[Federal Register Volume 79, Number 89 (Thursday, May 8, 2014)]
[Notices]
[Pages 26493-26495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-10542]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72089; File No. SR-EDGA-2014-12]
Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
EDGA Rule 11.5 Regarding the Route Peg Order
May 2, 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 29, 2014, EDGA Exchange, Inc. (``EDGX'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the Exchange. 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.down
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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 the Route Peg Order under Rule
11.5(c)(14) to permit: (i) Executions against routable orders that are
equal to or less than the aggregate size of the Route Peg Order
interest available at that price; and (ii) Users \3\ to add a minimum
execution quantity instruction. All of the changes described herein are
applicable to EDGA Members.
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\3\ The term ``User'' is defined as ``any Member or Sponsored
Participant who is authorized to obtain access to the System
pursuant to Rule 11.3.'' See Exchange Rule 1.5(ee).
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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.
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Route Peg Order under Rule
11.5(c)(14) to permit: (i) Executions against routable orders that are
equal to or less than the aggregate size of the Route Peg Order
interest available at that price, which would replace the current
requirement that routable orders be equal to or less than the size of
an individual Route Peg Order; and (ii) Users to add a minimum
execution quantity instruction.
A Route Peg Order is a non-displayed limit order that posts to the
EDGA Book, and thereafter is eligible for execution at the national
best bid (``NBB'') for buy orders and national best offer (``NBO'') for
sell orders against routable orders that are equal to or less than the
size of the Route Peg Order.\4\ Route Peg Orders are passive, resting
orders on the EDGA Book \5\ and do not take liquidity. Route Peg Orders
may be entered, cancelled, and cancelled/replaced prior to and during
Regular Trading Hours.\6\ Route Peg Orders are eligible for execution
in a given security during Regular Trading Hours, except that, even
after the commencement of Regular Trading Hours, Route Peg Orders are
not eligible for execution (1) in the opening cross, and (2) until such
time that regular session orders in that security can be posted to the
EDGA Book. A Route Peg Order does not execute at a price that is
inferior to a Protected Quotation, and is not be permitted to execute
if the
[[Page 26494]]
NBBO is locked or crossed. Any and all remaining, unexecuted Route Peg
Orders are cancelled at the conclusion of Regular Trading Hours.
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\4\ See Securities Exchange Act Release No. 67726 (August 24,
2012), 77 FR 52771 (August 30, 2012) (Order Approving the Route Peg
Order).
\5\ The ``EDGA Book'' is defined as ``the System's electronic
file of orders.'' See Exchange Rule 1.5(d).
\6\ ``Regular Trading Hours'' is defined as ``the time between
9:30 a.m. and 4:00 p.m. Eastern Time.'' See Exchange Rule 1.5(y).
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Aggregate Size
As noted above, Route Peg Orders will currently only trade with
routable orders that are equal to or smaller in quantity than the order
quantity of an individual Route Peg Order. The Exchange proposes to
amend the operation of the Route Peg Order to permit it to execute
against routable orders that are equal to or less than the aggregate
size of the Route Peg Order interest available at that price. The
Exchange believes this change would incentivize Users seeking large
size executions to route orders to the Exchange by increasing
opportunities for executions against Route Peg Orders. This proposed
change to the Route Peg Order is similar to the operation of the Nasdaq
Stock Market LLC's (``Nasdaq'') Supplemental Order and NYSE Arca,
Inc.'s (``NYSE Arca'') Tracking Order, which both only execute if the
size of the incoming order is less than or equal to the aggregate size
of Supplemental Order or Tracking Order interest available at that
price.\7\
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\7\ See Nasdaq Rules 4751(f)(14), 4751(g) and 4757(a)(1)(D); see
also NYSE Arca Rule 7.31(f).
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Minimum Execution Quantity
The Exchange also proposes to amend the Route Peg Order under Rule
11.5 to add optional functionality to allow Users to designate a
minimum execution quantity. As proposed, a minimum execution quantity
on a Route Peg order will no longer apply where the number of shares
remaining after a partial execution are less than the minimum execution
quantity. This proposed change is similar to the operation of NYSE
Arca, Inc.'s Tracking Order, which permits Tracking Orders to include a
minimum size requirement.\8\ The Exchange believes that providing Users
with the option to designate a minimum quantity for Route Peg Orders
will promote the entry of liquidity at the Exchange because Users
entering such orders will be assured of obtaining a larger sized
execution. The Exchange believes that the proposed rule change could
attract Users that are seeking larger executions to enter Route Peg
Orders because by designating a minimum quantity, the submitting User
would be assured that they are not traded against by smaller-sized
interest.
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\8\ On NYSE Arca, if the Tracking Order with a minimum size
requirement is executed but not exhausted and the remaining portion
of the Tracking Order is less than the minimum size requirement,
NYSE Arca would cancel the Tracking Order. See NYSE Arca Rule
7.31(f). See also Securities Exchange Act Release No. 71366 (January
22, 2014), 79 FR 4515 (January 28, 2014) (SR-NYSEArca-2014-01)
(Notice of Filing and Immediate Effectiveness of Proposed Rule
Change Amending NYSE Arca Equities Rule 7.31 to Add a Minimum
Execution Size Designation for Tracking Orders).
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Implementation Date
The Exchange will announce the effective date of the proposed rule
change in a Trading Notice to be published no later than 30 days
following publication of the proposed rule change by the Commission.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \9\ in general, and furthers the objectives of Section
6(b)(5) of the Act \10\ in particular, in that it is designed to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system and, in general, to
protect investors and the public interest.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
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Aggregate Size
The Exchange believes that the proposal to permit executions
against routable orders that are equal to or less than the aggregate
size of the Route Peg Order interest available at that price would
remove impediments to and perfect the mechanism of a free and open
market and protect investors and the public interest because it would
incentivize Users seeking large size executions to route orders to the
Exchange by increasing opportunities for executions against Route Peg
Orders in a manner similar to existing functionality available on
Nasdaq and NYSE Arca.\11\ The proposed rule change also encourages
market participants to post liquidity at the NBBO on the Exchange
through the use of Route Peg Orders, thereby promoting just and
equitable principles of trade and removing impediments to and
perfecting the mechanism of a free and open market and national market
system. Moreover, the proposed rule changes would protect investors and
the public interest by increasing the probability of an execution on
the Exchange at the NBBO in the event that the order would otherwise be
shipped to an external destination and potentially miss an execution at
the NBBO while in transit. Lastly, the Exchange does not believe that
this will permit unfair discrimination among customers, brokers, or
dealers because it will be available to all Users.
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\11\ See supra note 8 and accompanying text.
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Minimum Execution Quantity
The Exchange also believes its proposal to amend the Route Peg
Order under Rule 11.5 to add optional functionality to allow Users to
designate a minimum execution quantity removes impediments to and
perfects the mechanism of a free and open market and protects investors
and the public interest because it would provide an incentive for
Members seeking larger-sized executions both to post liquidity at the
Exchange using this feature and to route larger-sized orders to the
Exchange because of the potential for an execution against such
liquidity. The Exchange further believes that adding an optional
minimum quantity would remove impediments to and perfect the mechanism
of a free and open market system because the proposed functionality is
similar to functionality available at the NYSE Arca.\12\ The Exchange
believes it is appropriate to provide an option for Users seeking to
provide such liquidity to not only designate a minimum execution
quantity, but for a minimum execution quantity on a Route Peg order to
no longer apply where the number of shares remaining after a partial
execution are less than the minimum execution quantity. Doing so would
permit Users to continue to have their Route Peg Orders eligible for
execution in such circumstances. In such case, Users will have the
option to cancel their Route Peg Order if they wish.
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\12\ See supra note 9 [sic] and accompanying text.
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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. To the contrary, the Exchange
believes that the proposal will promote competition by enhancing the
value of the Exchange's Route Peg Order by mirroring the function of
similar order types offered by Nasdaq and NYSE Arca.\13\
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\13\ See supra notes 8 [sic] and 9 [sic] and accompanying text.
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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 neither solicited nor received written comments on
the proposed rule change.
[[Page 26495]]
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed rule change pursuant to Section
19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\
Because the proposed rule change does not: (i) Significantly affect the
protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative prior to
30 days from the date on which it was filed, or such shorter time as
the Commission may designate, if consistent with the protection of
investors and the public interest, the proposed rule change has become
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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\14\ 15 U.S.C. 78s(b)(3)(A)(iii).
\15\ 17 CFR 240.19b-4(f)(6).
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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. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\16\ 15 U.S.C. 78s(b)(2)(B).
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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-2014-12 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-2014-12. 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 such 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 publicly available. All
submissions should refer to File Number SR-EDGA-2014-12 and should be
submitted on or before May 29, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-10542 Filed 5-7-14; 8:45 am]
BILLING CODE 8011-01-P