Document ID: SEC-2011-1124-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGA Exchange, Inc.
Posted Date: 2011-08-04T04:00Z

[Federal Register Volume 76, Number 150 (Thursday, August 4, 2011)]
[Notices]
[Pages 47283-47285]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-19740]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64989; File No. SR-EDGA-2011-23]

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

July 29, 2011.
    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 July 27, 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.
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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

1. Purpose
    With respect to the category of securities priced at or above 
$1.00, when Members add liquidity, they are currently assessed a charge 
of $0.00025 per share. Alternatively, when Members remove liquidity, 
they are currently rebated in the amount of $0.00015 per share. The 
Exchange proposes to amend the fee structure (and related Flags) set 
forth in the fee schedule to instead provide a rebate for Members in 
the amount of $0.0005 per share when adding liquidity and assess a 
$0.0006 per share charge when removing liquidity.
    The Exchange proposes to make conforming changes to the relevant 
flags, as described below, for adding and removing liquidity from the 
EDGA book. Specifically, the Exchange proposes to: (a) Discontinue the 
$0.00025 per share charge for adding liquidity to EDGA book in Tape B 
securities (Flag B) and instead offer a rebate of $0.0005 per share; 
(b) discontinue the rebate of $0.00015 per share for removing liquidity 
from the EDGA book in Tapes B and C securities (Flag N) and instead 
assess a $0.0006 per share charge; (c) discontinue the $0.00025 per 
share charge for adding liquidity to the EDGA book in Tape A securities 
(Flag V) and instead offer a rebate of $0.0005 per share; (d) 
discontinue the rebate of $0.00015 per share for removing liquidity 
from the EDGA book in Tape A securities (Flag W) and instead assess a 
$0.0006 per share charge; (e) discontinue the $0.00025 per share charge 
for adding liquidity to the EDGA book in Tape C securities (Flag Y) and 
instead offer a rebate of $0.0005 per share; (f) discontinue the 
$0.00025 per share charge for adding liquidity in the pre- and post-
market trading sessions in Tapes A and C securities (Flag 3) and 
instead offer a rebate of $0.0005 per share; (g) discontinue the 
$0.00025 per share charge for adding liquidity in the pre- and post-
market trading sessions in Tape B securities (Flag 4) and instead offer 
a rebate of $0.0005 per share; and (h) discontinue the rebate of 
$0.00015 per share for removing liquidity in the pre- and post-market 
trading sessions in securities on all Tapes (Flag 6) and instead assess 
a $0.0006 per share charge.
    The Exchange also proposes to delete, in its entirety, footnote 12, 
which describes a tiered rate ($0.00005 per share) if Members, measured 
monthly, post 0.9% of the Total Consolidated Volume (``TCV'') in 
average daily volume to EDGA. As a result of the deletion of footnote 
12, current footnotes 13-14 have been re-numbered as footnotes 12-13.
    Currently, the BY flag is yielded when an order is routed to BATS 
BYX Exchange and removes liquidity using order types ROUC, ROBY, ROBB, 
or ROCO, as defined in Exchange Rules 11.9(b)(3)(a), (c), and (g). The 
Exchange proposes to decrease the rebate from $0.0004 to $0.0002 when 
an order is routed to BATS BYX Exchange and removes liquidity.
    The Exchange also proposes to eliminate the text in footnote 7, 
which describes the INET tier, and replace it with the words 
``intentionally omitted.'' This tier provides that ``Members routing an 
average daily volume (``ADV''): (i) Less than 5,000,000 shares will be 
charged $0.0030 per share, as described in the schedule; (ii) equal to 
or greater than 5,000,000 shares but less than 20,000,000 shares will 
be charged Nasdaq's best removal tier rate per share; (iii) equal to or 
greater than 20,000,000 shares but less than 30,000,001 shares will be 
charged Nasdaq's best removal tier rate--$0.0001 per share; and (iv) 
equal to or greater than 30,000,001 shares will be charged Nasdaq's 
best removal tier rate--$0.0002 per share. The rates, in all cases, are 
calculated for shares removed from Nasdaq.'' Conforming changes have 
been made to eliminate the references to footnotes 7 and a on Flags 2 
and L, as they are no longer applicable.
    The Exchange proposes to implement these amendments to its fee 
schedule on August 1, 2011.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Exchange Act,\4\ in general, 
and furthers

[[Page 47284]]

the objectives of Section 6(b)(4),\5\ 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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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4).
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    The Exchange's proposal to provide a rebate of $0.0005 per share 
for adding liquidity and assess a charge of $0.0006 per share for 
removing liquidity is designed to allow the Exchange to compete with 
other market centers, and at the same time preserve its current spread 
of $0.0001 per share. Because the Exchange's spread remains at $0.0001 
per share under the proposed rate, the Exchange believes the proposed 
maker/taker fee spread to be reasonable. The proposed maker/taker 
spread is competitive with other market centers maker/taker spreads 
(BATS BZX Exchange, $0.0001 per share), Nasdaq ($.001--($.00045) per 
share), and NYSE Arca ($0.0009--($0.0002) per share). The Exchange 
believes that the proposed rate is non-discriminatory in that it 
applies uniformly to all Members.
    Currently, the Exchange has a taker/maker fee structure whereby the 
Exchange assesses a fee of $0.00025 per share to add liquidity and 
provides a rebate of $0.00015 per share to remove liquidity. By 
changing its fee structure to the proposed maker/taker model, the 
Exchange will make it less expensive for Members to post liquidity to 
EDGA. As a result, EDGA expects to gain market share and see its order 
volume increase. 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 a rebate. The 
increased liquidity also benefits all investors by deepening EDGA's 
liquidity pool, supporting the quality of price discovery, promoting 
market transparency and improving investor protection.
    The elimination of the tier described in footnote 12 (posting 0.9% 
of the TCV in average daily volume to EDGA) results from discussions 
with the Exchange's customers whereby the Exchange has concluded that 
the tier is not effective at incenting liquidity.
    The Exchange believes that the proposed decrease in rebate 
associated with the BY flag (from $0.0004 per share to $0.0002 per 
share) represents an equitable allocation of reasonable dues, fees, and 
other charges since it reflects a pass through of the BATS fee for 
removing liquidity. EDGA believes that it is reasonable and equitable 
to pass on these fees to its members. The Exchange believes that the 
proposed decrease in rebate is non-discriminatory in that it applies 
uniformly to all Members.
    The Exchange believes that the proposed elimination of the INET 
tier in footnote 7 represents an equitable allocation of reasonable 
dues, fees, and other charges as the INET tier is not used by any 
Members and therefore, its elimination will not impact any Members. The 
proposed elimination of the tier also provides more simplicity to the 
fee schedule.
    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 \6\ and Rule 19b-4(f)(2) \7\ 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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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-EDGA-2011-23 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-2011-23. 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-EDGA-2011-23 and should be 
submitted on or before August 25, 2011.

[[Page 47285]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-19740 Filed 8-3-11; 8:45 am]
BILLING CODE 8011-01-P