Document ID: SEC-2013-1783-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2013-10-22T04:00Z

[Federal Register Volume 78, Number 204 (Tuesday, October 22, 2013)]
[Notices]
[Pages 62778-62780]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-24661]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70669; File No. SR-EDGX-2013-38]

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

October 11, 2013.
    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 October 2, 2013, EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule

[[Page 62779]]

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 EDGX Rule 15.1(a) and (c) 
(``Fee Schedule'') to add orders yielding Flag AA to the calculation of 
the average daily trading (``ADV'') threshold required to meet the 
MidPoint Match Volume Tier. The text of the proposed rule change is 
available on the Exchange's Internet Web site at www.directedge.com, at 
the Exchange's principal office, and at the Public Reference Room of 
the Commission.
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    \3\ 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).
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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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule to add orders 
yielding Flag AA to the calculation of the ADV threshold required to 
meet the MidPoint Match Volume Tier. Footnote 3 of the Fee Schedule 
currently provides that Members may qualify for the MidPoint Match 
Volume Tier and not be charged a fee for orders that yield Flag MM on 
EDGX if they add and/or remove an ADV of at least 2,500,000 shares on a 
daily basis, measured monthly, on EDGX, yielding flags MM (adds 
liquidity to MidPoint Match using the Midpoint Match order type \4\) 
and/or MT (removes liquidity from MidPoint Match using MidPoint Match 
order type). The Exchange proposes to add orders yielding Flag AA 
(MidPoint Match Cross (same MPID)) to the calculation of the ADV 
threshold required to meet the MidPoint Match Volume Tier. The Exchange 
appends Flag AA to buy and sell MidPoint Match Orders that 
inadvertently match against each other and share the same MPID (Member 
shares both sides of the trade). MidPoint Match Orders yielding Flag AA 
would continue to be charged a rate of $0.0012 per share. The remainder 
of the criteria required to meet the tier as well as the rate offered 
by the tier would remain unchanged.
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    \4\ As defined in Exchange Rule 11.5(c)(7), the Midpoint Match 
Order is an order with an instruction to execute it at the midpoint 
of the NBBO.
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    The Exchange proposes to implement these amendments to its Fee 
Schedule on October 2, 2013.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\5\ in general, and 
furthers the objectives of Section 6(b)(4),\6\ 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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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that adding orders yielding Flag AA to the 
calculation of the ADV threshold required to meet the MidPoint Match 
Volume Tier represents an equitable allocation of reasonable dues, 
fees, and other charges because adding orders yielding Flag AA, like 
Flags MM and MT, are designed to encourage Members to add liquidity at 
the midpoint of the national best bid or offer (``NBBO'') to the EDGX 
Book \7\ each month. The Exchange appends Flag AA to buy and sell 
MidPoint Match Orders that inadvertently match against each other and 
share the same MPID (Member shares both sides of the trade). MidPoint 
Match Orders yielding Flag AA would continue to be charged a rate of 
$0.0012 per share and only the liquidity added at the midpoint of the 
NBBO (Flag MM) in this tier is not charged a fee. Both added and 
removed liquidity in Flags AA, MM and MT would be counted towards 
achieving the tier's ADV threshold. The Exchange believes that Members 
utilizing MidPoint Match Orders that add liquidity at the midpoint of 
the NBBO may receive the benefit of price improvement, and including 
orders that yield Flag AA to the calculation of the ADV threshold of 
the MidPoint Match Volume Tier would be a reasonable means by which to 
further encourage the use of such orders. In addition, the Exchange 
believes that by encouraging the use of MidPoint Match Orders, Members 
seeking price improvement would be more motivated to direct their 
orders to EDGX because they would have a heightened expectation of the 
availability of liquidity at the midpoint of the NBBO. In addition, the 
Exchange also believes that the proposed amendment to the MidPoint 
Match Volume Tier is non-discriminatory because it applies uniformly to 
all Members.
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    \7\ The ``EDGX Book'' is defined as ``the System's electronic 
file of orders.'' See Exchange Rule 1.5(d).
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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 EDGX'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 Flag AA to the 
calculation of the ADV threshold required to meet the MidPoint Match 
Volume Tier would increase intermarket competition because it would 
lead to more competition for orders that seek liquidity at the midpoint 
of the NBBO. The Exchange believes that its proposal would neither 
increase nor decrease intramarket competition because the MidPoint 
Match Volume Tier would continue to 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.

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

[[Page 62780]]

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 \8\ and Rule 19b-4(f)(2) \9\ 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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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 240.19b-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 rule-comments@sec.gov. Please include 
File Number SR-EDGX-2013-38 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-2013-38. 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-EDGX-2013-38 and should be 
submitted on or before November 12, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-24661 Filed 10-21-13; 8:45 am]
BILLING CODE 8011-01-P