Security, is
approved to participate in the Program shall issue a press release to
the public when the CLP Company, on behalf of a CLP Security, commences
or ceases participation in the Program.\43\ The press release shall be
in a form and manner prescribed by the Exchange, and, if practicable,
shall be issued at least two days before commencing or ceasing
participation in the Program.\44\ The CLP Company shall dedicate space
on its Web site, or, if it does not have a Web site, on the Web site of
the Sponsor of the CLP Security, which space will (i) include any such
press releases, and (ii) provide a hyperlink to the dedicated page on
the Exchange's Web site that describes the Program.\45\
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    \43\ See proposed Interpretation and Policy .03(d)(4) to Rule
11.8.
    \44\ Id.
    \45\ Id.
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CLP Company Fees

    A CLP Company participating in the Program shall incur an annual
basic CLP Fee of $10,000 per CLP Security. The basic CLP Fee must be
paid to the Exchange prospectively on a quarterly basis.\46\
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    \46\ See proposed Interpretation and Policy .03(d)(2)(A) to Rule
11.8.
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    A CLP Company may also incur an annual supplemental CLP Fee per CLP
Security. The basic CLP Fee and supplemental CLP Fee, when combined,
may not exceed $100,000 per year. The supplemental CLP Fee is a fee
selected by a CLP Company on an annual basis, if at all. The
supplemental CLP Fee must be paid to the Exchange prospectively on a
quarterly basis. The amount of the supplemental CLP Fee, if any, will
be determined by the CLP Company initially per CLP Security and will
remain the same for the period of a year. The Exchange will provide
notification on its Web site regarding the amount, if any, of any
supplemental CLP Fee determined by a CLP Company per CLP Security.\47\
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    \47\ See proposed Interpretation and Policy .03(d)(2)(B) to Rule
11.8.
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    The CLP Fee is in addition to the standard (non-CLP) Exchange
listing fee applicable to the CLP Security and does not offset such
standard listing fee.\48\ For a CLP Security housed by a CLP Company
that has a Sponsor or Sponsors, the CLP Fee with respect to the CLP
Security shall be paid by the Sponsor or Sponsors of such CLP
Security.\49\ The Exchange will prospectively bill each CLP Company for
the quarterly CLP Fee for each CLP Security.\50\ CLP Fees (both basic
and supplemental) will be credited to the BATS General Fund.\51\
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    \48\ See proposed Interpretation and Policy .03(d)(2)(C) to Rule
11.8.
    \49\ See proposed Interpretation and Policy .03(d)(2)(C)(i) to
Rule 11.8. See also proposed Interpretation and Policy .03(b)(2) to
Rule 11.8.
    \50\ See proposed Interpretation and Policy .03(d)(2)(D) to Rule
11.8.
    \51\ See proposed Interpretation and Policy .03(d)(2)(E) to Rule
11.8.
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ETP CLP Quoting Requirements

    ETP CLPs will be subject to both a daily quoting requirement in
order to be eligible to receive financial incentives and a monthly
quoting requirement in order to remain qualified as an ETP CLP. Any ETP
CLP that meets the daily quoting requirement set forth below will be
eligible to receive a CLP Rebate for each day's quoting activity. An
ETP CLP that does not meet the ETP CLP monthly quoting requirement is
subject to the non-regulatory penalties described below.\52\
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    \52\ See proposed Interpretation and Policy .03(e) to Rule 11.8.
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    The Exchange will measure the performance of an ETP CLP in assigned
CLP Securities by calculating Size Event Tests (``SETs'') between 9:25
a.m. and 4:05 p.m. on every day on which the Exchange is open for
business. The Exchange will measure each ETP CLP's quoted size,
excluding odd lots, at the National Best Bid (``NBB'') and National
Best Offer (``NBO'') at least once per second to determine SETs. The
three ETP CLPs with the greatest aggregate size at the NBB at the time
of each SET (a ``Bid SET'') will be considered to have a winning Bid
SET (a ``Winning Bid SET''). In the event of a tie, all ETP CLPs with
the same aggregate size at the NBB will be considered to have a Winning
Bid SET if there are two or less CLPs that have greater aggregate size
at the NBB. Of the ETP CLPs with a Winning Bid SET for a particular Bid
SET, the ETP CLPs with the greatest aggregate size at the NBB will
receive three Bid SET credits (``Bid SET Credits''); the ETP CLPs with
the second greatest aggregate size at the NBB will receive two Bid SET
Credits; and the ETP CLPs with the third greatest aggregate size at the
NBB will receive one Bid SET Credit. Separately, the three ETP CLPs
with the greatest aggregate size at the NBO at the time of each SET (an
``Offer SET'') will be considered to have a winning Offer SET (a
``Winning Offer SET''). In the event of a tie, all ETP CLPs with the
same aggregate size at the NBO will be considered to have a Winning
Offer SET if there are two or less CLPs that have greater aggregate
size at the NBO. Of the ETP CLPs with a Winning Offer SET for a
particular Offer SET, the ETP CLPs with the greatest aggregate size at
the NBO will receive three Offer SET credits (``Offer SET Credits'');
the ETP CLPs with the second greatest aggregate size at the NBO will
receive two Offer SET Credits; and the ETP CLPs with the third greatest
aggregate size at the NBO will receive one Offer SET Credit.\53\
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    \53\ See proposed Interpretation and Policy .03(i)(1) to Rule
11.8. In the Notice, the Exchange provided examples of how SET
Credits are distributed. See Notice, supra note 3, 79 FR at 33985.
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    An ETP CLP must be quoting, at a minimum, five round lots (usually
500 shares), excluding odd lots, of the CLP Security, at the NBB or
NBO, respectively, at the time of a SET in order to have a Winning Bid
SET or a Winning Offer SET.\54\ In addition, in order for an ETP CLP to
have a Winning Bid SET during Regular Trading Hours,\55\ the ETP CLP
must also be quoting at least a displayed round lot offer, excluding
odd lots, at a price at or within 1.2% of the ETP CLP's bid at the time
of the SET.\56\ Similarly, in order for an ETP CLP to have a Winning
Offer SET during Regular Trading Hours, the ETP CLP must be quoting at
least a displayed round lot offer, excluding odd lots, at a price at or
within 1.2% of the ETP CLP's offer at the time of the SET.\57\
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    \54\ See proposed Interpretation and Policy .03(i)(4) to Rule
11.8.
    \55\ As defined in BATS Rule 1.5(w), the term ``Regular Trading
Hours'' means the time between 9:30 a.m. and 4:00 p.m. Eastern Time.
    \56\ See proposed Interpretation and Policy .03(i)(5) to Rule
11.8.
    \57\ Id.
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    In order to meet the daily quoting requirement, an ETP CLP must
have Winning Bid SETs or Winning Offer SETs equal to at least 10% of
the total Bid SETs or total Offer SETs, respectively, on any trading
day in order to be eligible for any CLP Rebate (each such ETP CLP, an
``Eligible ETP CLP'') for a CLP Security. Eligible ETP CLPs will be
ranked according to the number of Bid SET Credits and Offer SET Credits
each trading day, and only the Eligible ETP CLP(s) ranked number one
and the Eligible ETP CLP(s) ranked number two in each of the Bid SET

Credits and Offer SET Credits will receive the CLP Rebate.\58\
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    \58\ See proposed Interpretation and Policy .03(i)(1)(A) to Rule
11.8.
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    In order to meet the monthly quoting requirements, an ETP CLP must
be quoting at the NBB or the NBO 10% of the time that the Exchange
calculates SETs.\59\
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    \59\ See proposed Interpretation and Policy .03(i)(1)(B) to Rule
11.8.
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    For purposes of calculating whether an ETP CLP is in compliance
with its ETP CLP quoting requirements, the ETP CLP must post displayed
liquidity in round lots in its assigned CLP Securities at the NBB or
the NBO.\60\ An ETP CLP may post non-displayed liquidity; however, such
liquidity will not be counted as credit towards the ETP CLP quoting
requirements.\61\ The ETP CLP shall not be subject to any minimum or
maximum quoting size requirement in assigned CLP Securities (other than
requirements relating to Winning SETs as described above) apart from
the requirement that an order be for at least one round lot.\62\ The
ETP CLP quoting requirements will be measured by utilizing the unique
identifiers that the Member has identified for ETP CLP trading
activity.\63\
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    \60\ See proposed Interpretation and Policy .03(i)(2) to Rule
11.8.
    \61\ See proposed Interpretation and Policy .03(i)(3) to Rule
11.8.
    \62\ See proposed Interpretation and Policy .03(i)(4) to Rule
11.8.
    \63\ Id.
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    ETP CLPs may only enter orders electronically directly into
Exchange systems and facilities designated for this purpose and all ETP
CLP orders must only be for the proprietary account of the CLP
Member.\64\
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    \64\ See proposed Interpretation and Policy .03(k) to Rule 11.8.
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CLP Rebate

    As described above, pursuant to the Program, the Exchange will
measure the performance of ETP CLPs in CLP Securities by calculating
SETs between 9:25 a.m. and 4:05 p.m. on every day on which the Exchange
is open for business. The amount of the total daily CLP Rebate
available will be equal to one quarter of the total annual CLP Fees
(basic and supplemental combined) for the CLP Security divided by the
number of trading days in the current quarter.\65\
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    \65\ See proposed Interpretation and Policy .03(m)(1) to Rule
11.8. In the Notice, the Exchange provides the following example:
where the total CLP Fees for a CLP Security is $64,000 and there are
64 trading days in the current quarter, the total CLP Rebate for the
CLP Security would be $250 (($64,000/4)/64). See Notice, supra note
3, 79 FR at 33986.
---------------------------------------------------------------------------

    The Eligible CLPs with the highest and second highest number of Bid
SET Credits will receive 60% and 40%, respectively, of half of the
daily CLP Rebate for the CLP Security.\66\ Similarly, the Eligible CLPs
with the highest and second highest number of Offer SET Credits will
receive 60% and 40%, respectively, of half of the daily CLP Rebate for
the CLP Security.\67\ In the event that there is only one Eligible ETP
CLP for the bid or offer portion of the CLP Rebate for a CLP Security,
such Eligible ETP CLP will receive 100% of such rebate.\68\ In the
event that multiple Eligible ETP CLPs have an equal number of Bid SET
Credits or Offer SET Credits, the Eligible ETP CLP with the highest
executed volume in the CLP Security will be awarded the greater portion
of the CLP Rebate.\69\ Where no ETP CLPs are eligible for the bid or
offer portion of the CLP Rebate, no CLP Rebate will be awarded to any
ETP CLP and no refund will be provided to the applicable CLP Company or
its Sponsor.\70\
---------------------------------------------------------------------------

    \66\ See proposed Interpretation and Policy .03(m)(1) to Rule
11.8.
    \67\ Id.
    \68\ Id.
    \69\ Id. Specifically, if the tie is for the most Bid (Offer)
SET Credits, the Eligible ETP CLP with the highest executed volume
in the CLP Security will receive 60% of the applicable portion of
the CLP Rebate and the Eligible ETP CLP with the second highest
executed volume in the CLP Security will receive 40% and no other
Eligible ETOP CLPs will receive any portion of the CLP Rebate.
Similarly, where the tie is for the second most Bid (Offer) SET
Credits, the Eligible ETP CLP with the highest executed volume in
the CLP Security will receive 40% of the of the applicable portion
of the CLP Rebate and no other Eligible CLPs with equal or less Bid
(Offer) SET Credits will receive any portion of the CLP Rebate. See
Notice, supra note 3, 79 FR at 33986.
    \70\ See proposed Interpretation and Policy .03(m)(1) to Rule
11.8.
---------------------------------------------------------------------------

Non-Regulatory Penalties

    If an ETP CLP fails to meet the ETP CLP quoting requirements, the
Exchange may impose certain non-regulatory penalties on the ETP CLP.
First, if, between 9:25 a.m. and 4:05 p.m. on any day on which the
Exchange is open for business, an ETP CLP fails to meet its daily
quoting requirement by failing to have at least 10% of the Winning Bid
SETs or Winning Offer SETs for that trading day, the ETP CLP will not
be eligible to receive a CLP Rebate for that day's quoting activity in
that particular assigned CLP Security.\71\ Second, if an ETP CLP fails
to meet its monthly quoting requirement for three consecutive months in
any assigned CLP Security, the ETP CLP will be at risk of losing its
ETP CLP status, and the Exchange may, in its discretion, take the
following non-regulatory actions: (i) Revoke the assignment of the
affected CLP Security(ies) and/or one or more additional unaffected CLP
Securities; or (ii) disqualify a Member's status as an ETP CLP.\72\
---------------------------------------------------------------------------

    \71\ See proposed Interpretation and Policy .03(l)(1)(A) to Rule
11.8.
    \72\ See proposed Interpretation and Policy .03(l)(1)(B) to Rule
11.8.
---------------------------------------------------------------------------

    The Exchange shall determine if and when a Member is disqualified
from its status as an ETP CLP.\73\ One calendar month prior to any such
determination, the Exchange will notify the ETP CLP of such impending
disqualification in writing.\74\ If the ETP CLP fails to meet the
monthly quoting requirements as described above for a third consecutive
month in a particular CLP Security, the ETP CLP may be disqualified
from ETP CLP status.\75\ When disqualification determinations are made,
the Exchange will provide a disqualification notice to the Member
informing such Member that it has been disqualified as an ETP CLP.\76\
In the event a Member is disqualified from its status as an ETP CLP,
such Member may re-apply for ETP CLP status in accordance with the
proposed rules, and such application process shall occur at least three
calendar months following the month in which such Member received its
disqualification notice.\77\ Further, in the event a Member is
determined to be ineligible for the CLP Rebate for failure to meet its
daily quoting obligation or is disqualified from its status as an ETP
CLP, such Member may seek review under Chapter X of the Exchange's
Rules governing adverse action.\78\
---------------------------------------------------------------------------

    \73\ See proposed Interpretation and Policy .03(l)(2) to Rule
11.8.
    \74\ Id.
    \75\ Id.
    \76\ Id.
    \77\ See proposed Interpretation and Policy .03(l)(3) to Rule
11.8.
    \78\ Id.
---------------------------------------------------------------------------

Program Implementation on a Pilot Basis

    The Exchange proposes that the Commission approve the Program for a
pilot period of one year from the date of implementation, which shall
occur no later than 90 days after Commission approval of the proposal
(the date of which will be circulated in a notice from BATS Trade
Desk).\79\ During the pilot, the Exchange will periodically provide
information to the Commission about market quality with respect to the
Program. During the pilot, the Exchange will submit monthly reports to
the Commission about market quality with respect to the Program, which
reports will endeavor to compare, to the extent practicable, securities
before and after they are in the Program, including those

securities that ``graduate'' from the Program or, where no securities
have ``graduated'' from the Program, securities that have ``graduated''
from comparable programs at other exchanges to the extent that such
securities exist.\80\ Such monthly reports will include information
regarding the Program which will enable the Exchange, the Commission,
and the public to better analyze the effectiveness of the Program, such
as: (i) Rule 605 metrics; \81\ (ii) volume metrics; (iii) number of
CLPs in target securities; (iv) spread size; and (v) availability of
shares at the NBBO.\82\ The Exchange states that it will endeavor to
provide similar data to the Commission about comparable ETPs that are
listed on the Exchange that are not in the Program, and any other
Program-related data requested by the Commission for the purpose of
evaluating the efficacy of the Program.\83\ The Exchange will post the
monthly reports on its Web site, and the first report will be submitted
within sixty days after the Program becomes operative.\84\
---------------------------------------------------------------------------

    \79\ See Notice, supra note 3, 79 FR at 33982.
    \80\ Id. at 33982-3.
    \81\ 17 CFR 242.605.
    \82\ See Notice, supra note 3, 79 FR at 33983.
    \83\ Id.
    \84\ Id.
---------------------------------------------------------------------------

Surveillance

    The Exchange states that its surveillance procedures are adequate
to properly monitor the trading of all securities trading on the
Exchange, including ETPs participating in the Program, during all
trading sessions, and to detect and deter violations of Exchange rules
and applicable federal securities laws.\85\ The Exchange states that it
may obtain information via the Intermarket Surveillance Group (``ISG'')
from other exchanges who are members or affiliates of the ISG or with
which the Exchange has entered into a comprehensive surveillance
sharing agreement, and from listed CLP Companies and public and non-
public data sources such as, for example, Bloomberg.\86\
---------------------------------------------------------------------------

    \85\ Id. at 33987.
    \86\ Id.
---------------------------------------------------------------------------

Changes to Interpretation and Policy .02 to Rule 11.8

    The Exchange is also proposing to make certain changes to paragraph
(d)(2) of Interpretation and Policy .02 to Rule 11.8, which governs ETP
participation in the existing CLP Program. The Exchange states that
these changes are designed to create a ``sunset'' period for any ETPs
that are currently participating in the CLP Program pursuant to
Interpretation and Policy .02 to Rule 11.8.\87\ Specifically, the
proposed rule change will allow any ETP listed on the Exchange prior to
the implementation of Rule 11.8(e), which governs the Exchange's Lead
Market Maker Program,\88\ that is participating in the CLP Program to
continue to participate in the CLP Program until the first of the
following to occur: (i) Such security has had a CADV of equal to or
greater than two million shares for two consecutive calendar months
during the first three years the security is subject to the CLP
Program, provided, however, that any ETP initially listed on the
Exchange shall be eligible for the CLP Program for the first six months
that it is listed on the Exchange, regardless of the ETP's CADV; (ii)
such security has been subject to the CLP Program for three years; or
(3) December 31, 2014.\89\ Thus, all ETPs participating in the CLP
Program would no longer be eligible to participate in such program
after December 31, 2014.
---------------------------------------------------------------------------

    \87\ Id.
    \88\ See Securities Exchange Act Release No. 72020 (April 25,
2014), 79 FR 24807 (May 1, 2014) (SR-BATS-2014-015). The Lead Market
Maker Program was implemented on June 2, 2014. See Notice, supra
note 3, 79 FR at 33982.
    \89\ See proposed Interpretation and Policy .02(d)(2) to Rule
11.8.
---------------------------------------------------------------------------

II. Discussion and Commission Findings

    The Commission has carefully considered the proposed rule change
and finds that the proposed rule change is consistent with the
requirements of the Act and the rules and regulations thereunder
applicable to national securities exchanges. In particular, as
discussed below, the Commission finds that the proposed rule change is
consistent with Section 6(b)(4) of the Act,\90\ which requires that the
rules of a national securities exchange provide for the equitable
allocation of reasonable dues, fees, and other charges among its
members and issuers and other persons using its facilities, and with
Section 6(b)(5) of the Act,\91\ which requires, among other things,
that the rules of a national securities exchange be designed to promote
just and equitable principles of trade, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest,
and that the rules not be designed to permit unfair discrimination
between customers, issuers, brokers, or dealers. Further, as required
by Section 3(f) of the Act, the Commission has considered the proposed
rule's impact on efficiency, competition, and capital formation.\92\
---------------------------------------------------------------------------

    \90\ 15 U.S.C. 78f(b)(4).
    \91\ 15 U.S.C. 78f(b)(5).
    \92\ See 15 U.S.C. 78c(f).
---------------------------------------------------------------------------

    The Program, as proposed to be implemented on a pilot basis, is
designed to enhance the market quality for certain lower volume ETPs
participating in the Program by incentivizing Market Makers to take ETP
CLP assignments in such ETPs by offering an alternative fee structure
for such ETP CLPs. As proposed by the Exchange, each ETP CLP must
comply with a monthly quoting requirement in order to remain qualified
as an ETP CLP, and must comply with a daily quoting requirement in
order to be eligible for the daily CLP Rebates, which are higher than
the standard quoting requirements applicable to Market Makers on the
Exchange.\93\ Specifically, with respect to the daily quoting
requirement, the three ETP CLPs with the greatest aggregate size at the
NBB or NBO at each SET will be considered to have a Winning Bid (Offer)
SET, provided each ETP CLP is quoting at least 500 shares of the ETP at
the NBB (NBO) and quoting at least 100 shares on the other side of the
market at a price at or within 1.2% of such ETP CLP's best bid (offer).
The ETP CLPs with a Winning Bid (Offer) SET for a particular Bid
(Offer) SET will each receive an amount of Bid (Offer) Set Credits that
is based upon each ETP CLP's quoted aggregate size at the NBB (NBO).
The ETP CLPs with the highest and second highest number of Bid (Offer)
SET Credits each day will receive a portion of the daily CLP Rebate,
provided that such ETP CLPs have Winning Bid (Offer) SETs equal to at
least 10% of the total Bid (Offer) SETs on any trading day. With
respect to the monthly quoting requirement, an ETP CLP must be quoting
at least 100 shares at the NBB or NBO at least 10% of the time that the
Exchange is calculating Bid (Offer) SETs. Thus, the proposal is
designed to incentivize both quoting frequency at the NBBO and quoted
size at the NBBO, by conditioning eligibility for ETP CLP status,
eligibility for the daily CLP Rebate, and allocation of the daily CLP
Rebate on whether an ETP CLP meets or exceeds various quoting
requirements. In addition, the Program is separately designed to
incentivize ETP CLPs to compete with each other to receive the CLP
Rebates, as only the eligible ETP CLPs with the highest and second
highest numbers of Bid (Offer) SET Credits will receive a portion of
the daily CLP Rebate, and if multiple ETP

CLPs have an equal number of Bid (Offer) SET Credits, the ETP CLP with
the higher executed volume in the CLP Security on the Exchange on the
particular trading day will be awarded the applicable portion of the
daily CLP Rebate. As a result, the proposal has the potential to
improve the market quality of the ETPs that participate in the Program
by encouraging ETP CLPs to provide liquidity in such ETPs consistent
with the performance standards. This potential improved market quality,
were it to occur, could benefit investors in the form of enhanced
liquidity, narrowed spreads, and reduced transaction costs.\94\
---------------------------------------------------------------------------

    \93\ See BATS Rule 11.8(d) (setting forth the quoting
requirements and obligations of Market Makers).
    \94\ In support of the proposal, the Exchange argues that the
Program will, among other things, lower transaction costs and
enhance liquidity in both ETPs and their components, making both
more attractive to a broader range of investors, and that, in so
doing, the Program will help companies access capital to invest and
grow. See Notice, supra note 3, 79 FR at 33983. The Exchange asserts
that being included in a successful ETP can provide the stocks of
these companies with enhanced liquidity and exposure, enabling them
to attract investors and access capital markets to fund investment
and growth. See id. at 33983, n. 17 and accompanying text. As
constructed, any potential benefit to operating companies from the
Program could be derived from the company being included within an
index or other benchmark that underlies an ETP that participates in
the Program.
---------------------------------------------------------------------------

    In addition, because the quoted bid-ask spread in a security
represents one of the main drivers of transaction costs for investors,
and because high price volatility should generally deter investors from
trading low-liquidity ETPs, the Program, were the potential benefits of
the program to occur, should facilitate a more-efficient and less-
uncertain trading environment for investors.\95\ Furthermore, were the
potential benefits of the Program to occur, improving the liquidity of
certain low-volume ETPs may lead to both an overall increase in ETP
trading volume and a redistribution of trading volume toward lower-
volume ETPs that would not otherwise attract sufficient liquidity to
successfully participate in the market.
---------------------------------------------------------------------------

    \95\ Transaction costs are generally defined as the penalty that
an investor pays for transacting. Transaction costs have four
components: commissions; bid/ask spread; market impact; and
opportunity cost. See Grinold, Kahn. Active Portfolio Management,
Second Edition, Chapter 16. An increase in bid-ask spreads will
inevitably increase the transaction costs of an investor. In
addition, transactions in low-liquidity securities have a higher
market impact when compared to other more liquid securities. See
Albert Kyle's (1985) measure of market impact (Kyle's Lambda),
defining an inverse relationship between volume and price impact.
Therefore, the lower the volume of the ETP or stock, the higher the
market impact of any transaction in that stock. This last effect
acts as a disincentive to trading that security. Therefore, an
environment where an ETP trades more often and with a larger number
of shares will reduce transaction costs both through the narrowing
of spreads and lower market impact.
---------------------------------------------------------------------------

    While the Commission believes that the Program has the potential to
improve market quality of the CLP Securities participating in the
Program, the Commission is concerned about unintended consequences of
the Program. For example, the Program could have the potential to
distort market forces because the Program may act to artificially
influence trading in ETPs that otherwise would not be traded.
Similarly, the Commission recognizes concerns about the potential
negative impact on a CLP Security participating in the Program, such as
reduced liquidity and wider spreads, when a CLP Company is withdrawn or
terminated from the Program. While the Commission is mindful of these
concerns, the Commission believes, for the reasons described below,
that certain aspects of the Program could help mitigate these concerns.
    First, the proposal contains disclosure provisions that will help
to alert and educate potential and existing investors in the CLP
Securities participating in the Program about the Program.
Specifically, the Exchange will disclose on its Web site the following
information: (i) The names of CLP Securities and the ETP CLP(s) in each
CLP Security; (ii) the dates that a CLP Company, on behalf of a CLP
Security, commences participation in and withdraws or is terminated
from the Program; (iii) the name of each CLP Company and the associated
CLP Securities on behalf of which it is participating in the Program;
(iv) the acceptance of a CLP Company, on behalf of a CLP Security, and
an ETP CLP into the Program; (v) the intent of a CLP Company, on behalf
of a CLP Security, or ETP CLP to withdraw from the Program, and the
date of actual withdrawal or termination from the ETP CLP Program; (vi)
the total number of CLP Securities that any one CLP Company may have in
the ETP CLP Program; and (vii) for each CLP Security, the amount, if
any, of the supplemental CLP Fee determined by a CLP Company per CLP
Security that would be in addition to the fixed basic CLP Fee of
$10,000. The Exchange also will include on its Web site a description
of the Program, as implemented on a pilot basis, including a fair and
balanced summation of the potentially positive aspects of the Program,
as well as the potentially negative aspects and risks that may be
attendant with an ETP's participation in the Program. Furthermore, a
CLP Company will be required to disclose on a product-specific Web site
for each CLP Security that the CLP Security is participating in the
Program and will be required to provide a link on that Web site to the
Exchange's Program Web site. Finally, a CLP Company that, on behalf of
a CLP Security, is approved to participate in the Program will be
required to issue a press release to the public when a CLP Company, on
behalf of a CLP security, commences or ceases participation in the
Program, to post such press release on its Web site (or if it does not
have a Web site, on the Web site of the Sponsor of the CLP Security),
and to provide on its Web site a hyperlink to the Exchange's Web page
describing the Program. This disclosure will help to inform investors
and other market participants which securities are participating in the
Program, which ETP CLPs are assigned to each CLP Security, the amount
of CLP Fees a CLP Company will incur as a result of participating in
the Program, the amount of the daily CLP Rebates that ETP CLPs may be
eligible to receive from the Exchange under the Program, and the
potential benefits and risks of the Program. A wide variety of ETPs are
currently listed and trading today, and the Commission believes that
such disclosure could be helpful for investors and other market
participants to discern which ETPs listed on the Exchange are and are
not subject to the Program and to make informed investment decisions
with respect to ETPs.\96\
---------------------------------------------------------------------------

    \96\ The concurrent exemptive relief the Commission is issuing
today from Rule 102 under Regulation M concerning the Program also
contains additional disclosure requirements. See Securities Exchange
Act Release No. 72693 (Jul. 28, 2014), supra note 4.
---------------------------------------------------------------------------

    Second, the Program is targeted at a subset of ETPs, namely those
ETPs that are generally less liquid and which the Exchange believes
might benefit most from the Program. Specifically, as proposed, ETPs
that are otherwise eligible for the Program will not be eligible if
they have a CADV of equal to or greater than 1,000,000 shares for three
consecutive calendar months.\97\ Likewise, the Program will terminate
with respect to a particular CLP Security if the security sustains a
CADV of 1,000,000 shares or more for three consecutive months.\98\
---------------------------------------------------------------------------

    \97\ However, any CLP Security initially listed on the Exchange
will remain eligible for the Program for the first six months that
it is listed on the Exchange, regardless of the ETP's CADV.
    \98\ The same exception applies to the termination provision.
See supra note 97.
---------------------------------------------------------------------------

    Finally, as proposed by the Exchange, the Program will be limited
to a one-year pilot. The Commission believes that it is important to
implement the Program as a pilot. Operating the Program as a pilot will
allow assessment

of whether the Program is in fact achieving its goal of improving the
market quality of CLP Securities, prior to any proposal or
determination to make the Program permanent.\99\ In addition, approval
on a pilot basis will allow the assessment, prior to any proposal or
determination to make the Program permanent, of whether the Program has
any unintended impact on the CLP Securities, securities not
participating in the Program, or the market or market participants
generally.
---------------------------------------------------------------------------

    \99\ The Exchange would be required to file with the Commission
any proposal to extend the Program beyond the pilot period or to
make the Program permanent pursuant to Section 19(b) of the Exchange
Act and the rules and regulations thereunder. Such a filing would be
published for comment in the Federal Register pursuant to Section
19(b) and Rule 19b-4.
---------------------------------------------------------------------------

    The Exchange has represented that during the pilot it will submit
monthly reports to the Commission about market quality in respect of
the Program and that these reports will be posted on the Exchange's
public Web site. The Exchange has represented that such reports will
compare securities before and after they are in the Program, and will
include information regarding CLP Security volume metrics, the number
of ETP CLPs in CLP Securities, quotation spread and size statistics,
and data and analysis about the market quality of CLP Securities that
exceed the one million CADV threshold and ``graduate'' from the Program
(or, where no securities have ``graduated'' from the Program,
securities that have ``graduated'' from comparable programs at other
exchanges to the extent that such securities exist). The Exchange also
has represented that it will provide to the Commission similar data and
analyses about comparable ETPs listed on the Exchange that are not
participating in the Program, as well as any other Program-related data
and analyses the Commission staff requests from the Exchange for the
purpose of evaluating the efficacy of the Program. The Commission
expects that this data and analyses provided by the Exchange should
help the Commission, the Exchange, and other interested members of the
public to evaluate whether the Program has resulted in the intended
benefits it is designed to achieve, any unintended consequences
resulting from the Program, and the extent to which the Program
alleviates or aggravates the concerns the Commission has noted,
including previously-stated Commission concerns relating to issuer
payments to market makers.\100\
---------------------------------------------------------------------------

    \100\ See infra notes 102-105 and accompanying text.
---------------------------------------------------------------------------

    For example, the Exchange and the Commission will look to assess
what impact, if any, there is on the market quality of CLP Securities
that are withdrawn or are otherwise terminated from the Program. One
way for a CLP Security to be terminated from the Program is if it
exceeds the 1,000,000 CADV threshold included within the rules. The
Commission recognizes that the Program may not, in the one-year pilot
period, produce sufficient data (i.e., a large number of CLP Securities
that enter and exit the Program) to allow a full assessment of whether
termination (or withdrawal) of a CLP Security from the Program has
resulted in any unintended consequences on the market quality of the
CLP Security or otherwise. However, the Commission believes that the
proposal strikes a reasonable balance between (i) setting the threshold
for ``graduation'' from the Program high enough to encourage
participation in the Program and (ii) setting the threshold low enough
to have a sufficient number of CLP Securities graduate from the Program
within the pilot period so that the Exchange, the Commission, and other
interested persons can assess the impact, if any, of the Program,
including ``graduation'' of CLP Securities from the Program. The
Commission also notes that if no securities ``graduate'' from the
Program during the pilot period, the Exchange has represented that it
will provide data and analysis to the Commission relating to securities
that have ``graduated'' from comparable programs at other exchanges to
the extent that such securities exist.
    Furthermore, the pilot structure of the Program has the potential
to generate data that is useful in evaluating the transition of ETPs
from the existing CLP Program to the Program. The validity of inference
and conclusions from statistical analysis of the pilot data may be
limited by the pilot's small scale, however.
    The Commission believes that the design of the Program and the
public disclosure requirements, coupled with implementation of the
proposal on a pilot basis, should help mitigate potential concerns the
Commission has noted above relating to any unintended or negative
effects of the Program on the ETP market and investors.
    The Commission has previously expressed concerns relating to
payments by issuers to market makers. FINRA Rule 5250 (formerly NASD
Rule 2460) prohibits FINRA members and their associated persons from
directly or indirectly accepting any payment from an issuer for acting
as a market maker.\101\ FINRA Rule 5250 was implemented, in part, to
address concerns about issuers paying market makers, directly or
indirectly, to improperly influence the price of an issuer's stock and
because of conflict of interest concerns between issuers and market
makers.\102\ FINRA Rule 5250 was designed to preserve ``the integrity
of the marketplace by ensuring that quotations accurately reflect a
broker-dealer's interest in buying or selling a security.'' \103\
Specifically, in the NASD Rule 2460 Approval Order, the Commission
found that the

    \101\ FINRA has amended Rule 5250 to create an exception for
payments to members that are expressly provided for under the rules
of a national securities exchange that are effective after being
filed with, or filed with and approved by, the Commission pursuant
to the requirements of the Act. See Securities Exchange Act Release
No. 69398 (Apr. 18, 2013), 78 FR 24261 (Apr. 24, 2013). This
amendment to FINRA Rule 5250 became effective May 15, 2013.
    \102\ See Securities Exchange Act Release No. 38812 (July 3,
1997), 62 FR 37105 (July 10, 1997) (SR-NASD-97-29) (``NASD Rule 2460
Approval Order''), at 37107.
    \103\ See id. at 37107.

decision by a firm to make a market in a given security and the
question of price generally are dependent on a number of factors,
including, among others, supply and demand, the firm's expectations
toward the market, its current inventory position, and exposure to
risk and competition. This decision should not be influenced by
payments to the member from issuers or promoters. Public investors
expect broker-dealers' quotations to be based on the factors
described above. If payments to broker-dealers by promoters and
issuers were permitted, investors would not be able to ascertain
which quotations in the marketplace are based on actual interest and
which quotations are supported by issuers or promoters. This
structure would harm investor confidence in the overall integrity of
the marketplace.\104\
---------------------------------------------------------------------------

    \104\ See id.

    The Commission also added that ``such payments may be viewed as a
conflict of interest since they may influence the member's decision as
to whether to quote or make a market in a security and, thereafter, the
prices that the member would quote.'' \105\
---------------------------------------------------------------------------

    \105\ See id. at 37106.
---------------------------------------------------------------------------

    The Commission believes that a number of aspects of the Program
mitigate the concerns that FINRA Rule 5250 was designed to address.
First, the Commission believes that the terms of the Program are
generally objective, clear, and transparent. The standards for the
Program are set forth in proposed Interpretation and Policy .03 to Rule
11.8. (further described above) \106\ and set forth the application and
withdrawal process, the CLP Company eligibility

requirements, the ETP CLP qualification requirements, the fee and
rebate structure, the market quality standards that an ETP CLP must
meet and maintain to secure a portion of the daily CLP Rebate and
maintain eligibility as an ETP CLP, the termination process, and the
disclosure requirements. These requirements apply to all CLP
Securities, CLP Companies, and ETP CLPs participating in the Program.
---------------------------------------------------------------------------

    \106\ See supra Section I.
---------------------------------------------------------------------------

    Second, the Exchange also will provide notification on its public
Web site regarding the various aspects of the Program. As discussed
above, this disclosure will include: (i) The CLP Securities and
associated CLP Companies participating in the Program and the ETP CLPs
assigned to each CLP Security; (ii) the date a particular CLP Company,
on behalf of a CLP Security, begins participating or ceases
participating in the Program; (iii) the acceptance of a CLP Company, on
behalf of a CLP Security, and an ETP CLP into the Program; (iv) the
intent of a CLP Company, on behalf of a CLP Security, or ETP CLP to
withdraw from the Program, and the date of actual withdrawal or
termination from the ETP CLP Program; (v) the total number of CLP
Securities that any one CLP Company may have in the ETP CLP Program;
(vi) the amount of the supplemental CLP Fee, if any, for each CLP
Security; and (vii) a description of the Program, including a fair and
balanced summation of the potentially positive aspects of the Program,
as well as the potentially negative aspects and risks of the Program.
    In addition, a CLP Company will be required to: (i) Disclose on a
product-specific Web site for each CLP Security that the CLP Security
is participating in the Program and provide on its Web site a hyperlink
to the Exchange's Web page describing the Program; and (ii) issue a
press release when the CLP Company, on behalf of a CLP security,
commences or ceases participation in the Program and post such press
release on its Web site (or if it does not have a Web site, on the Web
site of the Sponsor of the CLP Security).
    And third, CLP Securities will be traded on the Exchange, which is
a regulated market, pursuant to the current trading and reporting rules
of the Exchange, and pursuant to the Exchange's established market
surveillance and trade monitoring procedures. The Exchange will
administer the application and acceptance of the CLP Companies and ETP
CLPs into the Program, as well as the continuation in and withdrawal
from the Program. The Exchange will collect the CLP Fees from CLP
Companies and/or Sponsors and credit them to the Exchange's General
Fund. An ETP CLP will be eligible to receive a CLP Rebate from the
Exchange's General Fund only after it meets the proposed ETP CLP
quoting requirements, as determined by the Exchange. Furthermore, the
CLP Fees will be paid into the Exchange's General Fund, and the CLP
Rebates will be paid out of the Exchange's General Fund. If no ETP CLP
is eligible for the bid or offer portion of the CLP Rebate for a
particular CLP Security on a particular day, no CLP Rebate will be
awarded to any ETP CLP on that day and no refund will be provided to
the applicable CLP Company or its Sponsor. The Commission believes that
these factors, taken together, should help to mitigate the conflict of
interest and other concerns that the Commission has previously
identified \107\ relating to issuers paying for market making.
---------------------------------------------------------------------------

    \107\ See NASD Rule 2460 Approval Order, supra note 102, and
supra notes 102-105. See also Securities Act Release No. 6334 (Aug.
6, 1981), 46 FR 42001 (Aug. 18, 1981), at Section IV.B (Treatment as
Statutory Underwriter).
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    The Commission believes that it is reasonable and consistent with
the Act for the Exchange to limit the Program to certain types of
securities to allow the Exchange, through a pilot, to assess whether
the Program will have the desired effect of improving the market
quality of these securities before implementing the Program on a
permanent basis. The Commission believes that it is reasonable and
consistent with the Act for the Exchange to limit the Program to
products under the 1,000,000 CADV threshold, to support the Exchange's
stated purpose to ``encourage narrow spreads and liquid markets in
securities that generally have not been, or may not be, conducive to
naturally having such narrow spreads and liquidity.'' \108\
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    \108\ See Notice, supra note 3, 79 FR at 33983.
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    The Commission believes that the CLP Fees are an equitable
allocation of reasonable fees. First, participation in the Program is
voluntary. An entity is free to determine whether it would be
economically desirable to pay the CLP Fee, given the amount of the fee,
the trading characteristics of the ETP, and the anticipated benefit. If
a CLP Company chooses to participate in the Program on behalf of a CLP
Security, it will incur the basic CLP Fee of $10,000, and the CLP
Company will have discretion to incur the supplemental CLP Fee in an
amount up to an additional $90,000. The CLP Fee will be paid for by the
CLP Company that has a CLP Security participating in the Program or,
for a CLP Security housed by a CLP Company that has a Sponsor, by the
Sponsor associated with such CLP Company. Thus, the CLP Fee will be
incurred and paid for by an entity that has chosen to participate in,
and that may potentially benefit from, the Program.\109\ An entity that
chooses not to participate will not be required to pay any additional
fee beyond the standard listing and annual fees. Further, the basic CLP
Fee will be the same for any CLP Company wishing to participate in the
Program.
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    \109\ Issuers of exchange-traded funds registered under the
Investment Company Act of 1940 (``1940 Act'') are prohibited from
paying directly or indirectly for distribution of their shares
(i.e., directly or indirectly financing any activity that is
primarily intended to result in the sale of shares), unless such
payments are made pursuant to a plan that meets the requirements of
Rule 12b-1 under the 1940 Act. Although the services at issue could
be primarily intended to result in the sale of fund shares, the
Commission has stated that such a determination will depend on the
surrounding circumstances. See Payment of Asset-Based Sales Loads by
Registered Open-End Management Investment Companies, Investment
Company Act Release No. 16431 (June 13, 1988) (``1988 12b-1
Release''). As the Commission has noted previously, if a fund makes
payments that are ostensibly for a non-distribution purpose, and the
recipient of those payments finances distribution, the question
arises whether the fund's assets are being used indirectly for
distribution. The Commission has stated that there can be no precise
definition of what types of expenditures constitute indirect use of
fund assets, and this determination is based on the facts and
circumstances of each individual case. In addition, fund directors,
particularly independent directors bear substantial responsibility
for making that judgment. See Bearing of Distribution Expenses by
Mutual Funds, Investment Company Act Release No. 11414 (October 28,
1980).
---------------------------------------------------------------------------

    The Commission also believes that availability of the discretionary
supplemental CLP Fee is consistent with the Act. Each CLP Company
participating in the Program will have the choice of whether or not to
incur, as well as the exact amount (up to $90,000) of, the supplemental
CLP Fee. Not all ETPs are alike, and trading in certain products may be
riskier or more costly than trading in others. The Commission believes
that it is reasonable to allow each CLP Company to choose to
participate in the Program and to determine whether (and if so, at what
amount) it is desirable to incentivize ETP CLPs through the
supplemental CLP Fee to improve the market quality of certain CLP
Securities. Finally, as discussed above, the payment of the
supplemental CLP Fee will be transparent to the marketplace, as this
information will be disclosed on the Exchange's Web site.

Section 11(d)(1) of the Exchange Act

    Section 11(d)(1) of the Exchange Act \110\ generally prohibits a
broker-dealer from extending or maintaining

credit, or arranging for the extension or maintenance of credit, on
shares of new issue securities, if the broker-dealer participated in
the distribution of the new issue securities within the preceding 30
days. The Commission's view is that shares of open-end investment
companies and unit investment trusts registered under the 1940 Act,
such as ETP shares, are distributed in a continuous manner, and broker-
dealers that sell such securities are therefore participating in the
``distribution'' of a new issue for purposes of Section 11(d)(1).\111\
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    \110\ 15 U.S.C. 78k(d)(1).
    \111\ See, e.g., Exchange Act Release Nos. 6726 (Feb. 8, 1962),
27 FR 1415 (Feb. 15, 1962) and 21577 (Dec. 18, 1984), 49 FR 50174
(Dec. 27, 1984).
---------------------------------------------------------------------------

    The Division of Trading and Markets, acting under delegated
authority, granted an exemption from Section 11(d)(1) and Rule 11d1-2
thereunder for broker-dealers that have entered into an agreement with
an exchange-traded fund's distributor to place orders with the
distributor to purchase or redeem the exchange-traded fund's shares
(``Broker-Dealer APs).\112\ The SIA Exemption allows a Broker-Dealer AP
to extend or maintain credit, or arrange for the extension or
maintenance of credit, to or for customers on the shares of qualifying
exchange-traded funds subject to the condition that neither the Broker-
Dealer AP, nor any natural person associated with the Broker-Dealer AP,
directly or indirectly (including through any affiliate of the Broker-
Dealer AP), receives from the fund complex any payment, compensation,
or other economic incentive to promote or sell the shares of the
exchange-traded fund to persons outside the fund complex, other than
non-cash compensation permitted under NASD Rule 2830(l)(5)(A), (B), or
(C). This condition is intended to eliminate special incentives that
Broker-Dealer APs and their associated persons might otherwise have to
``push'' exchange-traded fund shares.\113\
---------------------------------------------------------------------------

    \112\ See Letter from Catherine McGuire, Chief Counsel, Division
of Trading and Markets, Securities and Exchange Commission to
Securities Industry Association (Nov. 21, 2005) (``SIA Exemption'').
    \113\ Trading and markets staff provided no-action relief from
Section 11(d)(1) for broker-dealers engaging in secondary market
proprietary or customer transactions in securities of Commodity-
based Exchange-Traded Trusts (``CBETTs'') similar to the
Commission's SIA Exemption. This relief is conditioned on the
broker-dealer and any natural person associated with the broker-
dealer not receiving from the Fund complex, directly or indirectly,
any payment, compensation or other economic incentive to promote or
sell Shares to persons outside of the Fund complex, other than non-
cash compensation permitted under NASD Rule 2830(1)(5)(A), (B), or
(C). See No-Action Letter re: DB Commodity Index Tracking Fund and
DB Commodity Services LLC (Jan. 19, 2006); No-Action Letter re:
Rydex Specialized Products LLC (Dec. 5, 2005); No-Action Letter re:
streetTRACKS Gold Trust (Dec. 12, 2005); and No-Action Letter re:
iShares COMEX Gold Trust (Dec. 12, 2005).
---------------------------------------------------------------------------

    The Program will permit certain ETPs to voluntarily incur increased
listing fees payable to the Exchange. In turn, the Exchange will use
the fees to make CLP Rebates to market makers that improve the
liquidity of participating issuers' securities, and thus enhance the
market quality for the participating issuers. CLP Rebates will be
accrued for, among other things, maintaining continuous, two-sided
displayed quotes or orders. Receipt of the CLP Rebates by certain
broker-dealers will implicate the conditions of the SIA Exemption \114\
from the new issue lending restriction in Section 11(d)(1) of the
Exchange Act discussed above. The Commission's view is that the CLP
Rebates market makers will receive under the proposal are indirect
payments from the fund complex to the market maker and that those
payments are compensation to promote the shares of the ETP. Therefore,
a market maker that is also a broker-dealer receiving the incentives
will not be able to rely on the SIA Exemption from Section
11(d)(1).\115\ This does not mean that broker-dealers cannot
participate in the Program; it merely means they cannot rely on the SIA
Exemption \116\ while doing so. Thus, broker-dealers that participate
in the Program will need to comply with Section 11(d)(1) unless there
is another applicable exemption.
---------------------------------------------------------------------------

    \114\ See also note 113, supra.
    \115\ Id.
    \116\ Id.
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III. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\117\ that the proposed rule change (SR-BATS-2014-022), be, and it
hereby is, approved.
---------------------------------------------------------------------------

    \117\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\118\
---------------------------------------------------------------------------

    \118\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18127 Filed 7-31-14; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 79, Number 57 (Tuesday, March 25, 2014)]
[Notices]
[Pages 16412-16414]
[FR Doc No: 2014-06460]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71746; File No. SR-BATS-2014-006]

Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Related to
Fees for Use of BATS Exchange, Inc.

March 19, 2014.
    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 March 7, 2014, BATS Exchange, Inc. (the ``Exchange'' or
``BATS'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Exchange has designated the proposed rule change as one establishing or
changing a member due, fee, or other charge imposed by the Exchange
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2)
thereunder,\4\ which renders the proposed rule change effective upon
filing with the Commission. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \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 the
Substance of the Proposed Rule Change

    The Exchange filed a proposal to amend the fee schedule applicable
to

Members \5\ and non-members of the Exchange pursuant to BATS Rules
15.1(a) and (c). Changes to the fee schedule pursuant to this proposal
are effective upon filing.
---------------------------------------------------------------------------

    \5\ 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
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of this proposed rule change is to implement pricing,
effective immediately, applicable to the Exchange's options platform
(``BATS Options'') with respect to executions that occur as part of the
modifications to the market opening procedures as described in Rule
20.7 [sic] (the ``Market Opening Procedures''), which was approved on
March 15 [sic], 2014.\6\ Under the Market Opening Procedures, the
Exchange will accept orders and quotes for queuing in a series of
options prior to the opening of trading in that series of options. As
such and as further described in Rule 20.7 [sic], executions might
occur in a series as part of the Market Opening Procedures as the
series is being opened for trading. The Exchange is proposing that for
executions occurring as part of the Market Opening Procedures, the
Exchange will neither charge a fee nor provide a rebate.
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 71651 (March 5,
2014), (SR-BATS-2014-003) (proposal to modify the BATS Options
Opening Process, which was approved on March 5, 2014).
---------------------------------------------------------------------------

    Currently, all orders executed on BATS Options are subject to
standard pricing, which includes variable fees and/or rebates based on
whether the order adds or removes liquidity, the capacity of the order
(Professional,\7\ Firm, Market Maker,\8\ or Customer \9\ orders), a
Member's average daily trading volume, and whether the issue is a penny
pilot issue, among others. In addition to standard rebates, the
Exchange does not charge a fee nor does it provide a rebate for
executions in Mini Options.\10\ Finally, orders that add liquidity may
be eligible for additional rebates upon execution of orders that
originally set a new NBBO \11\ as well as executions that qualify for
the Exchange's quoting incentive program.\12\
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    \7\ The term ``Professional'' is defined in Exchange Rule 16.1
to mean any person or entity that (A) is not a broker or dealer in
securities, and (B) places more than 390 orders in listed options
per day on average during a calendar month for its own beneficial
account(s).
    \8\ As defined on the Exchange's fee schedule, the terms
``Firm'' and ``Market Maker'' apply to any transaction identified by
a member for clearing in the Firm or Market Maker range,
respectively, at the Options Clearing Corporation (``OCC'').
    \9\ As defined on the Exchange's fee schedule, a ``Customer
order'' refers to an order identified by a Member for clearing in
the Customer range at the OCC, excluding any transaction for a
``Professional'' as defined in Exchange Rule 16.1.
    \10\ Mini Options are options that overlie 10 equity or ETF
shares, rather than the standard 100 shares. See Securities Exchange
Act Release No. 69018 (March 1, 2013), 78 FR 15090 (March 8, 2013)
(notice of filing and immediate effectiveness allowing Mini Options
to be listed and traded on BATS Options) (SR-BATS-2013-013).
    \11\ As defined in Exchange Rule 27.1(11), the term ``NBBO'' is
defined to mean the national best bid and offer in an option series
as calculated by an Eligible Exchange.
    \12\ See Securities Exchange Act Release No. 69079 (March 8,
2013), 78 FR 16306 (March 14, 2013) (SR-BATS-2013-017) (notice of
filing and immediate effectiveness of proposed rule change related
to fees for use of BATS Options).
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    The Exchange is proposing that for executions occurring as part of
the Market Opening Procedures, the Exchange will neither charge a fee
nor provide a rebate. Specifically, executions in the Market Opening
Procedures will not be eligible for any rebate, including the NBBO
setter liquidity rebate or the quoting incentive program liquidity
rebates. It should be noted, however, that executions in the Market
Opening Procedures will be counted in calculations of ADV \13\ and TCV
\14\ for purposes of calculating other rebates and fees.
---------------------------------------------------------------------------

    \13\ As defined on the Exchange's fee schedule, ADV means
average daily volume calculated as the number of contracts added or
removed, combined, per day on a monthly basis; routed contracts are
not included in ADV calculation; with prior notice to the Exchange,
a Member may aggregate ADV with other Members that control, are
controlled by, or are under common control with such Member.
    \14\ As defined on the Exchange's fee schedule, TCV means total
consolidated volume calculated as the volume reported by all
exchanges to the consolidated transaction reporting plan for the
month for which the fees apply.
---------------------------------------------------------------------------

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 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 to be
excessive.
    The introduction of pricing for the Market Opening Procedures, as
described above and proposed by this filing, is intended to allow the
Exchange to begin allowing executions to occur as part of the Market
Opening Procedures without charging any fees or providing any rebates
for such executions. The Exchange believes that this is a reasonable,
fair and equitable approach to pricing, particularly because the
Exchange does not have any specific advanced knowledge of how market
participants will react to the introduction of the Market Opening
Procedures. Further, the Exchange believes that the proposal is
reasonable because a high level of fees for executions occurring in the
Market Opening Procedures would discourage participants from entering
orders to participate in the Market Opening Procedures. In addition,
the Exchange believes that this structure is a fair and equitable
approach to pricing because it provides certainty for market
participants with respect to execution costs across all trades
occurring as part of the Market Opening Procedures. Lastly, the
Exchange also believes that the proposed pricing for executions
occurring as part of the Market Opening Procedures is non-
discriminatory because it will apply equally to all Members.
    The Exchange notes that this proposal is not increasing fees or
decreasing rebates for any products traded on or routed by BATS
Options, but rather, the proposal only proposes to introduce a pricing
structure for executions occurring as part of the Market Opening
Procedures.

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

    The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. To the contrary, the Exchange
notes that this rule change is being proposed as a competitive offering
at a time when many other options exchanges are already offering
similar processes for opening their respective markets. As a result of
the competitive environment, market participants will have various
pricing and execution models to choose from in making determinations on
where to enter orders prior to the opening of trading in a series of
options. As stated above, 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 to be
excessive.

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 \15\ and paragraph (f) of Rule 19b-4
thereunder.\16\ 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.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-BATS-2014-006 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-BATS-2014-006. 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 such 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-BATS-2014-006 and should be
submitted on or before April 15, 2014.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-06460 Filed 3-24-14; 8:45 am]
BILLING CODE 8011-01-P