Document ID: SEC-2014-1412-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGA Exchange, Inc.
Posted Date: 2014-08-20T04:00Z

[Federal Register Volume 79, Number 161 (Wednesday, August 20, 2014)]
[Notices]
[Pages 49355-49357]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-19702]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72844; File No. SR-EDGA-2014-22]

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

August 14, 2014.
    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 August 11, 2014, EDGA Exchange, Inc. (the ``Exchange'' or 
``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) 
(``Fee Schedule'') to: (1) harmonize the definitions of Average Daily 
Trading Volume (``ADV'') and Total Consolidated Volume (``TCV'') with 
those contained in the BATS Exchange, Inc. (``BATS'') and BATS-Y 
Exchange, Inc. (``BYX'') fee schedules; and (2) amend the criteria of 
both Step-Up Tier 1 and Step-Up Tier 2 under Footnote 4.
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    \3\ The term ``Member'' is defined as ``any registered broker or 
dealer, or any person associated with a registered broker or dealer, 
that has been admitted to membership in the Exchange. A Member will 
have the status of a ``member'' of the Exchange as that term is 
defined in Section 3(a)(3) of the Act.'' See Exchange Rule 1.5(n).
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    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
    The Exchange proposes to amend its Fee Schedule to: (1) Harmonize 
the definitions of ADV and TCV with those contained in the BATS and BYX 
fee schedules; and (2) amend the criteria of both Step-Up Tier 1 and 
Step-Up Tier 2 under Footnote 4.
ADV and TCV Definitions
    On January 31, 2014, Direct Edge Holdings LLC (``DE Holdings''), 
the former parent company of the Exchange, completed its business 
combination with BATS Global Markets, Inc., the parent company of BATS 
and BYX.\4\ As part of its effort to reduce regulatory duplication and 
relieve firms that are members of the Exchange, BATS, and BYX of 
conflicting or unnecessary regulatory burdens, the Exchange is now 
engaged in the process of reviewing and amending certain Exchange, 
BATS, and BYX Rules. To conform to comparable BATS and BYX rules for 
purposes of its harmonization efforts due to its business combination, 
the Exchange proposes to amend the definitions of ADV and TCV to make 
each definition similar to those contained in the BATS and BYX fee 
schedules.
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    \4\ See Securities Exchange Act Release No. 71449 (January 30, 
2014), 79 FR 6961 (February 5, 2014) (SR-EDGA-2013-34). Upon 
completion of the combination, DE Holdings and BATS Global Markets, 
Inc. each became intermediate holding companies, held under a single 
new holding company. The new holding company, formerly named ``BATS 
Global Markets Holdings, Inc.,'' changed its name to ``BATS Global 
Markets, Inc.''
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    Currently, the Exchange determines the liquidity adding reduced fee 
that it will provide to Members based on the Exchange's tiered pricing 
structure based on the calculation of ADV,\5\ and/or average daily 
TCV.\6\ Like BATS and BYX, the Exchange currently excludes from is 
definition of ADV and TCV days where its system experiences a 
disruption that lasts for more than 60 minutes during Regular Trading 
Hours,\7\ and the last Friday in June (the ``Russell Reconstitution 
Day''). BATS and BYX also exclude from its definitions of ADV and TCV 
days with a scheduled early market close.\8\ Similarly, the General 
Notes section of the Exchange's Fee Schedule states that trading 
activity on days when the market closes early are

[[Page 49356]]

not counted toward volume tiers.\9\ To harmonize the definitions of ADV 
and TCV with BATS and BYX, the Exchange proposes relocate this 
exclusion from the General Notes section of the Fee Schedule and 
include it the definitions of ADV and TCV. By amending the definitions 
of ADV and TCV, the Exchange is not proposing to modify any of the 
existing rates or the percentage thresholds at which a Member may 
qualify for certain reduced fees pursuant to the tiered pricing 
structure.
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    \5\ As provided in the Fee Schedule, ``ADV'' is currently 
defined as ``the average daily volume of shares that a Member 
executed on the Exchange for the month in which the fees are 
calculated. ADV is calculated on a monthly basis, excluding shares 
on any day that the Exchange's system experiences a disruption that 
lasts for more than 60 minutes during Regular Trading Hours 
(``Exchange System Disruption'') and on the last Friday in June (the 
``Russell Reconstitution Day''). With prior notice to the Exchange, 
a Member may aggregate ADV with other Members that control, are 
controlled by, or are under common control with such Member (as 
evidenced on such Member's Form BD).''
    \6\ As provided in the Fee Schedule, ``TCV'' is currently 
defined as ``the volume reported by all exchanges and trade 
reporting facilities to the consolidated transaction reporting plans 
for Tapes A, B and C securities for the month in which the fees are 
calculated, excluding volume on any day that the Exchange 
experiences an Exchange System Disruption or the Russell 
Reconstitution Day.''
    \7\ ``Regular Trading Hours'' is defined as ``the time between 
9:30 a.m. and 4:00 p.m. Eastern Time.'' See Exchange Rule 1.5(y).
    \8\ See Securities Exchange Act Release Nos. 72590 (July 10, 
2014), 79 FR 41605 (July 16, 2014) (SR-BYX-2014-009); and 72589 
(July 10, 2014), 79 FR 41618 (July 16, 2014) (SR-BATS-2014-025).
    \9\ Days with a scheduled early market close are December 24, 
2014, the trading day after Thanksgiving, and the trading day before 
July 4th.
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Step Up Tiers 1 and 2
    Footnote 4 of the Fee Schedule contains the Step-Up Tier 1 and 
Step-Up Tier 2 (collectively, the ``Step-Up Tiers''). Step-Up Tier 1 
provides Members with a reduced fee of $0.0003 per share for adding 
liquidity to the Exchange when the Member, on an MPID basis, adds more 
than 0.10% of the TCV on EDGA on a daily basis, measured monthly, more 
than the MPID's December 2012 or September 2013 added ADV. The Step-Up 
Tier 2 provides Members with a reduced fee of $0.0003 per share to add 
liquidity to the Exchange when the Member: (i) On an MPID basis, adds 
more than 0.05% of the TCV on EDGA on a daily basis, measured monthly, 
more than the MPID's December 2012 or September 2013 added ADV; and 
(ii) has an ``added liquidity'' to ``added plus removed liquidity'' 
ratio of at least 85%. Under both tiers, where an MPID's December 2012 
and September 2013 ADV is zero, the Exchange would apply a default ADV 
baseline of 10,000,000 shares. The Exchange now proposes to delete 
default ADV baseline of 10,000,000 shares for both tiers.
Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule on August 11, 2014.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\10\ in general, and 
furthers the objectives of Section 6(b)(4),\11\ 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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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
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ADV and TCV Definitions
    The Exchange believes that the proposal to amend the definitions of 
ADV and TCV are reasonable, as they are designed to provide for the 
equitable allocation of reasonable dues, fees and other charges among 
its Members and other persons using its facilities. The Exchange 
believes that the proposed rule change will provide greater 
harmonization between similar Exchange, BATS and BYX rules, resulting 
in greater uniformity and less burdensome and more consistent standards 
for common members. As such, the proposed rule change would foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities and would remove impediments to and perfect 
the mechanism of a free and open market and a national market system. 
By amending the definitions of ADV and TCV, the Exchange is not 
proposing to amend the thresholds a Member must achieve to become 
eligible for, or the dollar value associated with, the tiered fees. The 
Exchange currently excludes trading activity on days where the market 
closes early and is simply proposing to relocate this provision from 
the General Notes section of its Fee Schedule to the definitions of ADV 
and TCV. Doing so would enable the Exchange to maintain definitions of 
ADV and TCV similar to those of BATS and BYX. Lastly, the Exchange 
believes that the proposed change is not unfairly discriminatory 
because it applies uniformly to all Members.
Step-Up Tiers 1 and 2
    The Exchange believes its proposal to delete the default ADV 
baseline of 10,000,000 shares for the Step-Up Tiers represents an 
equitable allocation of reasonable dues, fees, and other charges. The 
objective to removing the default ADV baseline for the Step-Up Tiers is 
to increase the number of Members who may be eligible to achieve the 
tier and to encourage firms who are currently not Members to become 
Members of the Exchange. Specifically, firms who were not Members 
during either December 2012 or September 2013 would have previously 
defaulted to the ADV baseline of 10,000,000 shares. The deletion of the 
default ADV baseline of 10,000,000 is, therefore, reasonable and 
equitable because it will enhance the value of the Step-Up Tiers to 
Members whose market was unable to meet the baseline eligibility 
because they were not Members in December 2012 or September 2013, 
thereby encouraging them to increase their volume on the Exchange in 
order to qualify for the Step-Up Tiers or incentive firms who are not 
currently Members to become Members. Such increased volume would 
increase potential revenue to the Exchange and allow the Exchange to 
spread its administrative and infrastructure costs over a greater 
number of shares, which would result in lower per share costs. The 
Exchange may then pass on these savings to Members in the form of 
reduced fees. The increased liquidity would also benefit all investors 
by deepening EDGA's liquidity pool, offering additional flexibility for 
all investors to enjoy cost savings, supporting the quality of price 
discovery, promoting market transparency and improving investor 
protection. Lastly, the Exchange believes that the proposed change is 
not unfairly discriminatory because it applies uniformly to all 
Members.

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

    The Exchange believes its proposed amendments to its Fee Schedule 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The proposed 
amendment to the definition of ADV and TCV is not designed to address 
any competitive issues but rather to provide greater harmonization 
among similar Exchange and BATS and BYX rules, resulting in less 
burdensome and more efficient and consistent standards for common 
members. The Exchange also believes that its proposal to delete the 
default ADV baseline of 10,000,000 shares for the Step-Up Tiers would 
increase intermarket competition because it offers Members increased 
opportunities to be eligible for the Step-Up Tiers and receive the 
discounted rate, thereby encouraging them to increase their volume on 
the Exchange in order to qualify for the Step-Up Tiers or incentive 
firms who are not currently Members to become Members. In addition, the 
Exchange believes that deleting the default ADV baseline of 10,000,000 
shares for the Step-Up Tiers would enhance intramarket competition, as 
it is intended to increase the competitiveness of and draw additional 
volume to the Exchange. The Exchange 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 structures to be 
unreasonable or excessive. Accordingly, the Exchange does not believe 
that the proposed change will impair the ability of Members or 
competing venues to

[[Page 49357]]

maintain their competitive standing in the financial markets.

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 \12\ and Rule 19b-4(f)(2) \13\ 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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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:

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-2014-22 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-EDGA-2014-22. 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-EDGA-2014-22, and should be 
submitted on or before September 10, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-19702 Filed 8-19-14; 8:45 am]
BILLING CODE 8011-01-P