[Federal Register Volume 78, Number 28 (Monday, February 11, 2013)]
[Notices]
[Pages 9749-9751]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-02950]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-68830; File No. SR-EDGA-2013-03]
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 5, 2013.
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 January 30, 2013, EDGA Exchange, Inc. (the ``Exchange'' or
``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\ and non-Members of the Exchange pursuant to EDGA Rule
15.1(a) and (c). All of the changes described herein are
[[Page 9750]]
applicable to EDGA Members and non-Members. The text of the proposed
rule change is available on the Exchange's Internet Web site at
www.directedge.com, at the Exchange's principal office, and at the
Public Reference Room of the Commission.
---------------------------------------------------------------------------
\3\ As defined in Exchange Rule 1.5(n).
---------------------------------------------------------------------------
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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
In SR-EDGA-2010-06,\4\ the Exchange proposed to adopt an annual fee
per physical port utilized by Members and non-Members to connect to the
Exchange's System \5\ for order entry and the receipt of Exchange data,
among other reasons. A physical port is a port used by a Member or non-
Member to connect into the Exchange at the data centers where Exchange
servers are located. Physical port connections can occur either through
an external telecommunication circuit or a cross-connection. The
Exchange noted at the time of filing that other market centers provided
similar services.\6\
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 62436 (July 1,
2010), 75 FR 39600 (July 9, 2010) (SR-EDGA-2010-06).
\5\ As defined in Exchange Rule 1.5(cc).
\6\ See Securities Exchange Act Release No. 62436 (July 1,
2010), 75 FR 39600, 39601 (July 9, 2010) (SR-EDGA-2010-06) (citing
Securities Exchange Act Release No. 61545 (February 19, 2010), 75 FR
8769 (February 25, 2010) (SR-BATS-2009-032) and Securities Exchange
Act Release No. 62392 (June 28, 2010), 75 FR 38857 (July 6, 2010)
(SR-NASDAQ-2010-077)).
---------------------------------------------------------------------------
In SR-EDGA-2010-22,\7\ the Exchange amended its fee schedule,
effective January 1, 2011, to allow Members and non-Members the option
of paying monthly fees for physical ports used to enter orders in the
Exchange's System.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 63519 (December 10,
2010), 75 FR 78791 (December 16, 2010) (SR-EDGA-2010-22).
---------------------------------------------------------------------------
The Exchange proposes to amend its fee schedule to eliminate the
option for Members and non-Members to pay for physical ports on an
annual basis. The Exchange's current monthly rates that it charges
Members and non-Members for physical ports remains unchanged;
therefore, the Exchange will assess a monthly fee of $500 per physical
port that connects to the Exchange's System via 1 gigabyte Copper
circuits; $750 per physical port that connects to the Exchange's System
via 1 gigabyte Fiber circuits; and $1,000 per physical port that
connects to the Exchange's System via 10 gigabyte Fiber circuits. In
addition, the Exchange proposes to pro-rate for the month of January
2013 only the annual fee paid by Members or non-Members who currently
have annual billing as of January 1, 2013 and then convert those
Members or non-Members to monthly billing starting in February 2013,
subject to the execution of a new contract that the Exchange has
distributed to all Members and non-Members to reflect this change.\8\
Furthermore, Direct Edge represents that its Members and non-Members
who currently have annual contracts for physical ports have either
consented to be converted to a month-to-month contract at the proposed
rates, or elected to terminate their contract because they no longer
require the service.
---------------------------------------------------------------------------
\8\ For example, Members or non-Members who are currently billed
annually will pay $416 per physical port for 1GB copper circuits
($5,000 annual fee/12 months) for the month of January 2013 only and
then shift to a monthly billing arrangement and pay $500 per
physical port from February 2013-December 2013 (monthly billing).
---------------------------------------------------------------------------
The Exchange proposes to implement these amendments to its fee
schedule on February 1, 2013. Members and Non-Members were notified of
the planned changes on November 8, 2012 and through subsequent direct
communication.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\9\ in general, and
furthers the objectives of Section 6(b)(4),\10\ in particular, as it
provides 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 proposal represents an equitable
allocation of reasonable dues, fees, and other charges as its billing
for port fees is reasonably constrained by competitive alternatives.
For example, the change to monthly billing is reasonable because it is
consistent with the monthly options offered by other exchanges, such as
the BATS Exchange, Inc. (``BATS'') and NASDAQ Stock Market LLC
(``NASDAQ'').\11\ Furthermore, Members and other persons using the
Exchange facilities also have the ability to obtain access to these
services without the need for an independent physical port connection,
such as through alternative means of financial extranets and service
bureaus that act as a conduit for orders entered by Members and non-
Members. Members and non-Members also have the ability to choose lower
cost connection service types and still obtain access to all EDGA
services.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(4).
\11\ The Exchange notes that BATS and NASDAQ only allow for
payment of physical port fees on a monthly basis. See BATS Exchange,
Inc., BATS BZX and BYX Exchange Fee Schedules, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf; NASDAQ Stock Market LLC, Price List--Trading &
Connectivity, http://www.nasdaqtrader.com/trader.aspx?id=pricelisttrading2.
---------------------------------------------------------------------------
Furthermore, the fees associated with physical ports will continue
to be equitably allocated and non-discriminatory as they will continue
to be uniform in application to all Members and non-Members. Members
and non-Members will continue to choose whether they want more than one
physical port and choose the method of connectivity based on their
specific needs.
The proposed rule change is also an equitable allocation of
reasonable dues, fees, and other charges because, for Members and non-
Members, the payment of physical connectivity fees on a monthly basis
provides administrative benefits over payments made on an annual basis.
For example, payment on a monthly basis allows Members and non-Members
to opt-in or opt-out of physical connectivity on thirty (30) days'
notice. Members and non-Members that choose to cancel their physical
connectivity within the thirty (30) days' notice will have no recurring
obligation.
Finally, the proposed rule change is also an equitable allocation
of reasonable dues, fees, and other charges as the Exchange believes
that the increased fees obtained through the monthly port fees over the
course of a year over annual port fees (an increase of $1,000 per year
per port on all 1Gb copper circuits, $1,500 per year per port on all
1Gb Fiber circuits, and $2,000 per year per port on all 10 Gb Fiber
circuits) will enable it to cover its increased infrastructure costs
associated with allowing Members and non-Members to establish physical
ports to connect to the Exchange's systems and continue to maintain and
improve its infrastructure, market technology, and services. The
Exchange believes that the proposed
[[Page 9751]]
rates are equitable and non-discriminatory in that they apply uniformly
to all Members and non-Members. The Exchange believes the fees and
monthly billing option remain competitive with those charged by other
exchanges and therefore continue to be reasonable and equitably
allocated to Members and non-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. Proposing to eliminate payment for physical connectivity on an
annual basis does not introduce a burden on competition as exchanges
such as BATS and NASDAQ currently only allow payment for physical
connectivity on a monthly basis.\12\ In addition, the proposed rule
change does not impose any burden on intramarket competition as payment
on a monthly basis is available to all Members and non-Members. In
addition, Members and non-Members also have the ability to obtain
access to these services without the need for an independent physical
port connection, such as through alternative means of financial
extranets and service bureaus that act as a conduit for orders entered
by Members and non-Members.
---------------------------------------------------------------------------
\12\ Id.
---------------------------------------------------------------------------
Fees for market access will be a component of the overall fees
charged by the Exchange to execute and route orders through the
Exchange. As the Commission has recognized, the market for execution
and routing services is extremely competitive.\13\ Market participants
that choose not to connect directly to the Exchange can readily access
liquidity available on the Exchange by directing their order flow to
other venues that, under Regulation NMS, must route to the Exchange if
it has posted the best price. Accordingly, the Exchange must set its
fees and billing options, including access service fees, at a level and
in such a way that will not deter market participants from connecting
to the Exchange; otherwise, potential users of the Exchange's services
will simply direct order flow to the Exchange's multiple competitors.
---------------------------------------------------------------------------
\13\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
---------------------------------------------------------------------------
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)(A) of the Act \14\ and Rule 19b-4(f)(2) \15\ 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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 19b-4(f)(2)[sic].
---------------------------------------------------------------------------
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-2013-03 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-2013-03. 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 Number SR-EDGA-2013-03 and should be
submitted on or before March 4, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
---------------------------------------------------------------------------
\16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02950 Filed 2-8-13; 8:45 am]
BILLING CODE 8011-01-P