[Federal Register Volume 77, Number 179 (Friday, September 14, 2012)]
[Notices]
[Pages 56900-56902]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-22644]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-67819; File No. SR-EDGA-2012-40]
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
September 10, 2012.
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 August 31, 2012 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, at the Exchange's
principal office, and at the Public Reference Room of the Commission.
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\3\ As defined in Exchange Rule 1.5(n).
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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
[[Page 56901]]
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to discontinue the Message Efficiency
Incentive Program (the ``MEIP'') \4\ and to delete the reference to the
MEIP in Footnote c, which is appended to the rebate for adding
liquidity in securities at or above $1.00 on the Exchange's fee
schedule. Under the MEIP, Members received standard rebates and tier
rebates as provided on the Exchange's fee schedule based upon the
Member's average inbound message-to-trade ratio for that month being
equal to or less than 100:1. Members could receive the maximum rebate
of $0.0003 per share if their average inbound message-to-trade ratio,
measured monthly, was equal to or less than 100:1, subject to
applicable rebate tiers.\5\ Where a Member exceeded the 100:1 message-
to-trade ratio, measured monthly, the Exchange reduced its rebates by
$0.0001 per share, without regard to the rebate tier for which the
Member qualified that month. In addition, under the MEIP, the following
Members were exempt from earning the rebate: (i) All Members that sent
less than 1,000,000 messages per day to the Exchange; and (ii)
registered Market Makers provided that they were registered in at least
100 securities on the Exchange over the course of a month and met their
continuous, two-sided quoting obligations under Exchange Rule 11.21(d)
on at least ten (10) consecutive trading days in the month. The
Exchange proposes to discontinue the $0.0001 per share reduction in
standard rebates and tier rebates that the Exchange applied to Members
that exceeded an average inbound message-to-trade ratio of 100:1,
measured monthly.
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\4\ See Securities Exchange Act Release No. 67160 (June 7,
2012), 77 FR 35450 (June 13, 2012) (SR-EDGA-2012-19) (where the
Exchange introduced the MEIP).
\5\ The Commission notes that the Exchange filed a proposed rule
change to modify the maximum rebate of $0.0003 per share as of
September 1, 2012. See SR-EDGA-2012-39.
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The Exchange proposes to implement these amendments to its fee
schedule on September 1, 2012.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\6\ 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.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(4).
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In its original filing introducing the MEIP, the Exchange stated
that it was establishing the MEIP in order to promote a more efficient
marketplace, to encourage liquidity provision and to enhance the
trading experience of Members on an ongoing basis.\8\ Having
implemented the MEIP for the period since its launch, the Exchange has
not seen these benefits, and thus believes that discontinuation of the
MEIP is appropriate at this time. Specifically, the Exchange believes
that, by not adequately isolating purely inefficient message flow, the
MEIP may have unintentionally captured, and therefore disincentivized,
order behavior that benefits market liquidity. For example, the MEIP
potentially discourages market participants from posting multiple
levels of liquidity in less actively traded securities. Thus, while the
Exchange's intention was to encourage efficiency and consequently
attract more liquidity, the MEIP appears to have resulted in the
opposite effect.
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\8\ See Securities Exchange Act Release No. 67160 (June 7,
2012), 77 FR 35450 (June 13, 2012) (SR-EDGA-2012-19).
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The Exchange believes its proposal to discontinue the MEIP is
equitable because it allows Members the freedom to manage their order
and message flow consistently with their business models. In addition,
the Exchange believes its proposal is reasonable because other
exchanges, e.g., BATS Exchange, Inc., maintain pricing models that are
designed to incentivize customers to increase liquidity, without any
restriction on order activity that applied under the MEIP. By
discontinuing the MEIP, the Exchange believes that it will remain
competitive with other exchanges that do not offer reductions in
standard rebates and/or tier rebates based on customers' message
efficiency. The Exchange believes that the proposal is equitable and
non-discriminatory in that it applies uniformly to all Members.
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 encourage market participants to direct their order flow to
the Exchange, or at least not to discourage the direction of order flow
to the Exchange. 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
This 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 240.19b-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-EDGA-2012-40 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.
[[Page 56902]]
All submissions should refer to File Number SR-EDGA-2012-40. 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-EDGA-2012-40 and should be
submitted on or before October 5, 2012.
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. 2012-22644 Filed 9-13-12; 8:45 am]
BILLING CODE 8011-01-P