Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Notices 73925 

4 15 U.S.C. 78s(b)(2)(C). 

5 15 U.S.C. 78q–1(b)(3)(F). 

6 15 U.S.C. 78q–1. 

7 15 U.S.C. 78q–1. 

8 15 U.S.C. 78s(b)(2). 

9 In approving the proposed rule change, the 

Commission considered the proposal’s impact on 

efficiency, competition and capital formation. 15 

U.S.C. 78c(f). 

10 17 CFR 200.30–3(a)(12). 

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). 

5The 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). 

process. This revision does not require 

any changes to the ICC Clearing Rules. 

According to ICC, it utilizes a ‘‘cross 

and lock’’ algorithm as part of its price 

discovery process. As described by ICC, 

under this algorithm, bids and offers 

derived from Clearing Participant 

(‘‘CP’’) submissions are matched by 

sorting them from highest to lowest and 

lowest to highest levels, respectively. 

This sorting process pairs the CP 

submitting the highest bid price with 

the CP submitting the lowest offer price, 

the CP submitting the second highest 

bid price with the CP submitting the 

second-lowest offer price, and so on. 

The algorithm then identifies crossed 

and/or locked markets. Crossed markets 

are the Clearing Participant pairs 

generated by the sorting and ranking 

process for which the bid price of one 

Clearing Participant is above the offer 

price of the matched Clearing 

Participant. The algorithm identifies 

locked markets, where the bid and the 

offer are equal, in a similar fashion. The 

mid-point of the first non-crossed, nonlocked matched market is, as stated by 

ICC, the final end-of-day level (with 

additional steps taken to remove offmarket submissions from influencing 

the final level). According to ICC, this 

process captures the market dynamics of 

trading; however, final pricing levels are 

ultimately determined by a single bid 

and a single offer, which results in the 

ability for one submission to influence 

the outcome. 

ICC proposes enhancements to its 

methodology to improve the consistency 

of prices and reduce the sensitivity of 

the final level to a single Clearing 

Participant’s submission. ICC states that 

under the new ‘‘cross and lock’’ 

methodology, the average of the midpoints of all non-crossed, non-locked 

matched markets that are less than or 

equal to one bid-offer width is used as 

the final level (with additional steps 

taken to remove off-market submissions 

from influencing the final level). ICC 

states that, as a result, prices are less 

sensitive to outlying submissions. ICC 

also proposes additional language in the 

ICC End-of-Day Price Discovery Policies 

and Procedures to clarify existing 

policies and practices, including, but 

not limited to, language to clarify the 

existing pricing methodology’s 

treatment of identical crossed or locked 

matched market bids or offers. 

III. Discussion and Commission 

Findings 

Section 19(b)(2)(C) of the Act 4 directs 

the Commission to approve a proposed 

rule change of a self-regulatory 

organization if the Commission finds 

that such proposed rule change is 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to such selfregulatory organization. Section 

17A(b)(3)(F) of the Act 5 requires, among 

other things, that the rules of a clearing 

agency are designed to promote the 

prompt and accurate clearance and 

settlement of securities transactions 

and, to the extent applicable, derivative 

agreements, contracts, and transactions, 

to assure the safeguarding of securities 

and funds which are in the custody or 

control of the clearing agency or for 

which it is responsible and, in general, 

to protect investors and the public 

interest. 

The Commission finds that the 

proposed rule change is consistent with 

Section 17A of the Act 6 and the rules 

thereunder applicable to ICC. The 

revised ICC End-of-Day Price Discovery 

Policies and Procedures will reduce the 

sensitivity of the final price level to a 

single Clearing Participant’s submission, 

resulting in more consistent day-overday end-of-day levels. The proposed 

rule change is therefore reasonably 

expected to provide a pricing 

methodology to more accurately reflect 

the market level. As such, the 

Commission believes that the changes 

will promote the prompt and accurate 

settlement of securities and derivatives 

transactions, and therefore are 

consistent with the requirements of the 

Act and the rules and regulations 

thereunder applicable to ICC, in 

particular, Section 17(A)(b)(3)(F). 

IV. Conclusion 

On the basis of the foregoing, the 

Commission finds that the proposal is 

consistent with the requirements of the 

Act and in particular with the 

requirements of Section 17A of the Act 7

and the rules and regulations 

thereunder. 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,8 that the 

proposed rule change (File No. SR–ICC– 

2014–17) be, and hereby is, approved.9

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–29181 Filed 12–11–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73781; File No. SR–EDGA– 

2014–31] 

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. 

December 8, 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 November 

25, 2014, 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 Act3 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. 

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 of the Exchange pursuant to 

EDGA Rules 15.1(a) and (c) (‘‘Fee 

Schedule’’). Changes to the fee schedule 

pursuant to this proposal are effective 

upon filing. 

The text of the proposed rule change 

is available at the Exchange’s Web site 

at http://www.directedge.com, at the 

principal office of the Exchange, and at 

mstockstill on DSK4VPTVN1PROD with NOTICES

73926 Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Notices 

6ADV is defined in the Exchange’s Fee Schedule 

‘‘as the average daily volume of shares that a 

Member executed on, or routed by, the Exchange for 

the month in which the fees are calculated. ADV 

is calculated on a monthly basis, excluding shares 

on any day that the Exchange’s system experiences 

a disruption that lasts for more than 60 minutes 

during Regular Trading Hours (‘Exchange System 

Disruption’), on any day with a scheduled early 

market close and on the last Friday in June (the 

‘Russell Reconstitution Day’).’’ 

7 15 U.S.C. 78f. 

8 15 U.S.C. 78f(b)(4). 

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 amend its 

Fee Schedule to amend the first two 

bullets regarding added and removal 

flags under the General Notes section to 

include Flags EA, ER, and 5, which 

include in [sic] internalized volume. 

The General Notes section of the Fee 

Schedule includes two bullets that 

contain the list of applicable ‘‘added 

flags’’ and ‘‘removal flags’’ that may be 

considered when calculating whether a 

Member satisfied a certain pricing tier. 

The Exchange appends Flags EA, ER, 

and 5 to orders that inadvertently match 

against each other and share the same 

MPID (Member shares both sides of the 

trade). The Exchange proposes to amend 

the first bullet regarding added flags to 

include Flag EA, which covers 

internalized trades that add liquidity. 

The Exchange also proposes to amend 

the second bullet regarding removal 

flags to include Flag ER, which covers 

internalized trades that remove 

liquidity. The Exchange believes that 

Members orders that yield Flags EA, ER, 

or 5 should be included in the 

calculation of the Average Daily 

Volume 6 (‘‘ADV’’) threshold as added 

or removal flags for purposes of 

determining whether a tier’s criteria has 

been met. 

Lastly, the Exchange proposes to 

amend both the first and second bullets 

to include Flag 5, which covers 

internalized trades that add or remove 

liquidity during the pre and post market 

sessions. The Exchange also proposes to 

add Footnote 13 to state that a Member’s 

monthly volume attributed to Flag 5 

will be divided evenly between the 

added flags and removal flags when 

determining whether that Member 

satisfied a certain tier. The Exchange 

proposes to divide a Member’s Flag 5 

volume as such because the Exchange’s 

systems cannot currently delineate 

orders yielding Flag 5 that added from 

those that removed liquidity for 

purposes of determining whether a 

Member satisfies a certain tier. 

Implementation Date 

The Exchange proposes to implement 

these amendments to its Fee Schedule 

on December 1, 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. 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. 

The Exchange believes that its 

proposal to amend two bullets under the 

General Notes section of the Fee 

Schedule that contain the list of 

applicable ‘‘added flags’’ and ‘‘removal 

flags’’ are [sic] represents an equitable 

allocation of reasonable dues, fees, and 

other charges among Members and other 

persons using its facilities. The 

Exchange appends Flag EA, ER, and 5 

to buy and sell orders that inadvertently 

match against each other and share the 

same MPID (Member shares both sides 

of the trade). The Exchange also believes 

proposed Footnote 13 stating that a 

Member’s monthly volume attributed to 

Flag 5 will be divided evenly between 

the added flags and removal flags when 

determining whether that Member 

satisfied a certain tier represents an 

equitable allocation of reasonable dues, 

fees, and other charges. The Exchange 

proposes to divide a Member’s Flag 5 

volume as such because Flag 5 includes 

both added and removed liquidity 

because the Exchange’s systems cannot 

currently delineate orders yielding Flag 

5 that added from those that removed 

liquidity purposes of determining 

whether a Member satisfies a certain 

tier. The Exchange believes that 

Members orders that yield Flags EA, ER, 

or 5 should be included in the 

calculation of the ADV threshold as 

added or removal flags for purposes of 

determining whether a tier’s criteria has 

been met. Including such Flags would 

be a reasonable means to encourage 

Members to direct their orders to the 

Exchange because they would have 

certainty that certain orders will not be 

excluded from their ADV calculations 

because it inadvertently matched 

against an order sharing the same MPID. 

Lastly, the Exchange also believes that 

the proposed amendment is nondiscriminatory because it applies 

uniformly to all Members. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

These proposed rule changes do 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 any 

of these changes represent a significant 

departure from previous pricing offered 

by the Exchange or pricing offered by 

the Exchange’s competitors. 

Additionally, Members may opt to 

disfavor EDGA’s pricing if they believe 

that alternatives offer them better value. 

Accordingly, the Exchange does not 

believe that the proposed changes will 

impair the ability of Members or 

competing venues to maintain their 

competitive standing in the financial 

markets. 

The Exchange believes that adding 

orders yielding Flags EA, ER, and 5 to 

the ‘‘added flags’’ and ‘‘removal flags’’ 

would increase intermarket competition 

because it would encourage Members to 

direct their orders to the Exchange 

because they would have certainty that 

their orders will not be excluded from 

their ADV calculations because it 

inadvertently matched against an order 

sharing the same MPID. The Exchange 

believes that its proposal would neither 

increase nor decrease intramarket 

competition because the added and 

removal flags would continue to apply 

mstockstill on DSK4VPTVN1PROD with NOTICES

Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Notices 73927 

9 15 U.S.C. 78s(b)(3)(A). 

10 17 CFR 240.19b–4(f). 

11 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

uniformly to all Members and the ability 

of some Members to meet the tiers 

would only benefit other Members by 

contributing to increased liquidity and 

improve market quality at the Exchange. 

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 9 and paragraph (f) of Rule 

19b–4 thereunder.10 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. 

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 rule-comments@

sec.gov. Please include File Number SR– 

EDGA–2014–31 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–2014–31. 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–EDGA– 

2014–31, and should be submitted on or 

before January 2, 2015. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.11

Kevin M. O’Neill, 

Deputy Secretary. 

[FR Doc. 2014–29107 Filed 12–11–14; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–73787; File No. SR–FICC– 

2014–06] 

Self-Regulatory Organizations; Fixed 

Income Clearing Corporation; Notice of 

Filing of Proposed Rule Change To 

Amend the Rules of the Government 

Securities Division and the MortgageBacked Securities Division on 

Insolvency and Ceasing To Act 

December 8, 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 November 

25, 2014, Fixed Income Clearing 

Corporation (‘‘FICC’’) 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 clearing agency. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Clearing Agency’s Statement of the 

Terms of Substance of the Proposed 

Rule Change 

The proposed rule change consists of 

amendments to the rules of the 

Government Securities Division (‘‘GSD 

Rules’’) of FICC and the rules of the 

Mortgage-Backed Securities Division 

(‘‘MBSD Rules’’) of FICC (each of GSD 

and MBSD, a ‘‘Division’’ of FICC) on 

insolvency and ceasing to act that 

simplify in certain respects FICC’s 

process in a cease to act situation and 

provide greater legal certainty for FICC 

and its members, particularly in an 

intra-day cease to act situation. 

II. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

In its filing with the Commission, 

FICC 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. FICC has prepared 

summaries, set forth in sections A, B 

and C below, of the most significant 

aspects of such statements. 

A. Clearing Agency’s Statement of the 

Purpose of, and Statutory Basis for, the 

Proposed Rule Change 

1. Purpose 

The purpose of this filing is to amend 

the GSD Rules and the MBSD Rules on 

insolvency and ceasing to act in order 

to simplify in certain respects FICC’s 

process in a cease to act situation and 

provide greater legal certainty for FICC 

and its members, particularly in an 

intra-day cease to act situation. 

Background 

In connection with lessons learned 

from a recent close-out simulation 

exercise conducted by The Depository 

Trust & Clearing Corporation, FICC’s 

parent company, in which FICC 

participated, and related review of the 

GSD Rules and the MBSD Rules, certain 

potential challenges with administering 

certain aspects of the GSD Rules and the 

MBSD Rules on insolvency and ceasing 

to act described below, particularly in 

an intra-day cease to act situation, were 

identified. 

‘‘Time of Insolvency’’ and ‘‘Cut-Off 

Time’’ 

Currently, GSD and MBSD include in 

their insolvency rules (GSD Rule 22, 

MBSD Rule 16) and cease to act rules 

(GSD Rule 22A, MBSD Rule 17) the 

mstockstill on DSK4VPTVN1PROD with NOTICES