[Federal Register Volume 79, Number 117 (Wednesday, June 18, 2014)]
[Notices]
[Pages 34803-34805]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-14197]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72374; File No. SR-EDGX-2014-16]
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
June 12, 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 June 2, 2014, 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\ of the Exchange pursuant to EDGX Rule 15.1(a) and (c)
(``Fee Schedule'') to: (i) Delete Flag RC, which routes to the National
Stock Exchange, Inc. (``NSX'') and adds liquidity; and (ii) make a
corrective change to the definition of Average Daily Trading Volume
(``ADV'') to state that ADV includes shares routed by the Exchange. 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).
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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) Delete Flag
RC, which routes to the NSX and adds liquidity; and (ii) make a
corrective change to the definition of ADV to state that ADV includes
shared routed by the Exchange.
Flag RC
The Exchange proposes to amend its Fee Schedule to delete Flag RC,
which routes to the NSX and adds liquidity, in response to the NSX's
announcement that it will cease market operations and its last day of
trading will be Friday, May 30, 2014.\4\ The Exchange currently charges
a fee of $0.0001 per share in securities priced at or above $1.00 and
no fee in securities priced below $1.00 for Members' orders that yield
Flag RC. The fee for orders that yield Flag RC represents a pass
through of the rate that DE Route, the Exchange's affiliated routing
broker-dealer, is charged for routing orders that add liquidity to NSX.
As of June 1, 2014, the Exchange, via DE Route, will no longer be able
to route orders to NSX because it ceased operations, and, therefore,
proposes to remove Flag RC from its Fee Schedule.
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\4\ See Securities Exchange Act Release No. 72107 (May 6, 2014),
79 FR 27017 (May 12, 2014) (SR-NSX-2014-14) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change to Cease Trading on
Its Trading System).
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ADV
The Exchange proposes to make a corrective change to the definition
of ADV to state that a Member's ADV does
[[Page 34804]]
include shares that are routed to other trading centers. The Exchange
determines the liquidity adding rebate that it will provide to Members
based on the Exchange's tiered pricing structure based on the
calculation of ADV, and/or average daily Total Consolidated Volume.\5\
On May 1, 2014, the Exchange harmonized its definition of ADV with that
contained in the BATS Exchange, Inc. (``BATS'') and BATS-Y Exchange,
Inc. (``BYX'') fee schedules by amending the definitions of ADV to
state that routed shares are not included in ADV calculation.\6\
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\5\ As provided in the Fee Schedule, ``TCV'' is currently
defined as the volume reported by all exchanges and trade reporting
facilities to the consolidated transaction reporting plans for Tapes
A, B and C securities for the month in which the fees are
calculated, excluding volume on any day that the Exchange
experiences an Exchange System Disruption or the Russell
Reconstitution Day.
\6\ See Securities Exchange Act Release No. 72002 (April 23,
2014), 79 FR 24028 (April 29, 2014) (SR-EDGX-2014-10). The Exchange
also amended the definition of ADV to exclude shares on: (i) Any day
that the Exchange's system experiences a disruption that lasts for
more than 60 minutes during Regular Trading Hours (``Exchange System
Disruption''); and (ii) the last Friday in June (the ``Russell
Reconstitution Day''). Id.
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The Exchange's Fee Schedule currently states that Flag 7, which is
yielded on orders routed during the pre and post market sessions, is
considered when determining the liquidity adding rebate that the
Exchange will provide to Members based on its tiered pricing structure.
In harmonizing its definition of ADV with BATS and BYX, the Exchange
mistakenly included a provision that excluded routed shares from the
definition of ADV, thereby creating a conflict with the above provision
in the Fee Schedule stating that Flag 7 is considered when determining
the liquidity adding rebate under its tiered pricing structure. The
Exchange now seeks to make a corrective change to the definition of ADV
to state that routed orders are included in a Member's ADV calculation.
The proposed rule change is designed to resolve a conflict in the Fee
Schedule between the definition of ADV and the inclusion of orders that
yield Flag 7 when determining the liquidity adding rebate under its
tiered pricing structure. The Exchange notes that its proposal conforms
to an existing practice and does not modify the fees or rebate that the
Exchange has been providing its Members for achieving tier-based
pricing.
Implementation Date
The Exchange proposes to implement these amendments to its Fee
Schedule on June 2, 2014.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of 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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Flag RC
The Exchange believes that its proposal to delete Flag RC in its
Fee Schedule represents an equitable allocation of reasonable dues,
fees, and other charges among Members and other persons using its
facilities. The proposed change is in response to NSX's announcement
that it will cease market operations and its last day of trading will
Friday, May 30, 2014.\9\ As of June 1, 2014, the Exchange, via DE
Route, will no longer be able to route orders to NSX and, therefore,
proposes to remove Flag RC from its Fee Schedule. The Exchange believes
that the proposed amendment is intended to make the Fee Schedule
clearer and less confusing for investors and eliminate potential
investor confusion, thereby removing impediments to and perfecting the
mechanism of a free and open market and a national market system, and,
in general, protecting investors and the public interest.
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\9\ See Securities Exchange Act Release No. 72107 (May 6, 2014),
79 FR 27017 (May 12, 2014) (SR-NSX-2014-14) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change to Cease Trading on
Its Trading System).
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ADV
The Exchange believes that correcting an inadvertent error in the
definition of ADV with regard to routed orders is reasonable because it
will increase the level of transparency on the Exchange's Fee Schedule
and improve the Exchange's ability to effectively convey the criteria
necessary to achieve tier-based pricing and resolve a conflict in the
Fee Schedule between the definition of ADV and the inclusion of orders
that yield Flag 7 when determining the liquidity adding rebate under
its tiered pricing structure. The Exchange notes that its proposal
conforms to an existing practice and does not modify the rebates or
fees that the Exchange provides its Members for achieving tier-based
pricing. The Exchange has historically in practice and will continue to
include routed shares when calculating a Member's ADV by including
orders that yield Flag 7 when determining the liquidity adding rebate
under its tiered pricing structure. Other than this correction, which
resolves a conflict in the Fee Schedule, the remainder of the
definition of ADV would remain unchanged. Lastly, the Exchange also
believes that these proposed amendments are non-discriminatory because
they apply uniformly to all Members.
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 EDGX'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.
Flag RC
The Exchange believes that its proposal to delete Flag RC in its
Fee Schedule would not affect intermarket nor intramarket competition
because this change is not designed to amend any fee or rebate or alter
the manner in which the Exchange assesses fees or calculates rebates.
It is simply proposed in response to NSX announcement that it will
cease market operations and its last day of trading will be Friday, May
30, 2014.\10\
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\10\ See Securities Exchange Act Release No. 72107 (May 6,
2014), 79 FR 27017 (May 12, 2014) (SR-NSX-2014-14) (Notice of Filing
and Immediate Effectiveness of Proposed Rule Change to Cease Trading
on Its Trading System).
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ADV
The Exchange believes that correcting an inadvertent error in the
definition of ADV would not impose a burden on intermarket or
intramarket competition because it simply conforms to an existing
practice by resolving a conflict in the Fee Schedule and does not
modify the rebates or fees that the Exchange provides its Members for
achieving tier-based pricing. The Exchange has historically in practice
and will continue to include routed shares when calculating a Member's
ADV by including orders that yield Flag 7 when determining the
liquidity adding rebate under its tiered pricing structure. Other than
this correction, the
[[Page 34805]]
remainder of the definition of ADV would remain unchanged.
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 \11\ and Rule 19b-4(f)(2) \12\ 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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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 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-2014-16 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-EDGX-2014-16. 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-2014-16, and should be
submitted on or before July 9, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-14197 Filed 6-17-14; 8:45 am]
BILLING CODE 8011-01-P