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[Federal Register Volume 77, Number 11 (Wednesday, January 18, 2012)]
[Notices]
[Pages 2581-2583]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-770]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66130; File No. SR-EDGA-2011-42]

 Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Amendments to the EDGA Exchange, Inc. Fee Schedule

January 11, 2012.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\

[[Page 2582]]

notice is hereby given that on December 30, 2011, the EDGA Exchange, 
Inc. (the ``Exchange'' or the ``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 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 EDGA Rule 15.1(a) and (c). All 
of the changes described herein are applicable to EDGA Members. The 
text of the proposed rule change is available on the Exchange's 
Internet Web site at http://www.directedge.com, at the Exchange's 
principal office, and at the Public Reference Room of the Commission.
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    \3\ A Member is any registered broker or dealer, or any person 
associated with a registered broker or dealer, that has been 
admitted to membership in the Exchange.
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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 
Statutory Basis for, the Proposed Rule Change

Purpose
    Footnote 4 of the EDGA fee schedule currently provides that: If a 
Member, on a daily basis, measured monthly, posts more than 1% of the 
Total Consolidated Volume (``TCV'') in average daily volume, then the 
Member will receive a rebate of $0.0005 per share. TCV is defined as 
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 prior to the month in which the fees are 
calculated.
    If a Member, on a daily basis, measured monthly, posts more than 
.25% of the TCV and removes more than .25% of TCV in average daily 
volume, then the Member will receive a rebate of $0.0005 per share.
    The Exchange proposes to amend the description in footnote 4 of its 
fee schedule to state that all non-displayed orders (H Flag executions) 
count toward added/posting liquidity in both paragraphs of footnote 4. 
The Exchange also proposes to append footnote 4 to the H Flag on its 
fee schedule in connection with this. Similar to the way that the H 
Flag counts toward adding/posting liquidity tiers on the EDGX Exchange, 
Inc. (``EDGX''),\4\ the H Flag is another flag that can also add 
liquidity on EDGA. Currently, the flags that add liquidity on EDGA and 
count toward the tiers identified in footnote 4 are B, V, Y, 3, and 4.
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    \4\ See, e.g., Securities Exchange Act Release No. 65541 
(October 12, 2011), 76 FR 64409 (October 18, 2011) (SR-EDGX-2011-
31).
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    Furthermore, the Exchange also proposes to amend the description in 
footnote 4 of its fee schedule to state that a Member has to post 
liquidity to EDGA in order to satisfy the tiers delineated in footnote 
4. To do so, the Exchange proposes to insert the words ``to EDGA'' 
after the phrases ``posts more than 1% of the TCV'' and ``posts more 
than .25% of the TCV'' in footnote 4.
    The Exchange proposes to delete footnote 13 from its fee schedule, 
as no Members have qualified for this tier. Footnote 13 states that for 
Members that route an average daily volume (ADV) more than 30,000,000 
shares per day to NYSE using the RDOT or RDOX routing strategy, then 
their removal rate decreases to $0.0022 per share.
    The Exchange also proposes to amend its fee schedule to add 
footnote b to it to specify that trading activity on days when the 
market closes early \5\ does not count toward any volume tiers, which 
are currently found in footnotes 1, 2, 4, 6, 13.
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    \5\ In 2012, these days include July 3, 2012, November 23, 2012, 
and December 24, 2012.
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    The Exchange proposes to implement these amendments to its fee 
schedule on January 1, 2012.
Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\6\ in general, and 
furthers the objectives of Section 6(b)(4),\7\ 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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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that amending the H Flag's application toward 
the tiers outlined in footnote 4 on the Exchange's fee schedule is an 
equitable allocation of reasonable dues, fees, and other charges. The H 
Flag is another flag that can also add liquidity on EDGA and counts 
towards the tiers identified in footnote 4. The Exchange believes that 
providing discounts for adding liquidity to the Exchange would incent 
liquidity. In addition, such increased volume increases potential 
revenue to the Exchange, and would allow the Exchange to spread its 
administrative and infrastructure costs over a greater number of 
shares, leading to lower per share costs. These lower per share costs 
would allow the Exchange to pass on the savings to Members in the form 
of a higher rebate. The increased liquidity also benefits all investors 
by deepening EDGA'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. In addition, by making this amendment, the Exchange adds 
additional transparency to its fee schedule for Members.
    The deletion of the tier in footnote 13 to the fee schedule is an 
equitable allocation of reasonable dues, fees, and other charges, as no 
Members have qualified for this tier and the Exchange generates 
administrative costs by maintaining it. In addition, by deleting this 
tier, the Exchange adds additional clarity to its fee schedule for 
Members. The Exchange believes that the proposed amendment is 
nondiscriminatory in that it applies uniformly to all Members.
    The Exchange also proposes to amend its schedule by adding footnote 
b to specify that trading activity on days when the market closes early 
does not count toward volume tiers (footnotes 1, 2, 4, 6, 13). Since 
the Exchange is only open until 1 p.m. Eastern Time (``ET'') on these 
days (e.g., the day after Thanksgiving),\8\ the Exchange believes that 
counting volume on these days towards the tiers would not be 
illustrative of typical market activity or liquidity provision, since 
the trading day is shortened. Therefore, the Exchange proposes to 
exclude such shortened trading days from any volume tier calculations, 
as presently found in footnotes numbers 1, 2, 4, 6, and 13. The 
Exchange believes that the proposed amendment is non-discriminatory in

[[Page 2583]]

that it applies uniformly to all Members and would more accurately 
represent their trading volume. In addition, the proposed amendment is 
in accordance with the practices employed by other Exchanges.\9\
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    \8\ In 2012, these days include July 3, 2012, November 23, 2012, 
and December 24, 2012.
    \9\ See fee schedules of Nasdaq and NYSE Arca found at: http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2; and https://usequities.nyx.com/sites/usequities.nyx.com/files/nyse_arca_marketplace_fees_12_1_2011.pdf
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    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.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.

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) of the Act \10\ and Rule 19b-4(f)(2) \11\ 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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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 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-EDGA-2011-42 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-EDGA-2011-42. 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 
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-EDGA-2011-42 and 
should be submitted on or before February 8, 2012.
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    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-770 Filed 1-17-12; 8:45 am]
BILLING CODE 8011-01-P
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