Document ID: SEC-2010-1169-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2010-08-04T04:00Z

[Federal Register: August 4, 2010 (Volume 75, Number 149)]
[Notices]               
[Page 47040-47041]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr04au10-98]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62587; File No. SR-EDGX-2010-08]

 
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
EDGX Rule 11.12

July 29, 2010.
    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 22, 2010, the EDGX Exchange, Inc. (the ``Exchange'' or the 
``EDGX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend EDGX Rule 11.12 to modify potential 
liability caps applicable under the rule. The text of the proposed rule 
change is available on the Exchange's Internet Web site at http://
www.directedge.com, at the principal office of the Exchange, on the 
Commission's Internet Web site at http://www.sec.gov, and at 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 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
    Currently, the Exchange provides a limited exception to its general 
limitation of liability rules that allows for the payment of claims to 
Users \3\ for order processing failures on the Exchange. The Exchange 
proposes to modify its process for allocating such payments and extend 
the time period for Users to submit such claims. Under the proposal, 
the Exchange will eliminate the $100,000 and $250,000 daily caps on 
liability and consider all such claims on a monthly basis subject to 
the already existing $500,000 monthly liability cap. If the total 
amount of all claims from all Users in calendar month exceeds the 
$500,000 monthly liability cap, the $500,000 maximum monthly dollar 
amount will be proportionally allocated among all such claims as set 
forth in the current rule.
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    \3\ Exchange Rule 1.5(cc) defines ``User'' as ``any Member or 
Sponsored Participant who is authorized to obtain access to the 
System pursuant to Rule 11.3.''
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    The Exchange is also proposing to extend, until 12 noon ET on the 
next business day following the day on which the use of the Exchange 
gives rise to the claim, the time period during which claims seeking 
compensation must be submitted.
    The proposal, in effect, would allow the Exchange an increased 
capability to compensate a market participant(s) up to the monthly cap 
of $500,000 even though the losses occurred on a single day or were 
across multiple days for a single participant. The expansion of time to 
make such compensation claims likewise increases the ability of market 
participants to submit claims in a timely manner. Finally, the Exchange 
notes that other market centers have rules in place to provide limited 
compensation for system malfunctions.\4\
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    \4\ See Securities Exchange Act Release No. 60794 (October 6, 
2009), 74 FR 52522 (October 13, 2009) (SR-NASDAQ-2009-084) (relating 
to amendments to NASDAQ Rule 4626); NYSE Arca Equities Rule 13.2; 
and International Securities Exchange Rule 705.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the provisions of Section 6 of the Act,\5\ in general, and Section 
6(b)(5) of the Act,\6\ in particular, in that the proposal is designed 
to prevent fraudulent and manipulative acts and practices, 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. The proposal, in effect, 
would allow the Exchange an increased capability to compensate a market 
participant(s) up to the monthly cap of $500,000 even though the losses 
occurred on a single day or were across multiple days for a single 
participant. The expansion of time to make such compensation claims 
likewise increases the ability of market participants to submit claims 
in a timely manner.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(5).
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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

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \7\ and Rule 19b-4(f)(6) thereunder.\8\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A)

[[Page 47041]]

of the Act and Rule 19b-4(f)(6)(iii) thereunder.
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    \7\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \8\ 17 CFR 240.19b-4(f)(6).
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    At any time within the 60-day period beginning on the date 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-EDGX-2010-08 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-2010-08. 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 such 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 publicly available. All 
submissions should refer to File Number SR-EDGX-2010-08 and should be 
submitted on or before August 25, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19215 Filed 8-3-10; 8:45 am]
BILLING CODE 8010-01-P