[Federal Register Volume 78, Number 108 (Wednesday, June 5, 2013)]
[Notices]
[Pages 33871-33873]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-13286]
[[Page 33871]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69670; File No. SR-EDGX-2013-18]
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
May 30, 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 May 21, 2013, EDGX Exchange, Inc. (the ``Exchange'' or
``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\ and non-Members of the Exchange pursuant to EDGX Rule
15.1(a) and (c). All of the changes described herein are applicable to
EDGX 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.
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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
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 currently maintains logical ports for order entry
(FIX, HP-API), drop copies (DROP), and market data (Data)
(collectively, ``Direct Logical Ports'').\4\ The Exchange currently
offers five (5) free Direct Logical Ports and charges $500 for each
additional Direct Logical Port. Currently, Members and non-Members may
send live or test symbols through their FIX and/or HP-API logical
ports. Members and non-Members may choose to send test symbols via
their FIX and/or HP-API logical ports in order to test their software
developed to take advantage of newly implemented exchange enhancements
or to test their own software updates prior to implementation.
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\4\ See Securities and Exchange Act Release No. 64963 (July 26,
2011), 76 FR 45895 (August 1, 2011) (SR-EDGX-2011-21) (proposing to
include logical ports that receive market data among the types of
logical ports that the Exchange assesses a monthly fee to Members
and non-Members). See also Securities and Exchange Act Release No.
67741 (Aug. 28, 2012), 77 FR 53950 (Sept. 4, 2012) (SR-EDGX-2012-36)
(proposing to reduce the quantity of free Direct Logical Ports from
ten to five).
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In order to provide dedicated testing ports to Members and non-
Members to conduct the testing behavior described above, the Exchange
proposes to add EdgeRisk Ports (``Test Ports'') to the list of Direct
Logical Ports currently offered by the Exchange. Test Ports would
provide Members, and non-Member service bureaus that act as conduits
for orders entered by Members that are their customers, access to a
System \5\ test environment through which they can test their automated
systems that integrate with the Exchange. Although Members and non-
Members currently have the ability to send live and test symbols via
FIX and/or HP-API logical ports, Test Ports are dedicated FIX or HP-API
ports that would only allow orders for designated test symbols to flow
through the production environment, rejecting any live symbols. This
would provide Members and non-Members an opportunity to safely test
their software developed to take advantage of newly implemented
exchange enhancements or to test their own software updates prior to
implementation without the risk of accidentally sending live symbols.
The Exchange notes that Members and non-Members that choose not to
utilize Test Ports will continue to be able to send live and test
symbols via their FIX and/or HP-API logical ports.
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\5\ As defined in Exchange Rule 1.5(cc).
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Accordingly, the Exchange proposes to amend its fee schedule to
include Test Ports in the list of the Direct Logical Ports currently
offered by the Exchange. The Exchange notes that Test Ports would be
included among the five free Direct Logical Ports currently offered by
the Exchange to Members and non-Members. In addition, the Exchange
notes that it would continue to assess a monthly fee of $500 for every
logical port Members and non-Members maintain in excess of the five
free Direct Logical Ports.\6\
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\6\ See EDGX, EDGX Exchange Fee Schedule, https://www.directedge.com/Membership/FeeSchedule/EDGXFeeSchedule.aspx.
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Lastly, the Exchange proposes to make a ministerial change to the
text of its fee schedule by amending the phrases ``DIRECT Logical
Ports'' to ``Direct Logical Ports'' and ``DIRECT Sessions'' to ``Direct
Sessions.''
The Exchange proposes to implement this proposal on June 3, 2013.
The Exchange, pursuant to an information circular, will communicate to
Members and non-Members that the Exchange proposed these changes in a
filing with the Securities and Exchange Commission.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with 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 believes that the proposed fee structure will provide
incentives to Members and non-Members to make efficient use of Test
Ports while also providing market participants with the ability to
safely test changes to their systems in a production environment.
Recent challenges and industry experiences have highlighted the ongoing
need for rigorous testing of trading software and infrastructure
modifications.\9\ In providing Members and non-Members the option to
obtain and use Test Ports, the Exchange can assist market participants
by providing effective ways
[[Page 33872]]
for them to verify the completeness and correctness of their trading
system modifications before transitioning those changes to their
production trading environment.
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\9\ See, e.g., Securities Exchange Act Release No. 69077, 78 FR
18084 (March 25, 2013) (File No. S7-01-13) (proposing release for
Regulation SCI stressing the importance of industry-wide testing to
determine the behavior of automated systems under a variety of
simulated conditions as a way to aid error prevention, including
through the use of test facilities and test symbols).
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The Exchange would use the revenue generated from its proposal to
fund its administrative and infrastructure costs associated with
allowing Members and non-Members to establish logical ports to connect
to the Exchange's systems and continue to maintain and improve its
infrastructure, market technology and services. The fees generated by
the proposed fee amendment would cover the costs associated with
responding to customer requests, configuring the Exchange's systems,
programming to user specifications, and administering the testing
service, among others. The additional revenue would offset the costs of
maintaining a robust environment through which market participants can
test their software modifications.
The Exchange also notes that assessing charges for Direct Logical
Ports in excess of the five free ports, inclusive of the Test Ports, is
reasonable because it is consistent with the practices of other
exchanges, such as the BATS Exchange, Inc. and the NASDAQ OMX Group,
Inc. that charge customers for logical ports.\10\ The Exchange further
notes that the purchase of Test Ports is optional as Members and Non-
Members may continue to send live and test symbols via their FIX and/or
HP-API logical ports without purchasing Test Ports.
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\10\ See BATS Exchange, Inc., BATS BZX Exchange Fee Schedule,
http://batstrading.com/FeeSchedule. See also NASDAQ OMX Group, Inc.,
Price List-Trading & Connectivity, http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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Lastly, the Exchange believes that its proposal to add Test Ports
to the list of Direct Logical Ports offered by the Exchange is non-
discriminatory as it applies uniformly to Members and non-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. The Exchange does not believe that the proposed amendment to
the fee schedule represents a significant departure from previous
Exchange fees or such fees offered by the Exchange's competitors.\11\
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\11\ Id.
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The Exchange believes that its proposal would increase competition
among trading centers as a robust production testing environment
enhances the quality of facilities the Exchange provides. Recent market
events underscore the important need for rigorous testing of system
modifications, and the Exchange has an opportunity to assist its
Members and non-Members by providing effective ways for them to verify
the completeness of their modifications. Those exchanges that provide
an environment that allows market participants to safely test their
system modifications help their market participants to reduce errors,
thereby improving the overall quality of the exchange compared to those
that do not provide similar capabilities.
Additionally, Members and non-Members may opt to disfavor the
Exchange's pricing if they believe that alternative venues offer them
better value. Accordingly, if the Exchange is charging excessive fees,
the Exchange would stand to lose not only connectivity revenues but
also revenues associated with the execution of orders routed to it,
and, to the extent applicable, market data revenues. The Exchange
believes that this competitive dynamic imposes powerful restraints on
the ability of any exchange to charge unreasonable fees for
connectivity.
The Exchange believes that the proposed rule change would not
burden intramarket competition because the purchase of Test Ports is
optional and available to all Members and non-Members at rates that
apply on a uniform basis.
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 \12\ and Rule 19b-4(f)(2) \13\ 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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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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-EDGX-2013-18 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-2013-18. 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-EDGX-2013-18 and should be
submitted on or before June 26, 2013.
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For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-13286 Filed 6-4-13; 8:45 am]
BILLING CODE 8011-01-P