[Federal Register Volume 76, Number 201 (Tuesday, October 18, 2011)]
[Notices]
[Pages 64404-64406]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-26859]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65542; File No. SR-EDGA-2011-32]
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
October 12, 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 September 30, 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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 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.
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\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.
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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
Purpose
The Exchange proposes to decrease its rebate from $0.0005 per share
to $0.0004 per share for adding liquidity and increase its charge from
$0.0006 per share to $0.0007 per share for removing liquidity. In the
Exchange's fee schedule, these modifications are reflected in Flags B,
V, Y, 3 and 4, where liquidity is added, and Flags N, W and 6, where
liquidity is removed. The Exchange proposes to increase its charge for
customer internalization in Flag E from $0.0001 per share, per side, to
$0.00015 per share per side, to move in lockstep with the proposed
maker/taker fee spread of $0.0003.
The Exchange proposes to add a new tier that provides if a Member,
on a daily basis, measured monthly, posts more than 1% of the Total
Consolidated Volume (``TCV'') in average daily volume, then the Member
will receive a rebate of $0.0005 per share, which is reflected in the
language in footnote 4. The Exchange proposes to add footnote 4 next to
Flags B, V, Y, 3 and 4 to clarify that these flags count towards the
tier.
The Exchange proposes to add the RR Flag for orders that are routed
to the EDGX Exchange, Inc. (``EDGX'') and remove liquidity using
routing strategies IOCX and IOCT, as defined in Exchange Rules Exchange
Rules 11.9(b)(3)(l) and (m). The Exchange proposes to assess a charge
of $0.0029 per share to account for the pass-through of the proposed
EDGX fee for removing liquidity.
[[Page 64405]]
The Exchange proposes to decrease the charge assessed for removing
liquidity for orders that are routed to the EDGX from $0.0030 per share
to $0.0029 per share to reflect the reduction in EDGX's fee for
removing liquidity. In the Exchange's fee schedule, this modification
is reflected in the I Flag.
The Exchange proposes to eliminate the FIX (ECN Translator) \4\
logical port fee effective as of October 1, 2011, as the ECN Translator
is no longer being used by its Members and non-members.\5\
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\4\ The ECN Translator allows a Member or non-member who
previously connected to Direct Edge's ECN to be re-directed
automatically to EDGA Exchange, Inc. It can only be accessed through
a FIX port.
\5\ Members were notified on May 3, 2011 that the ECN Translator
ports would no longer be available as of August 1, 2011.
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The Exchange also proposes to make technical amendments to the
membership fee table included in the fee schedule to eliminate the word
``proposed'' since these fees were effective on September 1, 2011 \6\
and add the word ``will'' to footnote 3.
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\6\ See Securities Exchange Act Release No. 34-65188 (August 24,
2011), 76 FR 53988 (August 30, 2011) (SR-EDGA-2011-27).
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The Exchange proposes to implement these amendments to its fee
schedule on October 1, 2011.
Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\7\ in general, and
furthers the objectives of Section 6(b)(4),\8\ 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.
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\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(4).
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The Exchange's proposal to decrease its rebate from $0.0005 per
share to $0.0004 per share for adding liquidity and increase it charge
from $0.0006 to $0.0007 per share for removing liquidity is designed to
allow the Exchange to compete with other market centers. The Exchange
believes the proposed maker/taker fee spread of $0.0002 or $0.0003,
depending on if a tier is met (proposed footnote 4), is reasonable as
the proposed maker/taker spread is competitive with other market
centers maker/taker spreads (BATS BZX Exchange, 0-$0.0004 per share),
Nasdaq OMX PSX ($.0001-$.0003 per share), and Nasdaq BX ($0.0001-
$0.0013) [sic] per share). In addition, the Exchange proposes to
increase its charge for customer internalization in Flag E from $0.0001
per share, per side, to $0.00015 per share per side, to move in
lockstep with the proposed maker/taker fee spread of $0.0003. In
addition, the increased revenue to the Exchange from the rate increase/
decreased [sic] rebate would allow the Exchange to have additional
revenue to offset administrative and infrastructure costs. The Exchange
believes that the proposed rate is non-discriminatory in that it
applies uniformly to all Members.
The Exchange's proposal to create a tier to provide an increased
rebate of $0.0005 per share if Members post more than 1% of the TCV in
average daily volume is designed to incentivize Members to route to
EDGA and thereby, increase volume on EDGA. Such increased volume
increases potential revenue to the Exchange, and would allow the
Exchange to spread its administrative and infrastructure costs over a
greater number of shares, leading to lower per share costs. These lower
per share costs would allow the Exchange to pass on the savings to
Members in the form of an increased rebate of $0.0005 per share. The
increased liquidity also benefits all investors by deepening EDGA's
liquidity pool, supporting the quality of price discovery, promoting
market transparency and improving investor protection. Volume-based
discounts such as the increase in rebate proposed herein have been
widely adopted in the cash equities markets and provide discounts that
are reasonably related to the value to an exchange's market quality
associated with higher levels of market activity, such as higher levels
of liquidity provision and introduction of higher volumes of orders
into the price and volume discovery processes. The Exchange believes
that the proposed increased rebate is non-discriminatory in that it
applies uniformly to all Members.
The Exchange believes that the proposed charge associated with the
RR flag ($0.0029 per share) represents an equitable allocation of
reasonable dues, fees, and other charges since it reflects a pass
through of the proposed EDGX fee for removing liquidity of $0.0029 per
share. The RR Flag will only apply to orders incorporating routing
strategies IOCX or IOCT, which are the Exchange's only two routing
strategies that solely sweep EDGA and then route the balance of the
order to EDGX. The RR Flag differs from the I Flag because the RR Flag
is the result of two routing strategies that target EDGA, and the I
Flag is the result of multiple routing strategies that execute at EDGA
amongst other destinations. In addition, the Exchange believes the
resulting effect of the RR Flag is consistent with similar strategies
that solely target one other away exchange such as ROBA, ROBY and ROPA
(and also pass on the removal rate of those respective exchange),
pursuant to Exchange Rules 11.9(b)(3)(e), 11.9(b)(3)(g) and
11.9(b)(3)(k). EDGA believes that it is reasonable and equitable to
pass on these fees to its members. The Exchange believes that the
proposed charge is non-discriminatory in that it applies uniformly to
all Members.
The Exchange believes that the proposed charge associated with the
I flag ($0.0029 per share) represents an equitable allocation of
reasonable dues, fees, and other charges since it reflects a pass
through of the proposed EDGX fee for removing liquidity of $0.0029 per
share. EDGA believes that it is reasonable and equitable to pass on
these fees to its members. The Exchange believes that the proposed
charge is non-discriminatory in that it applies uniformly to all
Members.
The Exchange believes that the proposed elimination of the FIX (ECN
Translator) logical port fee represents an equitable allocation of
reasonable dues, fees, and other charges as the ECN Translator is no
longer used by any Members and therefore, its elimination will not
impact any Members. The proposed elimination of the fee also provides
more simplicity to the fee schedule.
The Exchange also 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 and non-discriminatory 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
[[Page 64406]]
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) [sic] of the Act \9\ and Rule 19b-4(f)(2) \10\ 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.
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\9\ 15 U.S.C. 78s(b)(3)(A).
\10\ 17 CFR 19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an E-mail to [email protected]. Please include
File Number SR-EDGA-2011-32 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-2011-32. 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, 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-2011-32 and should be
submitted on or before November 8, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-26859 Filed 10-17-11; 8:45 am]
BILLING CODE 8011-01-P