Document ID: SEC-2013-0983-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGA Exchange, Inc.
Posted Date: 2013-05-28T04:00Z

[Federal Register Volume 78, Number 102 (Tuesday, May 28, 2013)]
[Notices]
[Pages 31996-31997]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12532]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69613; File No. SR-EDGA-2013-13]

Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of 
Filing of Proposed Rule Change Relating to the EDGA Exchange, Inc.'s 
Routing Broker Dealer, as Described in EDGA Rule 2.12(b)

May 21, 2013.
    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, on May 16, 2013, EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') filed with the Securities and Exchange Commission (the 
``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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to make permanent the existing pilot program 
that permits the Exchange's inbound router, as described in Rule 
2.12(b), to receive inbound routes of equities orders through Direct 
Edge ECN LLC d/b/a DE Route (``DE Route''), the Exchange's routing 
broker dealer, from EDGX Exchange, Inc. (``EDGX''). 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 www.directedge.com, at the Exchange's principal office, and at the 
Public Reference Room of the Commission.

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
    Currently, DE Route is the approved outbound order routing facility 
of EDGX.\4\ The Exchange has been authorized to receive inbound routes 
of equities orders by DE Route from EDGX. The Exchange's authority to 
receive inbound routes of equities orders by DE Route from EDGX is 
currently subject to a pilot period of twelve months, ending June 30, 
2013.\5\ The Exchange hereby seeks permanent approval to permit the 
Exchange to accept inbound orders that DE Route routes in its capacity 
as a facility of EDGX. This is reflected in the proposed amendment to 
EDGA Rule 2.12(b).
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 61698 (March 12, 
2010), 75 FR 13151 (March 18, 2010).
    \5\ See Securities Exchange Act Release No. 66643 (March 22, 
2012), 77 FR 18876 (March 28, 2012) (SR-EDGA-2012-10).
---------------------------------------------------------------------------

    Under the pilot, the Exchange is committed to the following 
obligations and conditions:
     The Exchange shall: (a) Enter into a plan pursuant to Rule 
17d-2 under the Exchange Act with a non-affiliated self-regulatory 
organization (``SRO'') to relieve the Exchange of regulatory 
responsibilities for DE Route with respect to rules that are common 
rules between the Exchange and the SRO, and (b) enter into a regulatory 
services contract (``Regulatory Contract'') with a non-affiliated SRO 
to perform regulatory responsibilities for DE Route for unique Exchange 
rules.
     The regulatory services contract shall require the 
Exchange to provide the non-affiliated SRO with information, in an 
easily accessible manner, regarding all exception reports, alerts, 
complaints, trading errors, cancellations, investigations, and 
enforcement matters (collectively ``Exceptions'') in which DE Route is 
identified as a participant that has potentially violated Exchange or 
SEC Rules, and shall require that the non-affiliated SRO provide a 
report, at least quarterly, to the Exchange quantifying all Exceptions 
in which DE Route is identified as a participant that has potentially 
violated Exchange or SEC rules.
     The Exchange, on behalf of Direct Edge Holdings LLC, shall 
establish and maintain procedures and internal controls reasonably 
designed to ensure that DE Route does not develop or implement changes 
to its system on the basis of non-public information obtained as a 
result of its affiliation with

[[Page 31997]]

the Exchange until such information is available generally to similarly 
situated Members \6\ in connection with the provision of inbound order 
routing to the Exchange.
---------------------------------------------------------------------------

    \6\ As defined in EDGA Rule 1.5(n).
---------------------------------------------------------------------------

    The Exchange has complied with the above-listed conditions during 
the pilot. In meeting them, the Exchange has set up mechanisms that 
protect the independence of the Exchange's regulatory responsibility 
with respect to DE Route, as well as demonstrate that DE Route cannot 
use any information that it may have because of its affiliation with 
the Exchange to its advantage. Since the Exchange has met all the 
above-listed obligations and conditions, it now seeks permanent 
approval of the Exchange and DE Route's inbound routing relationship. 
Upon approval of the proposed rule change, the Exchange will continue 
to comply with the obligations and conditions as set forth in proposed 
EDGA Rule 2.12.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder that 
are applicable to a national securities exchange, and, in particular, 
with the requirements of Section 6(b) of the Act.\7\ Specifically, the 
proposal is consistent with Section 6(b)(5) of the Act,\8\ because it 
would promote just and equitable principles of trade, remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, the proposed rule change will allow the Exchange to 
continue receiving inbound routes of equities orders from DE Route 
acting in its capacity as a facility of EDGX, in a manner consistent 
with prior approvals and established protections. The Exchange believes 
that meeting the commitments established during the pilot program 
demonstrates that the Exchange has mechanisms that protect the 
independence of the Exchange's regulatory responsibility with respect 
to DE Route, as well as demonstrates that DE Route cannot use any 
information that it may have because of its affiliation with the 
Exchange to its advantage.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change does 
not impose any burden on intermarket or intramarket competition as it 
would allow the Exchange to have a permanent inbound router consistent 
with its competitors.\9\
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 65453 (September 30, 
2011), 76 FR 62122 (October 6, 2011) (SR-NYSE-2011-45); Securities 
Exchange Act Release No. 64090 (March 17, 2011), 76 FR 16462 (March 
23, 2011) (SR-BX-2011-007); Securities Exchange Act Release No. 
66807 (April 13, 2012), 77 FR 23300 (April 18, 2012) (SR-BYX-2012-
006); Securities Exchange Act Release No. 66808 (April 13, 2012), 77 
FR 23294 (April 18, 2012) (SR-BATS-2012-013).
---------------------------------------------------------------------------

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 written comments from its 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 such 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 email to rule-comments@sec.gov. Please include 
File Number SR-EDGA-2013-13 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-2013-13. 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 will also 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-2013-13 and should be 
submitted on or before June 18, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
---------------------------------------------------------------------------

    \10\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-12532 Filed 5-24-13; 8:45 am]
BILLING CODE 8011-01-P