Document ID: SEC-2010-1237-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2010-08-16T04:00Z

[Federal Register: August 16, 2010 (Volume 75, Number 157)]
[Notices]               
[Page 50029-50030]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16au10-127]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62682; File No. SR-EDGX-2010-09]

 
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing of Proposed Rule Change Relating to a Revenue Sharing Program 
with Correlix, Inc.

August 10, 2010.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, July 28, 2010, EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. 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\ 15 U.S.C. 78a.
    \3\ 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

    EDGX proposes to establish a revenue sharing program with Correlix, 
Inc. (``Correlix''). There is no new proposed rule text.

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 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 is filing a proposed rule change to establish a 
revenue sharing program with Correlix effective upon filing with the 
Commission. Pursuant to an agreement with Correlix, Correlix will 
provide to users of the Exchange real-time analytical tools to measure 
the latency of orders to and from that System. Under the agreement, the 
Exchange will receive 30% of the total monthly subscription fees 
received by Correlix from parties who have contracted directly with 
Correlix to use their RaceTeam latency measurement service for the 
Exchange. The Exchange will not bill or contract with any Correlix 
RaceTeam customer directly.
    Pricing for the Correlix RaceTeam product for the Exchange varies 
depending on the depth of latency information requested, the number of 
unique MPIDs subscribed by the customer, and the number of ports 
available for monitoring by Correlix. For boundary-level Exchange 
latency information,\4\ the fee will be an initial $1,500 monthly base 
fee for the first 25 ports associated in aggregate with any of the 
MPIDs selected by the Member for latency monitoring. For each 
additional 25 ports associated in aggregate with any of the MPIDs 
selected by the Member for latency monitoring, an additional monthly 
charge of $750 will be assessed. For match-level Exchange latency 
information,\5\ the fee will be an initial $2,000 monthly base fee for 
the first 25 ports associated in aggregate with any of the MPIDs 
selected for latency monitoring, and an additional $1,000 per month for 
each additional 25 ports associated in aggregate with any of the MPIDs 
selected for latency monitoring.
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    \4\ The time that elapses from an order message's receipt by an 
Exchange device until the time that a matching engine 
acknowledgement with respect to such order message is transmitted 
from the Exchange device back to the user. For market data, the time 
measurement will be from the time that the market data engine 
receives a market data update until the time that the market data 
update is transmitted from the Exchange device back to the user.
    \5\ In addition to the boundary-level Exchange latency 
information, match level information will also provide further 
elapsed time detail for messaging between Exchange internal systems.
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    Under the program, Correlix will see an individualized unique 
Exchange-generated identifier that will allow Correlix RaceTeam to 
determine round trip order time,\6\ from the time the order reaches the 
Exchange extranet, through the Exchange matching engine, and back out 
of the Exchange extranet. The RaceTeam product offering does not 
measure latency outside of the Exchange extranet. The unique identifier 
serves as a technological information barrier so that the RaceTeam data 
collector will only be able to view data for Correlix RaceTeam 
subscriber firms related to latency. Correlix will not see subscriber's 
individual order detail such as security, price or size. Individual 
RaceTeam subscribers' logins will restrict access to only their own 
latency data. Correlix will see no specific information regarding the 
trading activity of non-subscribers.
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    \6\ The product measures latency of orders whether the orders 
are rejected, executed, or partially executed.
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    The Exchange believes that above arrangement will provide users of 
the Exchange greater transparency into the processing of their trading 
activity and allow them to make more efficient trading decisions.
2. Statutory Basis
    The statutory basis for the proposed rule change is Section 6(b)(5) 
of the Act,\7\ which requires the rules of an exchange to promote just 
and equitable principles of trade, to foster cooperation and 
coordination with persons engaged in regulating, clearing, settling, 
processing information with respect to, and facilitating transactions 
in securities, 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. In particular, the proposal 
will provide greater transparency into trade and information processing 
and thus allow market participants to make better-informed and more 
efficient trading decisions.
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    \7\ 15 U.S.C. 78f(b)(5).

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[[Page 50030]]

    In addition, the Exchange believes that the proposed rule change is 
consistent with the provisions of Section 6 of the Act,\8\ in general, 
and with Section 6(b)(4) of the Act,\9\ in particular, in that it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among members and issuers and other persons using any 
facility or system which the Exchange operates or controls. In 
particular, the Exchange notes that it operates in a highly competitive 
market in which market participants can readily direct orders to 
competing venues and that use of the Correlix RaceTeam product is 
completely voluntary. Further, the Exchange makes the RaceTeam product 
uniformly available pursuant to a standard non-discriminatory pricing 
schedule offered by Correlix.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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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

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period up to 90 days (i) as the 
Commission may designate if it finds such longer period to be 
appropriate and publishes its reasons for so finding or (ii) as to 
which the self-regulatory organization consents, the Commission will:
    (A) By order approve or disapprove the proposed rule change, or
    (B) Institute proceedings to determine whether the proposed rule 
change should be disapproved.

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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-EDGX-2010-09 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-2010-09. 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,\10\ 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-
EDGX-2010-09 and should be submitted on or before September 7, 2010.
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    \10\ The text of the proposed rule change is available on 
Exchange's Web site at http://www.directedge.com, on the 
Commission's Web site at http://www.sec.gov, at EDGX, and at the 
Commission's Public Reference Room.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-20104 Filed 8-13-10; 8:45 am]
BILLING CODE 8010-01-P