Document ID: SEC-2013-0871-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2013-05-09T04:00Z

[Federal Register Volume 78, Number 90 (Thursday, May 9, 2013)]
[Notices]
[Pages 27274-27276]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-11017]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69510; File No. SR-EDGX-2013-15]

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

May 3, 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 May 1, 2013, EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') 
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 EDGX Rule 15.1(a) and (c). All 
of the changes described herein are applicable to EDGX 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.
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    \3\ As defined in 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
    In securities priced at or above $1.00, the Exchange currently 
provides a rebate of $0.0002 per share for Members' orders that yield 
Flag BY, which routes to BATS BYX (``BYX'') and removes liquidity using 
routing strategies ROUC, ROUE, or ROBY.\4\ The Exchange proposes to 
amend its fee schedule to assess no charge (``free'') nor provide any 
rebate for Members' orders that yield Flag BY. When Direct Edge ECN LLC 
(d/b/a DE Route) (``DE Route''), the Exchange's affiliated routing 
broker-dealer, routes to BYX, it is rebated $0.0005 per share for 
adding an average daily volume of 50,000 shares per day on BYX.\5\ 
However, DE Route will pass through the non-tiered rate on BYX (no fee 
nor rebate) to the Exchange and the Exchange, in turn, will pass 
through no fee nor rebate to its Members.\6\
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    \4\ As defined in Exchange Rule 11.9(b)(2).
    \5\ See Securities Exchange Act Release No. 69317 (April 5, 
2013), 78 FR 21651 (April 11, 2013) (SR-BYX-2013-012) (amending the 
rebate BYX provides for removing liquidity from the BYX order book 
for executions by members that add a daily average volume of at 
least 50,000 shares from $0.0002 per share to $0.0005 per share).
    \6\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered rebate on BYX, its rate for Flag BY 
will not change. See BYX Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf 
(offering no rebate to remove liquidity from BYX for executions by 
its members that do not qualify for an enhanced rebate).
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    In securities priced at $1.00 or above, the Exchange currently 
assesses a charge of $0.0005 per share for Members' orders that yield 
Flag RY, which routes to BYX and adds liquidity. The Exchange proposes 
to amend its fee schedule to increase the rate it charges Members from 
$0.0005 per share to $0.0007 per share for Flag RY. The proposed change 
represents a pass through of the rate that DE Route is charged for 
routing orders to BYX that do not qualify for additional volume tiered 
discounts.\7\ DE Route passes through the charge to the Exchange and 
the Exchange, in turn, passes through the charge to its Members. The 
Exchange notes that the proposed change is in response to BYX's April 
2013 fee filing with the Commission, wherein BYX increased the rate it 
charges its customers, such as DE Route, from a charge of $0.0005 per 
share to a charge of $0.0007 per share for orders

[[Page 27275]]

that are routed to BYX and add liquidity.\8\
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    \7\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered rebate on BYX, its rate for Flag RY 
will not change.
    \8\ See Securities Exchange Act Release No. 69317 (April 5, 
2013), 78 FR 21651 (April 11, 2013) (SR-BYX-2013-012) (amending the 
rate BYX charges for adding displayed liquidity to the BYX order 
book for executions by members that do not qualify for a reduced 
charge from $0.0005 per share to $0.0007 per share).
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    The Exchange proposes to implement these amendments to its fee 
schedule on May 1, 2013.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\9\ in general, and 
furthers the objectives of Section 6(b)(4),\10\ 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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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposal to decrease the rebate for 
Flag BY and pass through no charge nor rebate for Members' orders that 
yield Flag BY represents an equitable allocation of reasonable dues, 
fees and other charges among its Members and other persons using its 
facilities. First, the elimination of the rebate allows the Exchange to 
have additional revenue to offset its administrative, operational, and 
infrastructure costs. Second, the proposed rate (free) is competitive 
as it is in line with the non-tiered rebates for adding liquidity to 
BYX. When DE Route, the Exchange's affiliated routing broker-dealer, 
routes to BYX, it is rebated $0.0005 per share provided it adds an 
average daily volume of 50,000 shares per day on BYX. However, when DE 
Route does not meet such volume threshold on BYX, it is assessed no fee 
nor rebate (free). The proposed rate (free) \11\ represents a rate that 
matches the non-tiered rate provided by BYX. The rate is also in line 
with what BATS Exchange, Inc. (``BZX'') rebates for routing to BYX.\12\ 
Lastly, the Exchange also believes that the proposed amendment is non-
discriminatory because it applies uniformly to all Members.
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    \11\ See BYX Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf (offering 
no rebate to remove liquidity from BYX for executions by its members 
that do not qualify for an enhanced rebate).
    \12\ For example, when orders using BZX's TRIM/TRIM2/TRIM3 
routing strategies execute at BYX Exchange, a rebate of $0.0002 per 
share is provided. This is a rate that is in between the tiered 
rebate of $0.0005 per share and non-tiered rate (free) from BYX. See 
BATS BZX Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf.
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    The Exchange believes that its proposal to pass through a charge of 
$0.0007 for Members' orders that yield Flag RY represents an equitable 
allocation of reasonable dues, fees, and other charges among Members of 
the Exchange and other persons using its facilities because the 
Exchange does not levy additional fees or offer additional rebates for 
orders that it routes to BYX through DE Route. Prior to BYX's April 
2013 fee filing, BYX charged DE Route a fee of $ 0.0005 per share for 
orders yielding Flag RY, which DE Route passed through to the Exchange 
and the Exchange passed through to its Members. In BYX's April 2013 fee 
filing, BYX increased the rate it charges its customers, such as DE 
Route, from $0.0005 per share to a charge of $0.0007 per share for 
orders that are routed to BYX and add liquidity. Therefore, the 
Exchange believes that the proposed change in Flag RY from a fee of 
$0.0005 per share to a fee of $0.0007 per share is equitable and 
reasonable because it accounts for the pricing changes on BYX. In 
addition, the proposal allows the Exchange to continue to charge its 
Members a pass-through rate for orders that are routed to BYX and add 
liquidity using DE Route. The Exchange notes that routing through DE 
Route is voluntary. Lastly, the Exchange also believes that the 
proposed amendment is non-discriminatory because it applies uniformly 
to all Members.

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 any of the Exchange's competitors. 
Additionally, Members may opt to disfavor the Exchange's pricing if 
they believe that alternatives offer them better value. Accordingly, 
the Exchange believes that the proposed changes would not impair the 
ability of Members or competing venues to maintain their competitive 
standing in the financial markets.
    The Exchange believes that its proposal to pass through no charge 
nor rebate for Members' orders that yield Flag BY would not burden 
intermarket competition because the proposed rate is in line with BYX's 
non-tiered rate and rates for routing to BYX from BZX. Additionally, 
for customers that do not have sufficient volume to satisfy BYX's tier, 
Flag BY offers customers an alternative means to route to BYX and 
remove liquidity for the same price as entering orders on BYX directly. 
The Exchange believes its proposal would not burden intramarket 
competition because the proposed rate would apply uniformly to all 
Members.
    The Exchange believes that its proposal to pass through a charge of 
$0.0007 per share for Members' orders that yield Flag RY would increase 
intermarket competition because it offers customers an alternative 
means to route to BYX and add liquidity for the same price as entering 
orders on BYX directly. The Exchange believes that its proposal would 
not burden intramarket competition because the proposed rate would 
apply uniformly to all Members.
    The Exchange believes that its proposal would increase competition 
for routing services because the market for order execution is 
competitive and the Exchange's proposal provides customers with another 
alternative to route their orders. The Exchange notes that routing 
through DE Route is voluntary.

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)(A) of the Act \13\ and Rule 19b-4(f)(2) \14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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:

[[Page 27276]]

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-2013-15 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-2013-15. 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-2013-15 and should be 
submitted on or before May 30, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-11017 Filed 5-8-13; 8:45 am]
BILLING CODE 8011-01-P