10414 Federal Register / Vol. 76, No. 37 / Thursday, February 24, 2011 / Notices 

7 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3Exchange Rule 11.5(c)(11) defines a ‘‘Step-up’’ 

order as a ‘‘market or limit order with the 

instruction that the System display the order to 

Users at or within the NBBO price pursuant to Rule 

11.9(b)(1)(C).’’ 

4Exchange Rule 11.5(c)(7) defines a ‘‘Mid-Point 

Match’’ order as an ‘‘order with an instruction to 

execute it at the midpoint of the NBBO.’’ 

5See Securities Exchange Act Release No. 63336 

(November 18, 2010), 75 FR 71781. 

6Amendment No. 2 replaced in its entirety the 

original filing and Amendment No. 1. See Securities 

Exchange Act Release No. 63574 (December 17, 

2010), 75 FR 80876. 

7See Letter dated December 15, 2010, from Janet 

L. McGuinness, Senior Vice President—Legal and 

Corporate Secretary, Legal & Government Affairs, 

NYSE Euronext to Elizabeth M. Murphy, Secretary, 

Commission (‘‘NYSE Euronext Letter’’). The NYSE 

Euronext Letter opposes the proposed rule change 

and, in so doing, expresses support for the 

Commission’s recent proposal that would eliminate 

the exception for ‘‘flash orders’’ from Rule 602 of 

Regulation NMS. See Securities Exchange Act 

Release No. 60684 (September 18, 2009), 74 FR 

48632 (September 23, 2009) (the ‘‘Flash Order 

Proposed Rulemaking’’). 

8See Letter dated January 18, 2011, from Eric 

Hess, General Counsel, DirectEdge Holdings, LLC 

(‘‘Direct Edge’’), to Elizabeth M. Murphy, Secretary, 

Commission. 

9As noted above, the Commission has issued a 

proposed rulemaking that, if adopted, could impact 

the permissibility of the Step-up orders of the 

Exchange that are the subject of the proposed rule 

change. See Flash Order Proposed Rulemaking, 

supra note 7. The Commission emphasizes that this 

institution of proceedings to determine whether to 

disapprove the proposed rule change in no way 

prejudges or otherwise determines what action, if 

any, the Commission may take with respect to the 

Flash Order Proposed Rulemaking. 

10Exchange Rule 1.5(cc) defines a User as ‘‘any 

Member or Sponsored Participant who is 

authorized to obtain access to the System pursuant 

to Rule 11.3.’’ Exchange Rule 11.9(b)(1) provides 

that (prior to display of an order to a User), an 

incoming order shall first attempt to be matched for 

execution against orders in the EDGX Book. 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–CBOE–2011–008. This file 

number should be included on the 

subject line if e-mail 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 

a.m. and 3 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–CBOE– 

2011–008 and should be submitted on 

or before March 17, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4075 Filed 2–23–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63930; File No. SR–EDGX– 

2010–17] 

Self-Regulatory Organizations; EDGX 

Exchange, Inc.; Order Instituting 

Proceedings To Determine Whether To 

Disapprove a Proposed Rule Change 

as Modified by Amendment No. 2 to 

Amend EDGX Rules 11.9 and 11.5 

Regarding Step-up Orders 

February 18, 2011. 

I. Introduction 

On November 8, 2010, EDGX 

Exchange, Inc. (the ‘‘Exchange’’ or 

‘‘EDGX’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (‘‘Act’’)1

and Rule 19b–4 thereunder,2 a proposed 

rule change to amend EDGX Rule 11.9 

regarding the description of the Step-up 

order type3 and modify Exchange Rule 

11.5(c)(7) to allow Mid-Point Match 

orders4 entered in response to Step-up 

orders to be processed pursuant to 

Exchange Rule 11.9. The proposed rule 

change was published for comment in 

the Federal Register on November 24, 

2010.5 On November 23, 2010, the 

Exchange submitted Amendment No. 1 

to the proposed rule change. On 

December 14, 2010, the Exchange 

submitted Amendment No. 2 to the 

proposed rule change, which was 

published for comment in the Federal 

Register on December 23, 2010.6 The 

Commission received one comment 

letter on the proposal,7 and received the 

Exchange’s response to the comment 

letter.8 This order institutes proceedings 

pursuant to Section 19(b)(2)(B) of the 

Act to determine whether to disapprove 

the proposed rule change, as modified 

by Amendment No. 2. Institution of 

disapproval proceedings, however, does 

not indicate that the Commission has 

reached any conclusions with respect to 

any of the issues involved.9

II. Description of the Proposal 

Exchange Rule 11.5(c)(11) defines a 

‘‘Step-up’’ order as a ‘‘market or limit 

order with the instruction that the 

System display the order to Users at or 

within the NBBO price pursuant to Rule 

11.9(b)(1)(C).’’ Exchange Rule 

11.9(b)(1)(C), in turn, states that Step-up 

orders shall be displayed to Users 

(hereinafter referred to as ‘‘Members’’),10

in a manner that is separately 

identifiable from other Exchange orders, 

at or within the NBBO price for a period 

of time not to exceed five hundred 

milliseconds, as determined by the 

Exchange (the ‘‘Step-up Display 

Period’’). Step-up orders are intended to 

permit a Member to initiate a price 

auction of such orders by displaying 

order solicitation information to other 

Members simultaneously, provided 

such other Members have elected to 

receive such order information. Under 

the current rules, the first responsive 

Member order would execute against 

the Step-up order. 

The Exchange proposes to specify the 

Step-up Display Period as 10 

milliseconds, and eliminate the 

discretion afforded to the Exchange in 

its existing Rule to vary the length of the 

Step-up Display Period. In addition, the 

Exchange proposes to amend Exchange 

Rule 11.9(b)(1)(C) to provide that, at the 

conclusion of the Step-up Display 

Period, the Step-up order shall execute 

against responsive Member orders 

priced at or within the NBBO on a 

price/time priority basis consistent with 

Exchange Rule 11.8(a)(1) and (2). The 


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Federal Register / Vol. 76, No. 37 / Thursday, February 24, 2011 / Notices 10415 

11Responses are accumulated for the Step-up 

Display Period by the Exchange, rather than 

processed at arrival time. Eligible Book Orders will 

continue to be eligible for execution against the 

EDGX Book during the Step-up Display Period, as 

they do currently. 

12NYSE Euronext Letter, supra note 7, at p. 3. As 

noted above, NYSE Euronext also expresses support 

for the Flash Order Proposed Rulemaking. This 

order addresses only those portions of the NYSE 

Euronext Letter that specifically address the 

Exchange’s proposed rule change. 

13 Direct Edge Letter, supra note 8, at p. 2. 

14See id. at p. 3–4. 

15 15 U.S.C. 78s(b)(2). 

16 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the 

Act also provides that proceedings to determine 

whether to disapprove a proposed rule change must 

be concluded within 180 days of the date of 

publication of notice of the filing of the proposed 

rule change. Id. The time for conclusion of the 

proceedings may be extended for up to 60 days if 

the Commission finds good cause for such 

extension and publishes its reasons for so finding. 

Id. 

15See 15 U.S.C. 78f(b)(5). 

18 15 U.S.C. 78f(b)(5). 

19 15 U.S.C. 78k–1(a)(1)(C)(i)–(iv). 

Exchange further proposes that, 

commencing on the six month 

anniversary of a Commission approval 

order, the orders eligible for executing 

against Step-up orders shall be 

expanded to include Member orders 

priced better but not outside the NBBO 

at the end of the Step-up Display Period 

that may have entered the Exchange 

book outside the Step-up process (such 

orders, ‘‘Eligible Book Orders’’).11

The Exchange also proposes to amend 

Exchange Rule 11.5(c)(7) to allow MidPoint Match orders that are entered in 

response to Step-up orders to participate 

in the price auction. The Exchange will 

not accept orders priced in subpennies 

during Step-up auctions. The Exchange 

believes a midpoint response will 

provide an additional mechanism for a 

Member that is willing to offer price 

improvement, but is unwilling to cross 

the spread between the NBBO, to do so. 

By providing this option, the Exchange 

believes that a greater proportion of 

Step-up orders will receive price 

improvement. 

The Step-up order process will not 

generate an execution if the market is 

crossed for the security that is the 

subject of a Step-up order. If the market 

is crossed, or if there are no responsive 

Member orders at or within the NBBO, 

at the end of the Step-up Display Period, 

the Step-up process shall terminate and 

the Step-up order shall be cancelled or 

routed in accordance with the Member’s 

instructions. 

III. Summary of Comments 

In its comment letter on the original 

filing, NYSE Euronext opposes the 

proposed rule change on several 

grounds. NYSE Euronext argues that the 

Step-up auction mechanism will 

increase the number of orders whose 

execution is artificially delayed, 

including both Step-up orders and those 

responding to them, and thus increase 

the number of orders missing execution 

opportunities in other markets. NYSE 

Euronext also believes that, by 

proposing to ultimately make Eligible 

Book Orders eligible for execution 

against Step-up orders, the proposed 

rule change would eliminate an 

Exchange member’s choice as to 

whether its orders will interact with 

Step-up orders. Finally, NYSE Euronext 

expresses concern that allowing MidPoint Match orders to be submitted in 

response to a Step-up order ‘‘further 

expands the use of [the Exchange’s] 

flash mechanism.’’ 12

Direct Edge, on behalf of the 

Exchange, responds that it is not 

offering an expansion of the flash order 

type, but rather an auction process that 

has significant similarities to those used 

by the NYSE, and notes that the 

duration of its auction will be the 

shortest in the securities markets.13

Direct Edge further argues that the Stepup auction process creates meaningful 

price improvement opportunities for 

investors while helping brokers to 

satisfy their best execution obligations. 

Direct Edge also believes that expanding 

participation in the auction to both 

Eligible Book Orders and Mid-Point 

Match orders will both increase price 

competition and expand member 

choice.14

IV. Proceedings To Determine Whether 

To Disapprove SR–EDGX–2010–17 and 

Grounds for Disapproval Under 

Consideration 

The Commission is instituting 

proceedings pursuant to Section 19(b)(2) 

of the Act 15 to determine whether the 

Exchange’s proposed rule change 

should be disapproved. Pursuant to 

Section 19(b)(2)(B) of the Act,16 the 

Commission is providing notice of the 

grounds for disapproval under 

consideration. Under the proposal, the 

Exchange would create a 10 millisecond 

auction for responding to Step-up orders 

and would expand the order types able 

to interact with Step-up orders during 

the Step-up auction process. The Act 

and the rules thereunder require, among 

other things, that the rules of an 

exchange be designed to promote just 

and equitable principles of trade, to not 

permit unfair discrimination among 

broker-dealers and customers and, in 

general, to protect investors and the 

public interest.17 The Commission is 

concerned that the Exchange’s proposal 

may be inconsistent with these 

standards. Specifically, the Commission 

is concerned about the extent to which 

a 10 millisecond auction would provide 

a meaningful opportunity for price 

improvement, or would materially 

increase the risk that a Step-Up order 

will miss an execution. The 

Commission notes that the Exchange 

has not provided any data with respect 

to the impact of its proposed 10 

millisecond auction on these issues. The 

Commission is also concerned about the 

potential implications of the Step-Up 

auction process, because Eligible Book 

Orders would not be able to participate 

in the Step-Up auction for six-months 

from the date of a Commission approval 

order. 

In view of the issues raised by the 

proposal, the Commission has 

determined to institute disapproval 

proceedings at this time to determine 

whether the Commission should 

disapprove the proposed rule change. 

Institution of disapproval proceedings 

does not indicate, however, that the 

Commission has reached any 

conclusions with respect to the issues 

involved. The sections of the Act and 

the rules thereunder that are applicable 

to the proposed rule change include: 

• Section 6(b)(5) of the Act, which 

requires, among other things, that the 

rules of a national securities exchange 

be designed to promote just and 

equitable principles of trade, 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, and not be designed to 

permit unfair discrimination between 

customers, issuers, brokers, or 

dealers; 18 and 

• Section 11A(a) of the Act, in which 

Congress found that it is in the public 

interest and appropriate for the 

protection of investors and the 

maintenance of fair and orderly markets 

to assure ‘‘economically efficient 

execution of securities transactions,’’ 

‘‘fair competition among brokers and 

dealers and among exchange markets,’’ 

‘‘the availability to brokers, dealers, and 

investors of information with respect to 

quotations for and transactions in 

securities,’’ and ‘‘the practicability of 

brokers executing investors’ orders in 

the best market.’’ 19

V. Procedure: Request for Written 

Comments 

The Commission requests written 

views, data, and arguments with respect 

to the concerns identified above as well 

as any other relevant concerns. Such 

comments should be submitted by April 


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10416 Federal Register / Vol. 76, No. 37 / Thursday, February 24, 2011 / Notices 

20 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act 

grants the Commission flexibility to determine what 

type of proceeding—either oral or notice and 

opportunity for written comments—is appropriate 

for consideration of a particular proposal by a selfregulatory organization. See Securities Acts 

Amendments of 1975, Report of the Senate 

Committee on Banking, Housing and Urban Affairs 

to Accompany S. 249, S. Rep. No. 75, 94th Cong., 

1st Sess. 30 (1975). 

21 17 CFR 200.30–3(a)(57). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b-4. 

3Exchange Rule 11.5(c)(11) defines a ‘‘Step-up’’ 

order as a ‘‘market or limit order with the 

instruction that the System display the order to 

Users at or within the NBBO price pursuant to Rule 

11.9(b)(1)(C).’’ 

4The Exchange proposes to define a ‘‘Mid-Point 

Match’’ order as an ‘‘order entered in response to a 

Step-up Order * * * with an instruction to execute 

it at the midpoint of the NBBO.’’ 

5See Securities Exchange Act Release No. 63335 

(November 18, 2010), 75 FR 71783. 6Amendment No. 2 replaced in its entirety the 

original filing and Amendment No. 1. See Securities 

Exchange Act Release No. 63572 (December 17, 

2010), 75 FR 80873. 7See Letter dated December 15, 2010, from Janet 

L. McGuinness, Senior Vice President—Legal and 

Corporate Secretary, Legal & Government Affairs, 

NYSE Euronext to Elizabeth M. Murphy, Secretary, 

Commission (‘‘NYSE Euronext Letter’’). The NYSE 

Euronext Letter opposes the proposed rule change 

and, in so doing, expresses support for the 

Commission’s recent proposal that would eliminate 

the exception for ‘‘flash orders’’ from Rule 602 of 

Regulation NMS. See Securities Exchange Act 

Release No. 60684 (September 18, 2009), 74 FR 

48632 (September 23, 2009) (the ‘‘Flash Order 

Proposed Rulemaking’’). 

8See Letter dated January 18, 2011, from Eric 

Hess, General Counsel, DirectEdge Holdings, LLC 

(‘‘Direct Edge’’), to Elizabeth M. Murphy, Secretary, 

Commission. 9As noted above, the Commission has issued a 

proposed rulemaking that, if adopted, could impact 

the permissibility of the Step-up orders of the 

Exchange that are the subject of the proposed rule 

change. See Flash Order Proposed Rulemaking, 

supra note 7. The Commission emphasizes that this 

institution of proceedings to determine whether to 

disapprove the proposed rule change in no way 

prejudges or otherwise determines what action, if 

any, the Commission may take with respect to the 

Flash Order Proposed Rulemaking. 

10Exchange Rule 1.5(cc) defines a User as ‘‘any 

Member or Sponsored Participant who is 

authorized to obtain access to the System pursuant 

to Rule 11.3.’’ Exchange Rule 11.9(b)(1) provides 

that (prior to display of an order to a User), an 

incoming order shall first attempt to be matched for 

execution against orders in the EDGA Book. 

11, 2011. Rebuttal comments should be 

submitted by April 25, 2011. Although 

there do not appear to be any issues 

relevant to disapproval which would be 

facilitated by an oral presentation of 

views, data, and arguments, the 

Commission will consider, pursuant to 

Rule 19b–4, any request for an 

opportunity to make an oral 

presentation.20

The Commission asks that 

commenters address the merit of the 

Exchange’s statements in support of the 

proposal, in addition to any other 

comments they may wish to submit 

about the proposed rule change. 

Interested persons are invited to submit 

written data, views, and arguments 

concerning the proposed rule change, 

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/other.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–EDGX–2010–17 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–EDGX–2010–17. The file 

number should be included on the 

subject line if e-mail 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/other.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 a.m. and 3 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–EDGX– 

2010–17 and should be submitted on or 

before April 11, 2011. Rebuttal 

comments should be submitted by April 

25, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.21

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–4161 Filed 2–23–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63929; File No. SR–EDGA– 

2010–18] 

Self-Regulatory Organizations; EDGA 

Exchange, Inc.; Order Instituting 

Proceedings To Determine Whether To 

Disapprove a Proposed Rule Change 

as Modified by Amendment No. 2 to 

Amend EDGA Rules 11.9 and 11.5 

Regarding Step-up Orders 

February 18, 2011. 

I. Introduction 

On November 8, 2010, EDGA 

Exchange, Inc. (the ‘‘Exchange’’ or 

‘‘EDGA’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’), 

pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a 

proposed rule change to amend EDGA 

Rule 11.9 regarding the description of 

the Step-up order type 3 and add 

Exchange Rule 11.5(c)(7) to allow MidPoint Match orders 4 entered in response 

to Step-up orders to be processed 

pursuant to Exchange Rule 11.9. The 

proposed rule change was published for 

comment in the Federal Register on 

November 24, 2010.5 On November 23, 

2010, the Exchange submitted 

Amendment No. 1 to the proposed rule 

change. On December 14, 2010, the 

Exchange submitted Amendment No. 2 

to the proposed rule change, which was 

published for comment in the Federal 

Register on December 23, 2010.6 The 

Commission received one comment 

letter on the proposal,7 and received the 

Exchange’s response to the comment 

letter.8 This order institutes proceedings 

pursuant to Section 19(b)(2)(B) of the 

Act to determine whether to disapprove 

the proposed rule change, as modified 

by Amendment No. 2. Institution of 

disapproval proceedings, however, does 

not indicate that the Commission has 

reached any conclusions with respect to 

any of the issues involved.9

II. Description of the Proposal 

Exchange Rule 11.5(c)(11) defines a 

‘‘Step-up’’ order as a ‘‘market or limit 

order with the instruction that the 

System display the order to Users at or 

within the NBBO price pursuant to Rule 

11.9(b)(1)(C).’’ Exchange Rule 

11.9(b)(1)(C), in turn, states that Step-up 

orders shall be displayed to Users 

(hereinafter referred to as ‘‘Members’’),10


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