[Federal Register Volume 76, Number 218 (Thursday, November 10, 2011)]
[Notices]
[Pages 70204-70206]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-29105]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-65683; File No. SR-EDGX-2011-34]
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Amendments to the EDGX Exchange, Inc. Fee Schedule
November 4, 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 October 31, 2011, the EDGX Exchange, Inc. (the ``Exchange'' or
the ``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 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 EDGX Rule 15.1(a) and (c). All
of the changes described herein are applicable to EDGX 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 the charge assessed for a
Directed Intermarket Sweep Order \4\ (``Directed ISO'') from $0.0033
per share to $0.0032 per share, which is reflected in Flag S of the
Exchange's fee schedule.
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\4\ See Exchange Rule 11.5(d)(2).
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The Exchange proposes to correct an administrative error by
appending footnote 1 to the H Flag on the Exchange's fee schedule. The
H flag was added on October 1, 2011,\5\ and is another flag that adds
liquidity on EDGX. Currently, the flags that add liquidity on EDGX and
count towards the tiers identified in footnote 1 are B, V, Y, 3, 4, and
MM.
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\5\ See Securities Exchange Act Release No. 65541 (October 12,
2011), 76 FR 64409 (October 18, 2011) (SR-EDGX-2011-31).
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The Exchange proposes to implement these amendments to its fee
schedule on November 1, 2011.
Basis
The Exchange believes that the proposed rule changes are consistent
with the objectives of Section 6 of the Exchange Act,\6\ in general,
and furthers
[[Page 70205]]
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.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed decrease in the rate for
Directed ISOs from $0.0033 per share to $0.0032 per share represents an
equitable allocation of reasonable dues, fees, and other charges. The
Exchange believes that this decreased fee to Members would provide an
incentive for Members to provide liquidity that supports the quality of
price discovery and promotes market transparency. Such increased volume
also 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 a lower fee. The fee is reasonable when compared
to other market centers' fees for Directed ISOs, including, BATS that
charges a fee of $0.0033 per share and NASDAQ that charges a fee of
$0.0035 per share for routing Directed ISOs.\8\ The Exchange believes
that the proposed rate is non-discriminatory in that it applies
uniformly to all Members.
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\8\ See http://www.batstrading.com/resources/regulation/rule_book/BZX_FeeSchedule.pdf. See also http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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The Exchange proposes to correct an administrative error by
appending footnote 1 to the H Flag on the Exchange's fee schedule. The
H flag was added on October 1, 2011, and is another flag that adds
liquidity on EDGX and counts towards the tiers identified in footnote
1. The Exchange believes that providing discounts for adding liquidity
to the Exchange would incent liquidity. In addition, 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 a higher rebate. The increased liquidity also
benefits all investors by deepening EDGX's liquidity pool, offering
additional flexibility for all investors to enjoy cost savings,
supporting the quality of price discovery, promoting market
transparency and improving investor protection. Volume-based rebates
such as the ones proposed herein have been widely adopted in the cash
equities markets, and are equitable because they are open to all
members on an equal basis 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. In addition, by correcting this
administrative error, the Exchange adds additional transparency to its
fee schedule for Members.
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 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 \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 email to [email protected]. Please include
File Number SR-EDGX-2011-34 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-EDGX-2011-34. 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
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-EDGX-2011-34 and should be
submitted on or before December 1, 2011.
[[Page 70206]]
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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2011-29105 Filed 11-9-11; 8:45 am]
BILLING CODE 8011-01-P