[Federal Register Volume 80, Number 73 (Thursday, April 16, 2015)]
[Notices]
[Pages 20516-20520]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-08701]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-74707; File No. SR-EDGA-2015-16]
Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Related to
Fees for Use of EDGA Exchange, Inc.
April 10, 2015.
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, 2015, 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 Exchange. The
Exchange has designated the proposed rule change as one establishing or
changing a member due, fee, or other charge imposed by the Exchange
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2)
thereunder,\4\ which renders the proposed rule change effective upon
filing with the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange filed a proposal to amend its fees and rebates
applicable to Members \5\ of the Exchange pursuant to EDGA Rule 15.1(a)
and (c) (``Fee Schedule'') to: (i) Amend the fees charged for and
description of the logical ports \6\ offered; (ii) amend the criteria
for the MidPoint Discretionary Order Add Volume Tier; and (iii) make a
series of immaterial, non-substantive changes.
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\5\ 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).
\6\ A logical port is commonly referred to as a TCP/IP port, and
represents a port established by the Exchange within the Exchange's
system for trading and billing purposes. Each logical port
established is specific to a Member or non-member and grants that
Member or non-member the ability to operate a specific application,
such as FIX order entry or Multicast PITCH data receipt.
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The text of the proposed rule change is available at the Exchange's
Web site at www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
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 Exchange 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 Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts 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: (i) Amend the fees charged for and
description of the logical ports offered; (ii) amend the criteria for
the MidPoint Discretionary Order Add Volume Tier; and (iii) make a
series of immaterial, non-substantive changes.
Logical Ports
Currently, the Exchange maintains logical ports for order entry,
drop copies, testing, and market data for which it currently charges
$500 per month per port, with the first two (2) ports provided free of
charge. Ports used to request a re-transmission of market data from the
Exchange are also provided free of charge.
In early 2014, the Exchange and its affiliate, EDGA Exchange, Inc.
[[Page 20517]]
(``EDGA''), received approval to effect a merger (the ``Merger'') of
the Exchange's parent company, Direct Edge Holdings LLC, with BATS
Global Markets, Inc., the parent of BZX and BYX (together with BZX,
EDGA, and EDGX, the ``BGM Affiliated Exchanges'').\7\ In the context of
the Merger, the BGM Affiliated Exchanges are working to align certain
system and regulatory functionality, retaining only intended
differences between the BGM Affiliated Exchanges. This includes
migrating the BGM Affiliated Exchanges, which are currently located in
different data centers, into a single data center. As part of the data
center migration, the operation and categorization of logical ports
provided to access the Exchange would be identical to those utilized to
access BZX and BYX. Therefore, the Exchange proposes to harmonize its
description of logical ports within its Fee Schedule to align with the
descriptions included in the BZX and BYX fee schedules.\8\ As a result,
the Exchange also proposes to no longer provide free of charge: (i) The
first two (2) logical ports per month; and (ii) ports used to request a
re-transmission of market data from the Exchange. The Exchange
communicated to Members and non-Members of [sic] these changes via a
trading notice issued on October 7, 2014.\9\
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\7\ See Securities Exchange Act Release No. 71449 (January 30,
2014), 79 FR 6961 (February 5, 2014) (SR-EDGX-2013-043; SR-EDGA-
2013-034).
\8\ The Exchange notes that EDGA intends to file a proposal very
similar to this proposal that will align its logical port fees
across each of the BGM Affiliated Exchanges. The Exchange also notes
that BZX and BYX also intend to file a proposal to increase its port
fees from $400 per month per port to $500 per month per port as well
as to change references to ``GRP Ports'' to ``Multicast PITCH GRP
Ports''.
\9\ See BATS Global Markets Access Fee Changes for 2015,
available at http://cdn.batstrading.com/resources/fee_schedule/2015/BATS-Global-Markets-Access-Services-Fee-Changes-for-2015.pdf (issued
October 7, 2014).
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First, the Exchange proposes to harmonize its description of
logical ports within its Fee Schedule to align with the descriptions
included in the BZX and BYX fee schedules. As part of the data center
migration discussed above, the operation and categorization of ports
provided to access the Exchange would be identical to those utilized to
access BZX and BYX. Currently, the Exchange charges direct session
logical ports fees of $500 per month and separately categorizes those
ports as FIX, EDGE XPRS (HPI-API), Data, DROP, EdgeRisk. To harmonize
the description of the logical ports offered with those of BZX and BYX,
the Exchange proposes to no longer individually list the available
ports (other than Multicast PITCH Spin Server and GRP ports described
below) as all of the above are encompassed under the term logical
ports. In addition, EdgeRisk ports will also no longer be separately
listed within in [sic] the Fee Schedule. EdgeRisk ports enable Members,
and non-Member service bureaus that act as conduits for orders entered
by Members that are their customers, access to a System \10\ test
environment through which they can test their automated systems that
integrate with the Exchange.\11\ Under BATS technology, Members and
non-Members would no longer need a dedicated port to access the
Exchange's test environment as they would be able to utilize any of
their existing ports to do so. Therefore, the Exchange proposes to not
individually list EdgeRisk as a separate logical port.
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\10\ The term ``System'' is defined in Rule 1.5(cc).
\11\ See Securities Exchange Act Release Nos. 69670 (May 30,
2013), 78 FR 33871 (June 5, 2013) (SR-EDGX-2013-18); and 69669 (May
30, 2013), 78 FR 33880 (June 5, 2013) (SR-EDGA-2013-14).
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Second, other than no longer providing certain ports free of charge
as described below, the Exchange does not propose to amend the monthly
fee [sic] logical port fees. All logical ports will continue to be
subject to a fee of $500 per month per port. In addition, logical port
fees proposed above would be limited to logical ports in the Exchange's
primary data center and no logical port fees would be assessed for
redundant secondary data center ports. In addition, the Exchange also
proposes to no longer provide the first two (2) logical ports free of
charge. The Exchange, like BZX and BYX, will assess the monthly per
logical port fees for all of a Member and non-Member's logical ports.
Currently, the Exchange provides ports used to request a
retransmission of data free of charge. Going forward, the Exchange
would no longer offer such ports free of charge, as proposed below.
There are currently two types of logical ports used to request and
receive a retransmission of data from the Exchange,\12\ Multicast PITCH
Spin Server Ports and Multicast PITCH GRP Ports. The Exchange's
Multicast PITCH data feed is available from two primary feeds,
identified as the ``A feed'' and the ``C feed'', which contain the same
information but differ only in the way such feeds are received. The
Exchange also offers two redundant fees, identified as the ``B feed''
and the ``D feed.''
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\12\ FIX and BOE ports are the only ports that may be used to
send orders and related instructions to the Exchange. All other port
types, including the Multicast PITCH Spin Server Port and GRP Port,
permit Members and non-members to receive information from the
Exchange.
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The Exchange proposes to offer Multicast PITCH Spin Server Ports
for a fee of $500 per month for a set of primary ports (A or C feed)
and Multicast PITCH GRP Ports for a fee of $500 per month for a primary
port (A or C feed). The Exchange will continue to offer for free the
ports necessary to receive the Exchange's redundant Multicast ``B
feed'' and ``D feed'', as well as all ports made available in the
Exchange's secondary data center. Accordingly, this proposal only
applies to ports used to receive an Exchange primary Multicast PITCH
feeds at the Exchange's primary data center. The proposed fees for
Multicast PITCH Spin Server Ports and GRP Ports are identical to those
charged by BZX and BYX.
Lastly, the Exchange proposes to rename this section of its Fee
Schedule entitled ``Port Fees'' as ``Logical Port Fees.''
MidPoint Discretionary Order Add Volume Tier
The Exchange proposes to amend the criteria for the MidPoint
Discretionary Order Add Volume Tier. Under the tier, a Member qualifies
for a reduced fee of $0.0003 per share where that Member: (i) Adds an
ADV of at least 0.25% of the TCV including non-displayed orders that
add liquidity; and (ii) adds or removes an ADV of at least 1,500,000
shares yielding fee codes DM or DT. Fee code DM is applied to Non-
Displayed orders that add liquidity using MidPoint Discretionary orders
\13\ and fee code DT is applied to Non-Displayed orders that remove
liquidity using MidPoint Discretionary Orders. Orders that yield fee
code DM or fee code DT that do not meet to the criteria of the MidPoint
Discretionary Order Add Volume Tier are charged a fee of $0.00050 per
share. The Exchange now proposes to decrease the ADV requirement to
require that a Member add an ADV of at least 0.20%, rather than 0.25%,
of the TCV including non-displayed orders that add liquidity. Easing
the criteria of the MidPoint Discretionary Order Add Volume Tier is
intended to further incentive Members to submit an increased number of
MidPoint Discretionary orders to the Exchange, thereby increasing the
liquidity on the Exchange at the midpoint of the National Best Bid or
Offer (``NBBO'').
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\13\ See Exchange Rule 11.8(e) for a description of MidPoint
Discretionary orders.
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Non-Substantive Changes
The Exchange also proposes to make a series of immaterial, non-
substantive
[[Page 20518]]
changes to its Fee Schedule. None of the changes proposed are intended
to amend any fee or rebate. These changes are:
Remove the word ``the'' from the description of fee code
D;
Remove the word ``the'' from the description of fee code
RN;
Amend the Market Data Section to add a colon after BATS
One Feed\sm\; and
Add a colon after Licensing and Continuing Education.
Implementation Date
The Exchange proposes to implement these amendments to its Fee
Schedule on April 1, 2015.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\14\ in general, and
furthers the objectives of Section 6(b)(4),\15\ 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. The Exchange also notes that it operates in a highly-
competitive market in which market participants can readily direct
order flow to competing venues if they deem fee levels at a particular
venue to be excessive. The proposed rule change reflects a competitive
pricing structure designed to incent market participants to direct
their order flow to the Exchange. The Exchange believes that the
proposed rates are equitable and non-discriminatory in that they apply
uniformly to all Members. The Exchange believes the fees and credits
remain competitive with those charged by other venues and therefore
continue to be reasonable and equitably allocated to Members.
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\14\ 15 U.S.C. 78f.
\15\ 15 U.S.C. 78f(b)(4).
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Logical Ports
The Exchange believes that the proposed rule change is consistent
with Section 6(b)(4) of the Act,\16\ in that it provides for the
equitable allocation of reasonable dues, fees and other charges among
members and other persons using any facility or system which the
Exchange operates or controls. The Exchange notes that its proposed
changes, combined with the planned filings for EDGA, BZX and BYX,\17\
would allow the BGM Affiliated Exchanges to provide consistent logical
port offerings across each of the BGM Affiliated Exchanges. Consistent
offerings, in turn, will simplify the connectivity requirements for
Members of the Exchange that are also participants on EDGA, BZX and/or
BYX. The proposed rule change would result in greater uniformity and
less burdensome and more efficient understanding of Exchange
connectivity requirements.
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\16\ 15 U.S.C. 78f(b)(4).
\17\ See supra note 8.
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The Exchange also believes that no longer providing the first two
(2) logical ports for free as well as ports used to request a
retransmission of market data also represents an equitable allocation
of reasonable dues, fees and other charges. The Exchange operates in a
highly competitive market in which exchanges offer connectivity
services as a means to facilitate the trading activities of members and
other participants. Accordingly, fees charged for connectivity are
constrained by the active competition for the order flow of such
participants as well as demand for market data from the Exchange. If a
particular exchange charges excessive fees for connectivity, affected
members will opt to terminate their connectivity arrangements with that
exchange, and adopt a possible range of alternative strategies,
including routing to the applicable exchange through another
participant or market center or taking that exchange's data indirectly.
Accordingly, the exchange charging excessive fees would stand to lose
not only connectivity revenues but also revenues associated with the
execution of orders routed to it by affected members, 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. Lastly, the
Exchange believe its proposed fees are reasonable because the Nasdaq
Stock Market LLC (``Nasdaq'') and the NYSE Arca, Inc. (``NYSE Arca'')
do not provide logical ports or ports used for the retransmission of
market data free of charge.\18\
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\18\ See Nasdaq Rule 7015 (providing no FIX or non-Trading FIX
ports free of charge) and the NYSE Arca fee schedule available at
https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf (dated February 26, 2105).
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The Exchange believes that its proposed changes to logical port
fees are reasonable in light of the benefits to Exchange participants
of direct market access and receipt of data. In addition, the Exchange
believes that its fees are equitably allocated among Exchange
constituents based upon the number of access ports that they require to
receive data from the Exchange. Further, the Exchange believes that its
fees are not unreasonably discriminatory because all market
participants are charged standard fees for port usage. The Exchange
notes that it believes its prior fee structure, under which two ports
were provided free of charge, was reasonable, equitably allocated and
not unreasonably discriminatory because it was available to all market
participants and was intended to encourage Members and non-members to
connect to the Exchange. However, by moving towards a more uniform
approach to port descriptions and charges across the BGM Affiliated
Exchanges, the Exchange believes that its fees are even more equitably
allocated and nondiscriminatory. The Exchange also believes that its
fees for access services will enable it to better cover its
infrastructure costs and to improve its market technology and services.
Lastly, the Exchange also believes that the proposed amendments to
its fee schedule are non-discriminatory because they will apply
uniformly to all Members. All Members that voluntarily select various
service options will be charged the same amount for the same services.
All Members have the option to select any connectivity option, and
there is no differentiation among Members with regard to the fees
charged for the services offered by the Exchange.
MidPoint Discretionary Order Add Volume Tier
The Exchange believes amending the criteria for the MidPoint
Discretionary Order Add Volume Tier represents an equitable allocation
of reasonable dues, fees, and other charges among Members and other
persons using its facilities because it is designed to further
incentivize Members to increase their use of MidPoint Discretionary
orders on EDGA. MidPoint Discretionary Orders increase displayed
liquidity on the Exchange while also enhancing execution opportunities
at the mid-point of the NBBO. Promotion of displayed liquidity at the
NBBO enhances market quality for all Members. Members utilizing
MidPoint Discretionary orders provide liquidity at the midpoint of the
NBBO increasing the potential for an order to receive price
improvement, and easing the tier's criteria so that Members may be
eligible for a decreased fee is a reasonable means by which to
encourage the use of such orders. In addition, the Exchange believes
that by encouraging the use of MidPoint Discretionary orders by easing
the tier's criteria, Members seeking price improvement would be more
motivated to direct their orders to EDGA because they would have a
heightened expectation of the availability of
[[Page 20519]]
liquidity at the midpoint of the NBBO. The Exchange also believes that
the proposed addition of the MidPoint Discretionary Order Add Volume
Tier is non-discriminatory because it will be available to all Members.
Non-Substantive Changes
The Exchange believes that the non-substantive clarifying changes
to its Fee Schedule are reasonable because none of the proposed changes
are designed to amend any fee, nor alter the manner in which it
assesses fees or calculates rebates. These non-substantive changes to
the Fee Schedule are 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.
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 the Exchange'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.
Logical Ports
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 Exchange notes that, other
than no longer providing two (2) ports or ports used for the
retransmission of market data for free each month, it does not proposes
to alter the fees charged from their current levels. As discussed
above, the Exchange believes that fees for connectivity are constrained
by the robust competition for order flow among exchanges and non-
exchange markets. Further, excessive fees for connectivity, including
logical port fees, would serve to impair an exchange's ability to
compete for order flow rather than burdening competition. In addition,
allowing the Exchange to implement substantively identical logical port
fees across each of the BGM Affiliated Exchanges does not present any
competitive issues, but rather is designed to provide greater
harmonization among Exchange, BYX, BZX, and EDGA. Lastly, the Exchange
believes the proposal to no longer provide two (2) ports or ports used
for the retransmission of market data for free each month would enhance
intermarket competition because Nasdaq and NYSE Arca do not provide
logical ports or ports used for the retransmission of market data free
of charge.\19\ The Exchange also does not believe the proposed rule
change would impact intramarket competition as it would apply to all
Members and non-Members equally.
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\19\ Id.
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MidPoint Discretionary Order Add Volume Tier
The Exchange believes that its proposal to ease the criteria for
the MidPoint Discretionary Order Add Volume Tier would increase
intermarket competition because it would further incentivize Members to
send an increased amount MidPoint Discretionary orders to the Exchange
in order to qualify for the tier's decreased fee. The Exchange believes
that its proposal would neither increase nor decrease intramarket
competition because the MidPoint Discretionary Order Add Volume Tier
would apply uniformly to all Members and the ability of some Members to
meet the tier would only benefit other Members by contributing to
increased liquidity at the midpoint of the NBBO and better market
quality at the Exchange.
Non-Substantive Changes
The Exchange believes that the non-substantive changes to the Fee
Schedule will not affect intermarket nor intramarket competition
because none of these changes are designed to amend any fee or alter
the manner in which the Exchange assesses fees or calculates rebates.
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 paragraph (f) of Rule 19b-4
thereunder.\21\ At any time within 60 days of the filing of the
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).
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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-2015-16 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-EDGA-2015-16. 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
[[Page 20520]]
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-2015-16, and should be
submitted on or before May 7, 2015
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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Brent J. Fields,
Secretary.
[FR Doc. 2015-08701 Filed 4-15-15; 8:45 am]
BILLING CODE 8011-01-P