Document ID: SEC-2012-0770-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGA Exchange, Inc.
Posted Date: 2012-05-17T04:00Z

[Federal Register Volume 77, Number 96 (Thursday, May 17, 2012)]
[Notices]
[Pages 29428-29429]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-11926]

[[Page 29428]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66971; File No. SR-EDGA-2012-18]

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

May 11, 2012.
    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, 2012 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, at the Exchange's 
principal office, and at the Public Reference Room of the Commission.
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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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Currently, Flag N is yielded when an order removes liquidity from 
the EDGA book in Tapes B or C securities. In this case, a charge of 
$0.0007 per share is assessed. In order to provide additional 
transparency to Members, the Exchange proposes to amend Flag N so that 
it only applies to orders that remove liquidity from the EDGA book in 
Tape C securities. The Exchange will continue to assess a charge of 
$0.0007 per share for Members that utilize Flag N. The Exchange then 
proposes to add Flag BB for orders that remove liquidity from the EDGA 
book in Tape B securities. The Exchange proposes to assess a charge of 
$0.0007 per share for Members that utilize Flag BB. In addition, 
similar to the footnotes appended to Flag N, the Exchange proposes to 
append Footnotes 1 and a to Flag BB. Therefore, Members using Flag BB 
will be subject to the conditions of Footnote 1, which states that all 
removal rates on EDGA are contingent on the attributed MPID adding 
(including hidden) and/or routing a minimum average daily share volume, 
measured monthly, of 50,000 shares on EDGA; and any attributed MPID not 
meeting the aforementioned minimum will be charged $0.0030 per share 
for removing liquidity from EDGA for securities priced $1.00 and over 
and 0.20% of dollar value for securities priced less than $1.00. In 
addition, Members using Flag BB will be subject to the conditions of 
Footnote a, under which EDGA will aggregate share volume calculations 
for wholly owned affiliates on a prospective basis upon the Member's 
request.
    The Exchange proposes to decrease the charge for Flag PX from 
$0.0020 per share to $0.0012 per share for orders that use the midpoint 
routing strategy RMPT \4\ and are routed out.
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    \4\ See Exchange Rule 11.9(b)(3)(t).
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    The Exchange proposes to append Footnote 17 to Flags PA, PT, and PX 
to provide that if a Member executes greater than 2 million shares per 
day, measured monthly, using routing strategy RMPT, then the Member's 
rate for Flag PA is reduced to $0.0000 per share and the Member's rate 
for Flags PT and PX is reduced to $0.0008 per share.
    The Exchange also proposes to make a technical amendment to the 
title of the EDGA Book Feed. The Exchange proposes to rename ``EDGA 
Book Feed'' to ``EdgeBook Depth A'' and to make conforming changes in 
the description on the fee schedule.
    The Exchange proposes to implement these amendments to its fee 
schedule on May 1, 2012.
2. Basis
    The Exchange believes that the proposed rule changes are consistent 
with the objectives of Section 6 of the Act,\5\ in general, and 
furthers the objectives of Section 6(b)(4),\6\ 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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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
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    In order to provide additional transparency to Members, the 
Exchange proposes to amend Flag N to apply to orders that remove 
liquidity from EDGA book in Tape C securities and to add Flag BB for 
orders that remove liquidity from the EDGA book in Tape B securities. 
The Exchange proposes to continue to assess a charge of $0.0007 per 
share for Members that utilize Flag N and the Exchange proposes to 
assess a charge of $0.0007 per share for Members that utilize Flag BB. 
The Exchange believes that utilizing Flag BB to identify Members that 
remove liquidity from EDGA book in Tape B securities and utilizing Flag 
N to identify Members that remove liquidity from EDGA book in Tape C 
securities promotes market transparency and improves investor 
protection by adding additional transparency to the EDGA fee schedule. 
This proposed change more precisely delineates for Members whether they 
are removing liquidity in Tape B or Tape C securities. The Exchange 
also believes that the proposal is non-discriminatory because it 
applies uniformly to all Members.
    The Exchange proposes to decrease the charge for Flag PX from 
$0.0020 per share to $0.0012 per share for orders that use the RMPT 
routing strategy and are routed out. The decreased charge is designed 
to incentivize Members to utilize the RMPT routing strategy to route 
through EDGA, thereby increasing the amount of liquidity on EDGA, 
before routing to other low cost destinations and other venues. The 
Exchange believes that increased liquidity may increase 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 
of

[[Page 29429]]

lower rates. The increased liquidity also benefits 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. In addition, the Exchange believes that the proposed rate 
is non-discriminatory in that it applies uniformly to all Members.
    Footnote 17 (appended to Flags PT, PX, and PT) provides that if a 
Member executes greater than 2 million shares per day, measured 
monthly, using routing strategy RMPT, then the Member's rate for Flag 
PA is reduced to $0.0000 per share and the Member's rate for Flags PT 
and PX is reduced to $0.0008 per share. The decreased charge is 
designed to incentivize Members to utilize the RMPT routing strategy to 
route through EDGA, thereby increasing the amount of liquidity on EDGA, 
before routing to other low cost destinations and other venues. The 
Exchange believes that increased liquidity may increase 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 
of lower rates. The increased liquidity also benefits 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. Volume-based discounts such as the ones proposed herein 
have been widely adopted in the cash equities markets, and are 
equitable because they are open to all Members on an equal basis and 
provide discounts that are reasonably related to the value to an 
exchange's market quality associated with higher levels of market 
activity, such as higher levels of liquidity provision and introduction 
of higher volumes of orders into the price and volume discovery 
processes. In addition, the Exchange believes that the proposed rate is 
non-discriminatory in that it applies uniformly to all Members.
    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 \7\ and Rule 19b-4(f)(2) \8\ 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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    \7\ 15 U.S.C. 78s(b)(3)(A).
    \8\ 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 email to rule-comments@sec.gov. Please 
include File Number SR-EDGA-2012-18 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-2012-18. 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-2012-18 and should be 
submitted on or before June 7, 2012.

    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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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-11926 Filed 5-16-12; 8:45 am]
BILLING CODE 8011-01-P