[Federal Register Volume 79, Number 72 (Tuesday, April 15, 2014)]
[Notices]
[Pages 21313-21316]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-08419]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-71917; File No. SR-EDGA-2014-08]
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
April 9, 2014.
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 April 1, 2014, 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.
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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)
(``Fee Schedule'') to: (i) Increase the rebate for orders yielding Flag
BY, which routes to the BATS-Y Exchange, Inc. (``BYX'') and removes
liquidity using routing strategies ROUC, ROUE, ROBY, ROBB, or ROCO; \4\
(ii) increase the fee for orders yielding Flag RY, which route to BYX
and adds liquidity; (iii) increase the fee for orders yielding Flag O,
which routes to the listing exchanges opening cross; and (iv) amend
Footnote 5 to increase the fee cap for orders yielding Flag O from
$10,000 to $20,000 per month per Member. 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\ The term ``Member'' is defined as ``any registered broker or
dealer, or any person associated with a registered broker or dealer,
that has been admitted to membership in the Exchange. A Member will
have the status of a ``member'' of the Exchange as that term is
defined in Section 3(a)(3) of the Act.'' See Exchange Rule 1.5(n).
\4\ The ROUC, ROUE, ROBY, ROBB, or ROCO routing strategies are
set forth in Exchange Rule 11.9(b)(2).
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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 proposes to amend its Fee Schedule to: (i) Increase
the rebate for orders yielding Flag BY, which routes to BYX and removes
liquidity using routing strategies ROUC, ROUE, ROBY, ROBB, or ROCO;
(ii) increase the fee for orders yielding Flag RY, which route to BYX
and adds liquidity; (iii) increase the fee for orders yielding Flag O,
which routes to the listing exchanges opening cross; and (iv) amend
Footnote 5 to increase the fee cap for orders yielding Flag O from
$10,000 to $20,000 per month per Member.
Flag BY
In securities priced at or above $1.00, the Exchange currently
provides a rebate of $0.0001 per share for Members' orders that yield
Flag BY, which routes orders to BYX and removes liquidity using routing
strategies ROUC, ROUE, ROBY, ROBB, or ROCO. The Exchange proposes to
amend its Fee Schedule to increase the rebate for orders that yield
Flag BY to $0.0016 per share in securities priced at or above $1.00.\5\
The proposed change represents a pass through of the rate Direct Edge
ECN LLC (d/b/a DE Route) (``DE Route''), the
[[Page 21314]]
Exchange's affiliated routing broker-dealer, is provided for routing
orders to BYX that remove liquidity. The proposed change is in response
to BYX's April 2014 fee change where BYX increased its rebate from
$0.0001 per share to $0.0016 per share for orders in securities priced
at or above $1.00.\6\ When DE Route routes to and removes liquidity
from BYX, it will now receive a standard rebate of $0.0016 per share.
DE Route will pass through the rebate provided by BYX to the Exchange
and the Exchange, in turn, will pass through this rate to its Members.
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\5\ The Exchange does not propose to amend its fee for orders
that yield Flag BY in securities priced below $1.00.
\6\ See the BYX Fee Schedule available at http://www.batstrading.com/resources/regulation/rule_book/BYX_Fee_Schedule.pdf.
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Flag RY
In securities priced at or above $1.00, the Exchange currently
charges a fee of $0.0003 per share for Members' orders that yield Flag
RY, which route to BYX and adds liquidity. The Exchange proposes to
amend its Fee Schedule to increase the fee for orders that yield Flag
BY to $0.0018 per share in securities priced at or above $1.00.\7\ The
proposed change represents a pass through of the rate DE Route, the
Exchange's affiliated routing broker-dealer, is charged for routing
orders to BYX that add liquidity. The proposed change is in response to
BYX's April 2014 fee change where BYX increased its standard fee to
$0.0018 per share from $0.0003 per share for orders in securities
priced at or above $1.00.\8\ When DE Route routes to and adds liquidity
on BYX, it will now be charged a standard rate of $0.0018 per share.\9\
DE Route will pass through the rate it is charged on BYX to the
Exchange and the Exchange, in turn, will pass through this rate to its
Members.
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\7\ The Exchange does not propose to amend its fee for orders
that yield Flag RY in securities priced below $1.00.
\8\ See the BYX Fee Schedule available at http://www.batstrading.com/resources/regulation/rule_book/BYX_Fee_Schedule.pdf.
\9\ The Exchange notes that to the extent DE Route does or does
not achieve any volume tiered reduced fee on BYX, its rate for Flag
RY will not change.
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Flag O
In securities priced at or above $1.00, the Exchange currently
charges a fee of $0.0005 per share for Members' orders that yield Flag
O, which routes to the listing exchange's opening process.\10\ The
Exchange proposes to amend its Fee Schedule to increase the fee for
orders that yield Flag O to $0.0010 per share in securities priced at
or above $1.00.\11\ The proposed change represents an equitable
allocation of routing fees that DE Route, the Exchange's affiliated
routing broker-dealer, is charged for orders routed to the listing
exchange's opening process when it does not qualify for a volume tiered
reduced fee. The proposed change is in response to the New York Stock
Exchange, Inc.'s (``NYSE'') April 2014 fee change where the NYSE
increased its fee to $0.0010 per share from $0.0005 per share for
orders in securities priced at or above $1.00.\12\ When DE Route routes
an order to the NYSE's opening cross, it will now be charged a standard
rate of $0.0010 per share. DE Route will pass through the rate it is
charged on the NYSE to the Exchange and the Exchange, in turn, will
pass through this rate to its Members.
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\10\ Under Flag O, the Exchange routes to the following listing
exchanges: The New York Stock Exchange, Inc.; The Nasdaq Stock
Market LLC (``Nasdaq''); NYSE MKLT LLC; NYSE Arca Inc. (``NYSE
Arca''), and BATS Exchange, Inc.
\11\ The Exchange does not propose to amend its fee for orders
that yield Flag O in securities priced below $1.00.
\12\ See NYSE Trader Update dated March 27, 2014 available at
http://www.nyse.com/pdfs/NYSE%20Client%20Notice%20Fees%2004%202014.pdf. Nasdaq currently
charges $0.0010 per share to participate in its opening cross. See
Nasdaq Price List available at http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2. NYSE Arca currently charges
$0.0005 per share to participate in its opening cross. See NYSE
Arca's Equity Trading Fees available at http://usequities.nyx.com/sites/usequities.nyx.com/files/nyse_arca_marketplace_fees_for_3-1-14.pdf.
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Footnote 5
The Exchange also proposes to amend Footnote 5 to increase the fee
cap for orders yielding Flag O from $10,000 to $20,000 per month per
Member. When the Exchange routes to a listing exchange's opening cross
(Flag O), the Exchange passes through the tier savings that DE Route
achieves on an away exchange to its Members. This tier savings takes
the form of a cap of Members' fees at $10,000 per month for using Flag
O. The proposed increase in the fee cap under Footnote 5 is in response
to April 2014 fee cap changes by Nasdaq and NYSE for orders that
participate in their opening cross processes. First, under the NYSE's
April 2014 fee change, it is increasing its fee cap for orders that
participate in its opening cross from $15,000 to $20,000 per month.\13\
Second, under Nasdaq's April 2014 fee cap increase, it is requiring
that members add, at a minimum, one million shares of liquidity to
Nasdaq, on average per day, during the month to be eligible for its
existing fee cap of $20,000 for orders that participate in the opening
cross.\14\ When DE Route routes to the NYSE or Nasdaq's opening cross,
it will now be subject to the increased fee cap and new tier
requirement. The proposed increase to the fee cap under Footnote 5
would enable the Exchange to equitably allocate its costs among all
Members utilizing Flag O. Therefore, the Exchange proposes to amend
Footnote 5 to increase the fee cap for orders yielding Flag O from
$10,000 to $20,000 per month per Member in response to the Nasdaq and
the NYSE's April 2014 increased fee caps and related requirements.
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\13\ See NYSE Trader Update dated March 27, 2014 available at
http://www.nyse.com/pdfs/NYSE%20Client%20Notice%20Fees%2004%202014.pdf.
\14\ See Nasdaq Equity Trader Alert 2014-28 available
at http://www.nasdaqtrader.com/TraderNews.aspx?id=ETA2014-28.
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Implementation Date
The Exchange proposes to implement these amendments to its Fee
Schedule on April 1, 2014.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\15\ in general, and
furthers the objectives of Section 6(b)(4),\16\ 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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\15\ 15 U.S.C. 78f.
\16\ 15 U.S.C. 78f(b)(4).
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Flag BY
The Exchange believes that its proposal to increase the rebate for
orders that yield Flag BY represents an equitable allocation of
reasonable dues, fees, and other charges among Members and other
persons using its facilities. Prior to the BYX's April 2014 fee change,
BYX provided DE Route a rebate of $0.0001 per share to remove liquidity
in securities priced at or above $1.00, which DE Route passed through
to the Exchange and the Exchange charged its Members. When DE Route
routes to BYX, it will now be provided a rebate of $0.0016 per share.
The Exchange does not levy additional fees or offer additional rebates
for orders that it routes to BYX through DE Route. Therefore, the
Exchange believes that the proposed change to Flag BY is equitable and
reasonable because it accounts for the pricing changes on BYX, which
enables the Exchange to charge its Members the applicable pass-through
rate. Lastly, the Exchange notes that routing through DE Route is
voluntary and believes that the proposed change is non-discriminatory
because it applies uniformly to all Members.
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Flag RY
The Exchange believes that its proposal to increase the fees for
orders yielding Flag RY represents an equitable allocation of
reasonable dues, fees, and other charges among Members and other
persons using its facilities. Prior to BYX's April 2014 fee change, BYX
charged DE Route a fee of $0.0003 per share to add liquidity in
securities priced at or above $1.00, which DE Route passed through to
the Exchange and the Exchange charged its Members. When DE Route routes
to BYX, it will now be charged a standard rate of $0.0018 per share.
The Exchange does not levy additional fees or offer additional rebates
for orders that it routes to BYX through DE Route. Therefore, the
Exchange believes that the proposed change to Flag RY is equitable and
reasonable because it accounts for the pricing changes on BYX, which
enables the Exchange to charge its Members the applicable pass-through
rate. Lastly, the Exchange notes that routing through DE Route is
voluntary and believes that the proposed change is non-discriminatory
because it applies uniformly to all Members.
Flag O
The Exchange believes that its proposal to increase the fees for
orders yielding Flag O represents an equitable allocation of reasonable
dues, fees, and other charges among Members and other persons using its
facilities. Prior to NYSE's April 2014 fee change, NYSE charged DE
Route a fee of $0.0005 per share for orders routed to the NYSE's
opening cross, which DE Route passed through to the Exchange and the
Exchange charged its Members. When DE Route routes to the NYSE opening
cross, it will now be charged a rate of $0.0010 per share.\17\ The
Exchange does not levy additional fees or offer additional rebates for
orders that it routes to the NYSE opening cross through DE Route.
Therefore, the Exchange believes that the proposed change to Flag O is
equitable and reasonable because it accounts for the pricing changes on
the NYSE, which enables the Exchange to equitably allocate its costs
among all Members utilizing Flag O. Lastly, the Exchange notes that
routing through DE Route is voluntary and believes that the proposed
change is non-discriminatory because it applies uniformly to all
Members.
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\17\ The Exchange notes that Nasdaq currently charges DE Route
$0.0010 per share to participate in its opening cross. See Nasdaq
Price List available at http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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Footnote 5
The Exchange believes that its proposal to amend Footnote 5 to
increase the fee cap for orders yielding Flag O from $10,000 to $20,000
per month per Member represents an equitable allocation of reasonable
dues, fees, and other charges among Members and other persons using its
facilities. The proposed increase in the fee cap under Footnote 5 is in
response to April 2014 fee cap updates by Nasdaq and NYSE for orders
that participate in their opening cross processes. Prior to Nasdaq's
April 2014 fee cap increase, Nasdaq capped DE Routes monthly fees for
participating in its opening cross at $20,000, regardless of the volume
it added to Nasdaq. When DE Route routes to the Nasdaq opening cross,
it will now be required to add, at a minimum, one million shares of
liquidity to Nasdaq, on average per day, during the month, to be
eligible for its $20,000 monthly fee cap.\18\ In addition, prior to
NYSE's April 2014 fee change, the NYSE capped DE Routes monthly fees
for participating in its opening cross at $15,000. When DE Route routes
to the NYSE opening cross, it will now be subject to the NYSE's higher
fee cap of $20,000.\19\ The proposed increase to the fee cap under
Footnote 5 would enable the Exchange to equitably allocate its costs
among all Members who utilize Flag O. Therefore, the Exchange believes
that the proposed change to Footnote 5 is equitable and reasonable
because it accounts for the increased NYSE fee cap and Nasdaq
eligibility requirements, which enables the Exchange to apply to its
Members similar fee caps. Lastly, the Exchange notes that routing
through DE Route is voluntary and believes that the proposed change is
non-discriminatory because it applies uniformly to all Members.
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\18\ See Nasdaq Equity Trader Alert 2014-28 available
at http://www.nasdaqtrader.com/TraderNews.aspx?id=ETA2014-28.
\19\ See NYSE Trader Update dated March 27, 2014 available at
http://www.nyse.com/pdfs/NYSE%20Client%20Notice%20Fees%2004%202014.pdf.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange believes its proposed amendments to its Fee Schedule
would 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 change represents a significant
departure from previous pricing offered by the Exchange or pricing
offered by the Exchange's competitors. Additionally, Members may opt to
disfavor EDGA's pricing if they believe that alternatives offer them
better value. Accordingly, the Exchange does not believe that the
proposed change will impair the ability of Members or competing venues
to maintain their competitive standing in the financial markets.
In particular, the Exchange believes that its proposal to pass
through the amended fees for orders that yield Flags BY and RY would
increase intermarket competition because it offers customers an
alternative means to route to BYX for the same price that they would be
charged if they entered orders on those trading centers directly. The
Exchange believes that its proposal would not burden intramarket
competition because the proposed rate would apply uniformly to all
Members.
The Exchange also believes that its proposal to pass through the
amended fees for orders that yield Flag O and its related fee cap under
Footnote 5 would increase intermarket competition because it offers
customers an alternative means to route to a listing exchange's opening
cross for the similar prices that they would be charged if they entered
orders on those trading centers directly. The Exchange believes that
its proposal would not burden intramarket competition because the
proposed rate would apply uniformly to all Members.
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 \20\ and Rule 19b-4(f)(2) \21\ 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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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 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-2014-08 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-EDGA-2014-08. 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-2014-08 and should be
submitted on or before May 6, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08419 Filed 4-14-14; 8:45 am]
BILLING CODE 8011-01-P