[Federal Register Volume 76, Number 28 (Thursday, February 10, 2011)]
[Notices]
[Pages 7616-7619]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-2969]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63839; File No. SR-EDGA-2011-03]


Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Amendments to the EDGA Exchange, Inc. Fee Schedule

February 3, 2011.
    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 February 1, 2011, the EDGA Exchange, Inc. (the ``Exchange'' or 
the ``EDGA'') 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 self-regulatory 
organization. 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.
---------------------------------------------------------------------------

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

    The Exchange proposes to amend its fees and rebates applicable to 
Members \3\ of the Exchange pursuant to EDGA Rule 15.1(a) and (c). All 
of the changes

[[Page 7617]]

described herein are applicable to EDGA Members. The text of the 
proposed rule change is available on the Exchange's Internet Web site 
at http://www.directedge.com.
---------------------------------------------------------------------------

    \3\ A Member is any registered broker or dealer, or any person 
associated with a registered broker or dealer, that has been 
admitted to membership in the Exchange.
---------------------------------------------------------------------------

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 self-regulatory organization 
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 self-regulatory organization 
has prepared summaries, set forth in sections A, B and C below, of the 
most significant aspects of such statements.

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

1. Purpose
    In SR-EDGA-2011-01,\4\ the Exchange filed for immediate 
effectiveness a rule filing to amend Rule 11.9 to add its routing 
strategies, which were contained in its fee schedule, to the rule and 
to introduce additional routing strategies to the rule. Two of the 
strategies that the Exchange added to Rules 11.9(b)(3)(h) and (i) were 
the ROUT and ROUX routing strategies. Under both routing strategies, an 
order checks the Exchange's system (``System'') for available shares 
and then is sent to destinations on the System routing table. In Rule 
11.9(b)(3) the Exchange defined the term ``System routing table'' to 
mean the proprietary process for determining the specific trading 
venues to which the System routes orders and the order in which it 
routes them.
---------------------------------------------------------------------------

    \4\ See SR-EDGA-2011-01 (January 21, 2011).
---------------------------------------------------------------------------

    In this filing, the Exchange proposes to add the corresponding 
flags for the use of the ROUT and ROUX strategies to its fee schedule 
and assign corresponding fees. For any order routed using the ROUT 
routing strategy, the Exchange is proposing a fee of $0.0025 per share 
to be assessed and a flag of ``RT'' to be yielded, except when routed 
to EDGX Exchange, Inc. (``EDGX''), in which case a flag ``I'' is 
yielded a flag and a fee of $0.0030 is assessed. The latter exception 
is clarified in proposed footnote 10. Similarly, for any order routed 
using the ROUX routing strategy, the Exchange is proposing a fee of 
$0.0027 per share to be assessed and a flag of ``RX'' to be yielded, 
except when routed to EDGX, in which case a flag ``I'' is yielded a fee 
of $0.0030 is assessed. The latter exception is clarified in proposed 
footnote 10. The Exchange notes that the fee is higher if an order is 
routed to EDGX, which is affiliated with EDGA, rather than to other 
destinations on the System routing table using the ROUT/ROUX 
strategies.
    In SR-EDGA-2011-01, the Exchange also added the ROOC routing option 
in Rule 11.9(b)(3)(p) for orders that the entering firm wishes to 
designate for participation in the opening or closing process of a 
primary listing market (NYSE, Nasdaq, NYSE Amex, or NYSE Arca) if 
received before the opening/closing time of such market. If shares 
remain unexecuted after attempting to execute in the opening or closing 
process, they are either posted to the book, executed, or routed like a 
ROUT routing option, as described in Rule 11.9(b)(3)(h). In this 
filing, the Exchange proposes to add the corresponding flags for the 
use of the ROOC strategy to its fee schedule and assign corresponding 
fees. If the entering firm wishes the order to participate in the 
listing market close via the ROOC strategy, it will be assigned a flag 
of ``CL'' and a fee of $0.0010 per share, except for NYSE Arca. This 
fee represents a blended rate of all four primary listing market fees 
for participation in the market close. For ease of administration, the 
Exchange uses this blended rate as it represents an average fee from 
the primary listing markets. However, a flag of ``O'' will be yielded 
and the associated fee for the ``O'' flag, $0.0005 per share, will be 
assessed, if the order is routed to the NYSE Arca closing process. This 
is clarified in proposed footnote 9 to the fee schedule and represents 
a pass through of the NYSE Arca fee. If the entering firm wishes to 
designate that the order participate in the opening process of NYSE 
Amex and it adds liquidity, it will be assigned a flag of ``8'' and a 
rebate of $0.0015 per share. This rebate represents a pass through of 
the NYSE Amex rebate. If the entering firm wishes to designate that the 
order participate in the opening process of NYSE Arca and it adds 
liquidity, it will be assigned a flag of ``9'' and a rebate of $0.0021 
per share. This rebate represents a pass through of the NYSE Arca 
rebate. The Exchange proposes to add these flags effective February 1, 
2011 but not implement them until the ROOC strategy is effective, which 
is on or about February 14, 2011.
    Currently, the ``K'' flag is yielded when an order is routed to 
BATS BZX Exchange using the ROBA order type. The Exchange proposes that 
this flag be yielded and its associated fee of $0.0025 per share be 
assessed when an order is routed to Nasdaq PSX using the ROUC order 
type, as defined in Rule 11.9(b)(3)(a).\5\ This fee of $0.0025 per 
share represents a pass through of the Nasdaq PSX rate.
---------------------------------------------------------------------------

    \5\ Rule 11.9(b)(3)(a) defines the ROUC order type as a routing 
option under which an order checks the System for available shares, 
and then is sent sequentially to destinations on the System routing 
table, Nasdaq OMX BX, and NYSE. If shares remain unexecuted after 
routing, they are posted on the EDGX Exchange's book.
---------------------------------------------------------------------------

    Currently, the Exchange provides a reduced rate for non-displayed 
(``Flag H'') executions for a non-aggregated MPID representing the 
volume of a Member and meeting certain criteria. For executions in 
stocks priced $1.00 and over, if the average daily volume (``ADV'') of 
Flag H executions for a non-aggregated MPID is increased such that its 
ADV is 1,000,000 greater than its ADV of Flag H executions averaged 
across the month of October 2010, then the non-aggregated MPID would 
qualify for a rate of $0.00025 per share. For executions in stocks 
priced below $1.00, if the ADV of Flag H executions for a non-
aggregated MPID is increased such that its ADV is 1,000,000 greater 
than its ADV of Flag H executions averaged across the month of October 
2010, then the non-aggregated MPID would qualify for a rate of .025% of 
the total dollar volume of the Flag H executions. The Exchange is 
proposing to delete these reduced rates, which are found in footnote 2 
of the fee schedule, effective February 1, 2011 as it does not believe 
that the reduced rates are effective at incenting Members to add 
liquidity to the Exchange.
    Currently, stocks priced below $1.00 are charged 0.20% of the 
dollar value of the transaction when routed to Nasdaq and removing 
liquidity in securities on all Tapes, as noted in footnote 3 of the fee 
schedule and as indicated on corresponding flag J. The Exchange 
proposes to increase this fee to 0.30% of the dollar value of the 
transaction to reflect an increase in rate provided by Nasdaq effective 
January 3, 2011.
    Finally, in the description of the SW flag on the fee schedule the 
Exchange proposes to make a technical change to amend the word 
``routing'' to ``routed.''
    EDGA Exchange proposes to implement these amendments to the 
Exchange fee schedule on February 1, 2011.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\6\

[[Page 7618]]

in general, and furthers the objectives of Section 6(b)(4),\7\ in 
particular, as it is designed to provide for the equitable allocation 
of reasonable dues, fees and other charges among its members and other 
persons using its facilities. The Exchange believes that the fees of 
$0.0025 per share/$0.0027 per share, respectively, for the ROUT and 
ROUX routing strategies, represent an equitable allocation of 
reasonable dues, fees, and other charges. When compared to other 
similar fees assessed for other Exchange routing strategies, the ROUT 
and ROUX strategies route to more destinations and more costly ones and 
thus, the Exchange passes on higher fees to its Members. In addition, 
other market centers charge comparable rates. The comparable routing 
strategy to the ROUT strategy is either Parallel D or Parallel 2D with 
the DRT (Dark routing technique) option on BATS BZX Exchange (``BATS'') 
and SCAN/STGY on Nasdaq OMX Exchange (``Nasdaq.'') BATS charges $0.0028 
per share for its Parallel D and Parallel 2D routing strategies and 
$0.0020 per share for its DRT option. Nasdaq charges $0.0030 per share 
for its SCAN and STGY routing strategies. The comparable routing 
strategy to the ROUX strategy is also the Parallel D or Parallel 2D 
strategies on BATS and the SKIP/SKNY strategies on Nasdaq. BATS charges 
$0.0028 per share for either of their strategies and Nasdaq charges 
$0.0030 for either of their strategies.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the fees associated with the new flags 
described above represent an equitable allocation of reasonable dues, 
fees, and other charges. The fee associated with the ``CL'' flag 
($0.0010) (except for NYSE Arca) represents a blended rate of all four 
primary listing market fees for participation in the market close. 
However, a flag of ``O'' will be yielded and the associated fee for the 
``O'' flag, $0.0005 per share, will be assessed, if the order is routed 
to the NYSE Arca closing process. This represents a pass through of the 
NYSE Arca fee. If the entering firm wishes to designate that the order 
participate in the opening process of NYSE Amex and it adds liquidity, 
it will be assigned a flag of ``8'' and a rebate of $0.0015 per share. 
This rebate represents a pass through of the NYSE Amex rebate. If the 
entering firm wishes to designate that the order participate in the 
opening process of NYSE Arca and it adds liquidity, it will be assigned 
a flag of ``9'' and a rebate of $0.0021 per share. This rebate also 
represents a pass through of the NYSE Arca rebate. The fee associated 
with the K flag ($0.0025 per share) also represents a pass through of 
the Nasdaq PSX rate. In addition, as discussed above, stocks priced 
below $1.00 are now proposed to be charged 0.30% of the dollar value of 
the transaction when routed to Nasdaq and removing liquidity in 
securities on all Tapes, as noted in proposed footnote 3 of the fee 
schedule. This increase in fee (from 0.20% of the dollar value of the 
transaction) reflects a pass through of the Nasdaq's increased rate, 
effective January 3, 2011.
    The Exchange notes that it operates in a highly competitive market 
in which market participants can readily direct order flow to competing 
venues if they deem fee levels at a particular venue to be excessive. 
The proposed rule change reflects a competitive pricing structure 
designed to incent market participants to direct their order flow to 
the Exchange. The Exchange believes that the proposed rates are 
equitable in that they apply uniformly to all Members. The Exchange 
believes the fees and credits remain competitive with those charged by 
other venues and therefore continue to be reasonable and equitably 
allocated to Members.

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

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

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 unsolicited 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) of the Act \8\ and Rule 19b-4(f)(2) \9\ thereunder. At any 
time within 60 days of the filing of such 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.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 19b-4(f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an e-mail to rule-comments@sec.gov. Please include 
File Number SR-EDGA-2011-03 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-EDGA-2011-03. This file 
number should be included on the subject line if e-mail is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission,\10\ 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 a.m. and 3 p.m. Copies of the filing also will be 
available for inspection and copying at the principal office of the 
Exchange. All comments received will be posted without change; the 
Commission does not edit personal identifying information from 
submissions. You should submit only information that you wish to make 
available publicly. All submissions should refer to File Number SR-
EDGA-

[[Page 7619]]

2011-03 and should be submitted on or before March 3, 2011.
---------------------------------------------------------------------------

    \10\ The text of the proposed rule change is available on 
Exchange's Web site at http://www.directedge.com, on the 
Commission's Web site at http://www.sec.gov, at EDGA, and at the 
Commission's Public Reference Room.
    \11\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-2969 Filed 2-9-11; 8:45 am]
BILLING CODE 8011-01-P