Self-Regulatory Organizations; Bats EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees as They Apply to the Equity Options Platform

Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), and Rule 19b-4 thereunder, notice is hereby given that on May 2, 2016, Bats EDGX Exchange, Inc. (the “Exchange” or “EDGX”) 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 and Rule 19b-4(f)(2) thereunder, which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons.

I. Self-Regulatory Organization's Statement of the Terms of Substance of the Proposed Rule Change

The Exchange filed a proposal to amend the fee schedule applicable to Members and non-members of the Exchange pursuant to EDGX Rules 15.1(a) and (c).

The text of the proposed rule change is available at the Exchange's Web site at www.batstrading.com,, at the principal office of the Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change

1. Purpose

The Exchange proposes to amend its fee schedule for its equity options platform (“EDGX Options”) to: (1) Modify an existing tier and add a new tier to its existing tiered pricing structure; and (2) simplify the Exchange's routing fees, as further described below.

Tiered Pricing Changes

The Exchange currently offers two pricing tiers under footnotes 1 and 2 of the fee schedule, Customer Volume Tiers and Market Maker Volume Tiers, respectively. Under the tiers, Members that achieve certain volume criteria may qualify for reduced fees or enhanced rebates for Customer and Market Maker orders. The Exchange proposes to modify Customer Volume Tier 6 under footnote 1 and to add an additional Market Maker Volume Tier under footnote 2, as further described below.

Fee code PC and NC are currently appended to all Customer orders in Penny Pilot Securities and Non-Penny Pilot Securities, respectively, and result in a standard rebate of $0.01 per contract. The Customer Volume Tiers in footnote 1 consist of six separate tiers, each providing an enhanced rebate to a Member's Customer orders that yield fee codes PC or NC upon satisfying monthly volume criteria required by the respective tier. For instance, pursuant to Customer Volume Tier 1, the lowest volume tier, a Member will receive a rebate of $0.05 per contract where the Member has an ADV in Customer orders equal to or greater than 0.10% of average TCV.

Pursuant to Customer Volume Tier 6, a Member currently will receive a rebate of $0.21 per contract where: (1) The Member has an ADV in Customer orders equal to or greater than 0.25% of average TCV; and (2) the Member has an ADV in Market Maker orders equal to or greater than 0.25% of average TCV. In order to encourage the entry of additional orders to the Exchange, Exchange proposes to modify Customer Volume Tier 6 to reduce the criteria necessary to qualify. Specifically, the Exchange proposes to provide the same rebate, $0.21 per contract, as it currently provides for Customer Volume Tier 6, but to provide such rebate where: (1) The Member has an ADV in Customer orders equal to or greater than 0.20% of average TCV; and (2) the Member has an ADV in Market Maker orders equal to or greater than 0.15% of average TCV. The Exchange believes that this change will make Customer Volume Tier 6 more attainable for additional Members.

Fee code PM and NM are currently appended to all Market Maker orders in Penny Pilot Securities and Non-Penny Pilot Securities, respectively, and result in a standard fee of $0.19 per contract. The Market Maker Volume Tiers in footnote 2 consist of six separate tiers, each providing a reduced fee or rebate to a Member's Market Maker orders that yield fee codes PM or NM upon satisfying monthly volume criteria required by the respective tier. For instance, pursuant to Market Maker Volume Tier 1, the lowest volume tier, a Member will pay a reduced fee of $0.16 per contract where the Member has an ADV in Market Maker orders equal to or greater than 0.05% of average TCV. Pursuant to Market Maker Volume Tier 6, the highest volume tier, a Member will receive a rebate of $0.01 per contract where the Member has an ADV in Market Maker orders equal to or greater than 1.10% of average TCV.

In addition to the change to the qualifying criteria for Customer Volume Tier 6 set forth above, the Exchange proposes to adopt a new Market Maker Volume Tier with the same criteria as amended Customer Volume Tier 6. Specifically, the Exchange proposes to adopt Market Maker Volume Tier 7, providing a reduced fee of $0.10 per contract where: (1) The Member has an ADV in Customer orders equal to or greater than 0.20% of average TCV; and (2) the Member has an ADV in Market Maker orders equal to or greater than 0.15% of average TCV. As with all other fees and rebates pursuant to footnote 2, the fee would be charged for transactions yielding fee code PM and NM.

The Exchange notes that the reduced fee of $0.10 per contract is the same fee as Market Maker Volume Tier 3, which is provided where the Member has an ADV in Market Maker orders equal to or greater than 0.20% of average TCV. By introducing Tier 7, the Exchange is providing an additional mechanism for a Member to achieve this reduced fee. The Exchange also notes that the proposed fee and associated criteria are intended to encourage the entry of both Customer orders and Market Maker orders by providing a hybrid tier that rewards the entry of both. Although the qualifying criteria includes Customer orders, as noted above, the proposed reduced fee of $0.10 per contract would only be awarded to a Member's Market Maker orders that yield fee codes PM or NM upon satisfying the monthly volume criteria (and not such Member's Customer orders). However, as noted above, because the criteria are the same, a Member qualifying for Market Maker Volume Tier 7 would also qualify for Customer Volume Tier 6, and thus would be entitled to enhanced rebates for such Member's Customer orders.

In addition to the changes described above, the Exchange proposes to add the phrase “of average TCV” to the end of the criteria for existing Market Making Volume Tiers 1 through 6. Although the filing initially adopting such tiers did include the language in describing the applicable criteria, the Exchange believes that such language is appropriate for the fee schedule. This change would ensure that the language of footnote 2 is consistent with footnote 1, which does include this phrase in each Tier's criteria description. The Exchange also proposes to change all references to “Customer Orders” to “Customer orders” and from “Market Maker Orders” to “Market Maker orders” throughout footnote 1 and footnote 2. These changes will also ensure consistency on the fee schedule with respect to the word “order”, which is not contained in any of the defined terms on the fee schedule.

Routing Fees

The Exchange proposes to modify the fees charged for orders routed away from the Exchange and executed at various away options exchanges. The Exchange currently has specific rates and associated fee codes for each away options exchange. Such rates are further divided at each options exchange into either two categories in order to differentiate between Customer and Non-Customer orders or into four categories in order to differentiate between Customer and Non-Customer orders and then into Penny Pilot Securities and Non-Penny Pilot Securities. In order to simplify routing fees for executions at away options exchanges, the Exchange proposes to charge flat rates for routing to other options exchanges that have been placed into groups based on the approximate cost of routing to such venues. The grouping of away options exchanges is based on the cost of transaction fees assessed by each venue as well as costs to the Exchange for routing (i.e., clearing fees, connectivity and other infrastructure costs, membership fees, etc.) (collectively, “Routing Costs”). To address different fees at various other options exchanges, the Exchange proposes to adopt five different fees and associated fee codes applicable to routing to away options exchanges, as further described below.

With respect to Non-Customer orders, the Exchange proposes to adopt two fee codes: (1) Fee code RN, which would result in a fee of $0.85 per contract and would apply to all Non-Customer orders in Penny Pilot Securities; and (2) fee code RO, which would result in a fee of $1.20 per contract and would apply to all Non-Customer orders in Non-Penny Pilot Securities. The Exchange notes that the current range of fees applicable to Non-Customer orders routed to other options exchanges is from $0.60 per contract (fee code RF, applicable to Non-Customer orders in Penny Pilot Securities executed at BZX Options) to $1.25 per contract (fee code QG, applicable to Non-Customer orders executed at NOM in Non-Penny Pilot Securities).

With respect to Customer orders, the Exchange proposes to adopt three fee codes: (1) Fee code RP, which would result in a fee of $0.25 per contract and would apply to all Customer orders routed to and executed at AMEX, BOX, BX Options, CBOE, ISE Mercury, MIAX or PHLX; (2) fee code RQ, which would result in a fee of $0.70 per contract and would apply to all Customer orders in Penny Pilot Securities routed to and executed at ARCA, BZX Options, C2, ISE, ISE Gemini or NOM; and (3) fee code RR, which would result in a fee of $0.90 per contract and would apply to all Customer orders in Non-Penny Pilot Securities routed to and executed at ARCA, BZX Options, C2, ISE, ISE Gemini or NOM. The Exchange notes that the current range of fees applicable to Customer orders routed to other options exchanges is from no charge per contract (fee code BD, applicable to Customer orders in Non-Penny Pilot Securities executed at BX Options) to $0.94 per contract (fee code RD, applicable to Customer orders executed at BZX Options in Non-Penny Pilot Securities).

As a general matter, the groupings described above in most instances attempt to differentiate between the Routing Costs applicable to either executions of orders in Penny Pilot Securities versus those in Non-Penny Pilot Securities or between fee ranges typical of exchanges that operate primarily a maker/taker or price/time market model (generally imposing higher fees, including for Customer orders) versus exchanges that operate primarily a pro rata or customer priority market model (generally imposing lower fees, especially for Customer orders).

As set forth above, the Exchange's proposed approach to routing fees is to set forth in a simple manner certain flat fees that approximate the cost of routing to other options exchanges. The Exchange will then monitor the fees charged as compared to the costs of its routing services, as well as monitoring for specific fee changes by other options exchanges, and intends to adjust its flat routing fees and/or groupings to ensure that the Exchange's fees do indeed result in a rough approximation of overall Routing Costs, and are not significantly higher or lower in any area. Although there may be instances where the Exchanges [sic] fee to a particular options exchange is indeed significantly higher than the fee charged by such options exchange, the Exchange believes that this is appropriate for several reasons discussed in further detail below, including the simplicity that it will provide Users of the Exchange's routing services.

Implementation Date

The Exchange proposes to implement these amendments to its fee schedule immediately.

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 believes its proposed fees and rebates pursuant to the tiered pricing structure are reasonable, fair and equitable, and non-discriminatory. The Exchange operates in a highly competitive market in which market participants may readily send order flow to many competing venues if they deem fees at the Exchange to be excessive. As a new options exchange, the proposed fee structure remains intended to attract order flow to the Exchange by offering market participants a competitive yet simple pricing structure. At the same time, the Exchange believes it is reasonable to incrementally adopt incentives intended to help to contribute to the growth of the Exchange.

Volume-based rebates such as those currently maintained on the Exchange have been widely adopted by options exchanges and are equitable because they are open to all Members on an equal basis and provide additional benefits or discounts that are reasonably related to the value of an exchange's market quality associated with higher levels of market activity, such as higher levels of liquidity provision and/or growth patterns, and introduction of higher volumes of orders into the price and volume discovery processes. The proposed modification to the Customer Volume Tier and the proposed addition of Market Maker Volume Tier 7 is each intended to incentivize Members to send additional Customer orders and Market Maker orders to the Exchange in an effort to qualify for the enhanced rebate or lower fee made available by the tiers.

The Exchange believes that the proposed tiers are reasonable, fair and equitable, and non-discriminatory, for the reasons set forth above with respect to volume-based pricing generally and because such changes will incentivize participants to further contribute to market quality. The proposed tiers will provide an additional way for market participants to qualify for enhanced rebates or reduced fees. The Exchange also believes that the proposed tiered pricing structure is consistent with pricing previously offered by the Exchange as well as other options exchanges and does not represent a significant departure from such pricing structures.

With respect to the proposed routing structure, the Exchange again notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues or providers of routing services if they deem fee levels to be excessive. As explained above, the Exchange proposes to approximate the cost of routing to other options exchanges, including other applicable costs to the Exchange for routing, in order to provide a simplified and easy to understand pricing model. The Exchange believes that a pricing model based on approximate Routing Costs is a reasonable, fair and equitable approach to pricing. Specifically, the Exchange believes that its proposal to modify fees is fair, equitable and reasonable because the fees are generally an approximation of the cost to the Exchange for routing orders to such exchanges. The Exchange believes that its flat fee structure for orders routed to various venues is a fair and equitable approach to pricing, as it will provide certainty with respect to execution fees at groups of away options exchanges. In order to achieve its flat fee structure, taking all costs to the Exchange into account, the Exchange will necessarily charge a higher premium to route to certain options exchanges than to others. As a general matter, the Exchange believes that the proposed fees will allow it to recoup and cover its costs of providing routing services to such exchanges and to make some additional profit in exchange for the services it provides. The Exchange also believes that the proposed fee structure for orders routed to and executed at these away options exchanges is fair and equitable and not unreasonably discriminatory in that it applies equally to all Members. Finally, the Exchange notes that it intends to consistently evaluate its routing fees, including profit and loss attributable to routing, as applicable, in connection with the operation of a flat fee routing service, and would consider future adjustments to the proposed pricing structure to the extent it was recouping a significant profit or loss from routing to away options exchanges.

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

The Exchange believes the proposed amendments to its fee schedule would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, the proposal is a competitive proposal that is seeking to further the growth of the Exchange and to simplify the Exchange's fees for routing orders to away options exchanges. With respect to the tiered pricing changes, the Exchange has structured the proposed fees and rebates to attract additional volume in Market Maker and Customer orders, however, the Exchange believes that its pricing for all capacities is competitive with that offered by other options exchanges. With respect to the proposed routing fee structure, the Exchange believes that the proposed fees are competitive in that they will provide a simple approach to routing pricing that some Members may favor. Additionally, Members may opt to disfavor the Exchange's pricing, including pricing for transactions on the Exchange as well as routing fees, if they believe that alternatives offer them better value. In particular, with respect to routing services, such services are available to Members from other broker-dealers as well as other options exchanges. The Exchange also notes that Members may choose to mark their orders as ineligible for routing to avoid incurring routing fees. Accordingly, the Exchange does not believe that the proposed change will impair the ability of Members or competing venues to maintain their competitive standing in the financial markets.

C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others

The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any written comments from members or other interested parties.

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 and paragraph (f)(2) of Rule 19b-4 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.

IV. Solicitation of Comments

Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:

Electronic Comments

• Use the Commission's Internet comment form ( http://www.sec.gov/rules/sro.shtml ); or
• Send an email to rule-comments@sec.gov. Please include File No. SR-BatsEDGX-2016-15 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 No. SR-BatsEDGX-2016-15. 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 No. SR-BatsEDGX-2016-15, and should be submitted on or before June 7, 2016.