[Federal Register Volume 78, Number 102 (Tuesday, May 28, 2013)]
[Notices]
[Pages 31994-31996]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-12533]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69614; File No. SR-EDGX-2013-17]
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing of Proposed Rule Change Relating to the EDGX Exchange, Inc.'s
Routing Broker Dealer, as Described in EDGX Rule 2.12(b)
May 21, 2013.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on May 16, 2013, EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission (the
``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\ 15 U.S.C. 78a.
\3\ 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 make permanent the existing pilot program
that permits the Exchange's inbound router, as described in Rule
2.12(b), to receive inbound routes of equities orders through Direct
Edge ECN LLC d/b/a DE Route (``DE Route''), the Exchange's routing
broker dealer, from EDGA Exchange, Inc. (``EDGA''). 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 www.directedge.com, at the Exchange's principal office, and at the
Public Reference Room of the Commission.
[[Page 31995]]
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
Currently, DE Route is the approved outbound order routing facility
of EDGA.\4\ The Exchange has been authorized to receive inbound routes
of equities orders by DE Route from EDGA. The Exchange's authority to
receive inbound routes of equities orders by DE Route from EDGA is
currently subject to a pilot period of twelve months, ending June 30,
2013.\5\ The Exchange hereby seeks permanent approval to permit the
Exchange to accept inbound orders that DE Route routes in its capacity
as a facility of EDGA. This is reflected in the proposed amendment to
EDGX Rule 2.12(b).
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\4\ See Securities Exchange Act Release No. 61698 (March 12,
2010), 75 FR 13151 (March 18, 2010).
\5\ See Securities Exchange Act Release No. 66644 (March 22,
2012), 77 FR 18877 (March 28, 2012) (SR-EDGX-2012-09).
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Under the pilot, the Exchange is committed to the following
obligations and conditions:
The Exchange shall: (a) Enter into a plan pursuant to Rule
17d-2 under the Exchange Act with a non-affiliated self-regulatory
organization (``SRO'') to relieve the Exchange of regulatory
responsibilities for DE Route with respect to rules that are common
rules between the Exchange and the SRO, and (b) enter into a regulatory
services contract (``Regulatory Contract'') with a non-affiliated SRO
to perform regulatory responsibilities for DE Route for unique Exchange
rules.
The regulatory services contract shall require the
Exchange to provide the non-affiliated SRO with information, in an
easily accessible manner, regarding all exception reports, alerts,
complaints, trading errors, cancellations, investigations, and
enforcement matters (collectively ``Exceptions'') in which DE Route is
identified as a participant that has potentially violated Exchange or
SEC Rules, and shall require that the non-affiliated SRO provide a
report, at least quarterly, to the Exchange quantifying all Exceptions
in which DE Route is identified as a participant that has potentially
violated Exchange or SEC rules.
The Exchange, on behalf of Direct Edge Holdings LLC, shall
establish and maintain procedures and internal controls reasonably
designed to ensure that DE Route does not develop or implement changes
to its system on the basis of non-public information obtained as a
result of its affiliation with the Exchange until such information is
available generally to similarly situated Members \6\ in connection
with the provision of inbound order routing to the Exchange.
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\6\ As defined in EDGX Rule 1.5(n).
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The Exchange has complied with the above-listed conditions during
the pilot. In meeting them, the Exchange has set up mechanisms that
protect the independence of the Exchange's regulatory responsibility
with respect to DE Route, as well as demonstrate that DE Route cannot
use any information that it may have because of its affiliation with
the Exchange to its advantage. Since the Exchange has met all the
above-listed obligations and conditions, it now seeks permanent
approval of the Exchange and DE Route's inbound routing relationship.
Upon approval of the proposed rule change, the Exchange will continue
to comply with the obligations and conditions as set forth in proposed
EDGX Rule 2.12.
2. Statutory Basis
The Exchange believes that its proposal is consistent with the
requirements of the Act and the rules and regulations thereunder that
are applicable to a national securities exchange, and, in particular,
with the requirements of Section 6(b) of the Act.\7\ Specifically, the
proposal is consistent with Section 6(b)(5) of the Act,\8\ because it
would promote just and equitable principles of trade, remove
impediments to, and perfect the mechanism of, a free and open market
and a national market system.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(5).
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Specifically, the proposed rule change will allow the Exchange to
continue receiving inbound routes of equities orders from DE Route
acting in its capacity as a facility of EDGA, in a manner consistent
with prior approvals and established protections. The Exchange believes
that meeting the commitments established during the pilot program
demonstrates that the Exchange has mechanisms that protect the
independence of the Exchange's regulatory responsibility with respect
to DE Route, as well as demonstrates that DE Route cannot use any
information that it may have because of its affiliation with the
Exchange to its advantage.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. The proposed rule change does
not impose any burden on intermarket or intramarket competition as it
would allow the Exchange to have a permanent inbound router consistent
with its competitors.\9\
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\9\ See Securities Exchange Act Release No. 65453 (September 30,
2011), 76 FR 62122 (October 6, 2011) (SR-NYSE-2011-45); Securities
Exchange Act Release No. 64090 (March 17, 2011), 76 FR 16462 (March
23, 2011) (SR-BX-2011-007); Securities Exchange Act Release No.
66807 (April 13, 2012), 77 FR 23300 (April 18, 2012) (SR-BYX-2012-
006); Securities Exchange Act Release No. 66808 (April 13, 2012), 77
FR 23294 (April 18, 2012) (SR-BATS-2012-013).
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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 written comments from its Members or other interested parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or (B)
institute proceedings to determine whether the proposed rule change
should be disapproved.
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.
[[Page 31996]]
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-2013-17 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-2013-17. 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 will also 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-2013-17 and should be
submitted on or before June 18, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\10\
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\10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-12533 Filed 5-24-13; 8:45 am]
BILLING CODE 8011-01-P