[Federal Register Volume 81, Number 5 (Friday, January 8, 2016)]
[Notices]
[Pages 987-989]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-00102]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76816; File No. SR-EDGX-2015-67]
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Related to
Fees for Use of EDGX Exchange, Inc.
January 4, 2016.
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 December 22, 2015, 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 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 the fee schedule applicable
to Members \5\ and non-members of the Exchange pursuant to EDGX Rules
15.1(a) and (c) (``Fee Schedule'') to adopt a new tier called the
Investor Depth Tier under footnote 1.
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\5\ The term ``Member'' is defined as ``any registered broker or
dealer that has been admitted to membership in the Exchange.'' See
Exchange Rule 1.5(n).
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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
Statutory Basis for, the Proposed Rule Change
1. Purpose
Currently, the Exchange determines the liquidity adding rebate that
it will provide to Members using the Exchange's tiered pricing
structure. Under such pricing structure, a Member will receive a rebate
of anywhere between $0.0025 and $0.0035 per share executed, depending
on the volume tier for which such Member qualifies. The Exchange
proposes to adopt a new tier called the Investor Depth Tier under
footnote 1 of the Fee Schedule. Members who would qualify for the
Investor Depth Tier would receive a rebate of $0.0033 per share where
they: (i) Add an ADV \6\ of at least 0.15% of the TCV; \7\ (ii) have an
``added liquidity'' as a percentage of ``added plus removed liquidity''
of at least 85%; and (3) add an ADV of at least 500,000 share as Non-
displayed \8\ orders that yield fee code HA.\9\ The Exchange proposes
to implement this amendment to its Fee Schedule on January 4, 2016.\10\
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\6\ As defined in the Exchange's Fee Schedule available at
http://batstrading.com/support/fee_schedule/edgx/.
\7\ Id.
\8\ See Exchange Rule 11.6(e)(2).
\9\ Fee code HA is appended to Non-displayed orders that add
liquidity on the Exchange. See the Exchange's Fee Schedule available
at http://batstrading.com/support/fee_schedule/edgx/.
\10\ The Exchange notes that the Fee Schedule's date was amended
to January 4, 2016 in file no. SR-EDGX-2015-62. See Securities
Exchange Act Release No. 76713 (December 21, 2015).
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[[Page 988]]
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\11\ in general, and
furthers the objectives of Section 6(b)(4),\12\ 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 tier is equitable and non-discriminatory in it would apply
uniformly to all Members. The Exchange believes the rates remain
competitive with those charged by other venues and, therefore,
reasonable and equitably allocated to Members.
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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(4).
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Volume-based rebates such as that proposed herein have been widely
adopted by equities and options exchanges and are equitable because
they are open to all Members on an equal basis and provide additional
benefits or discounts that are reasonably related to: (i) The value to
an exchange's market quality; (ii) associated higher levels of market
activity, such as higher levels of liquidity provision and/or growth
patterns; and (iii) introduction of higher volumes of orders into the
price and volume discovery processes. The Exchange believes that the
proposed tier is a reasonable, fair and equitable, and not unfairly
discriminatory allocation of fees and rebates because they will provide
Members with an additional incentive to reach certain thresholds on the
Exchange.
In particular, the Exchange believes the addition of the Investor
Depth Tier is a reasonable means to encourage Members to increase their
liquidity on the Exchange. The Exchange further believes that the
proposed Investor Depth Tier represents an equitable allocation of
reasonable dues, fees, and other charges because the thresholds
necessary to achieve the tier encourages Members to add displayed
liquidity to the EDGX Book \13\ each month, as only the displayed
liquidity in this tier is awarded the rebate of $0.0033 per share. This
tier also recognizes the contribution that non-displayed liquidity
provides to the marketplace, including: (i) Adding needed depth to the
EDGX market; (ii) providing price support/depth of liquidity; and (iii)
increasing diversity of liquidity to EDGX. The increased liquidity
benefits all investors by deepening EDGX's liquidity pool, offering
additional flexibility for all investors to enjoy cost savings,
supporting the quality of price discovery, promoting market
transparency and improving investor protection.
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\13\ The EDGX Book is the System's electronic file of orders.
See Exchange Rule 1.5(d).
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The Exchange also notes that the criteria and rebate under the
Investor Depth Tier is equitable and reasonable as compared to other
tiers offered by the Exchange. For example, under the Investor Tier
Members may receive a rebate of $0.0032 per share where they (i) add an
ADV of at least 0.15% of the TCV; and (ii) have an ``added liquidity''
as a percentage of ``added plus removed liquidity'' of at least 85%.
These thresholds mirror the first two thresholds required to meet the
proposed Investor Depth Tier. However, in order to achieve the higher
rebate of $0.0033 per share provided by the proposed Investor Depth
Tier, Members must also add an ADV of at least 500,000 share as Non-
displayed orders that yield fee code HA.\14\ Therefore, the Exchange
believes the proposed Investor Depth Tier is consistent with Section
6(b)(4) \15\ of the Act as the more stringent criteria correlates with
the tier's higher rebate.
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\14\ The Exchange notes that Market Depth Tiers 1 and 2 under
footnote 1 also require that Members add an ADV of certain number of
shares as Non-displayed orders that yield fee code HA, in addition
other added ADV requirements.
\15\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe its proposed amendment to its Fee
Schedule would 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.
The Exchange does not believe that the proposed new tier would
burden competition, but instead, enhances competition, as it is
intended to increase the competitiveness of and draw additional volume
to the Exchange. As stated above, the Exchange 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 structures to be
unreasonable or excessive. The proposed change is generally intended to
enhance the rebates for liquidity added to the Exchange, which is
intended to draw additional liquidity to the Exchange. The Exchange
does not believe the proposed tier would burden intramarket competition
as it would apply to all Members uniformly.
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 \16\ and paragraph (f) of Rule 19b-4
thereunder.\17\ 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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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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 No. SR-EDGX-2015-67 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange
[[Page 989]]
Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File No. SR-EDGX-2015-67. 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 will also 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 No. SR-EDGX-2015-67 and should be
submitted on or before January 29, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-00102 Filed 1-7-16; 8:45 am]
BILLING CODE 8011-01-P