Document ID: SEC-2012-1275-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGA Exchange, Inc.
Posted Date: 2012-08-07T04:00Z

[Federal Register Volume 77, Number 152 (Tuesday, August 7, 2012)]
[Notices]
[Pages 47150-47152]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-19211]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67553; File No. SR-EDGA-2012-34]

Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Optional Attribution of Orders on the EDGA Book Feed

August 1, 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 July 24, 2012, EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') 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 Exchange. 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\ 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 amend Rule 11.5, entitled ``Orders and 
Modifiers'', to allow optional attribution of orders submitted to the 
Exchange on the EDGA Book Feed (the ``Service'' or ``EdgeBook 
Attributed\SM\'') to Members and non-Members of the Exchange 
(collectively referred to as ``Recipients'') without charge. The text 
of the proposed rule change is available on the Exchange's 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 Exchange 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 SR-EDGA-2011-19,\3\ the Exchange made available the EDGA Book 
Feed (``EDGA Book Feed''), a data feed that contains all orders for 
securities trading on the Exchange, including all displayed orders for 
listed securities trading on EDGA, order executions, order 
cancellations, order modifications, order identification numbers and 
administrative messages. The EDGA Book Feed offers real-time data, 
thereby allowing Member firms to more accurately price their orders 
based on EDGA's view of the depth of book information. It also provides 
Members an ability to track their own orders from order entry to 
execution. It is available in both unicast and multicast formats. In 
SR-EDGA-2012-15,\4\ the Exchange modified the EDGA fee schedule by 
codifying the fees associated with the receipt of the EDGA Book Feed.
---------------------------------------------------------------------------

    \3\ Securities Exchange Act Release No. 64792 (July 1, 2011), 76 
FR 39959 (July 7, 2011) (SR-EDGA-2011-19).
    \4\ Securities and Exchange Release No. 66863 (Apr. 26, 2012), 
77 FR 26059 (May 2, 2012) (SR-EDGA-2012-15).
---------------------------------------------------------------------------

    The purpose of this filing is to allow Members to optionally enter 
orders into the Exchange's System,\5\ conveying their identity.\6\ Such 
information will then be

[[Page 47151]]

displayed on the Exchange's new Service, namely EdgeBook 
Attributed\SM\, that will allow Recipients the option to view the 
market participant identifier (``MPID'') of such Members of the 
Exchange, including Market Makers,\7\ on an order-by-order basis. 
Specifically, the Exchange proposes to amend Rule 11.5(c)(18) to add a 
definition of an Attributable Order, which shall mean an order that is 
designated for display (price and size) including the Member's MPID. 
The Exchange also proposes to adopt a definition in Rule 11.5(c)(19) 
for a Non-Attributable Order, which shall mean an order that is 
designated for display (price and size) on an anonymous basis by the 
Exchange. The proposed definitions of Attributable Order and Non-
Attributable Order are virtually identical to definitions contained in 
the Rules of BATS Exchange, Inc. (``BATS'') and The NASDAQ Stock Market 
LLC (``Nasdaq'').
---------------------------------------------------------------------------

    \5\ As defined in EDGA Rule 1.5(cc).
    \6\ Through the use of a field within the order entry message, 
Members will permit the display of their entered order on the EDGA 
Book Feed to include their associated MPID.
    \7\ As defined in EDGA Rule 1.5(l).
---------------------------------------------------------------------------

    The attributed information will be disseminated on the EDGA Book 
Feed and available for use by Recipients. Currently, all display-
eligible orders are displayed in the EDGA Book Feed on an anonymous 
basis without attribution to the individual Member. The Exchange is 
proposing to allow Recipients to utilize a new feature on the EDGA Book 
Feed, which will include MPIDs on published quotations.
    At this time, EDGA does not have plans to charge an additional fee 
associated with the receipt of the Service. Should EDGA determine to 
charge fees associated with EdgeBook Attributed\SM\, EDGA will submit a 
proposed rule change to the Commission in order to implement those 
fees.
    The Exchange believes that such attribution is consistent with the 
Exchange's Market Making rules, traditional market making on the floor 
of an exchange, and existing rules of the Exchange's competitors.\8\ 
The additional feature will allow Members to publically disclose their 
identity when quoting on the Exchange and to display their attributed 
quote on the EDGA Book Feed. The Service will, in particular, allow a 
Market Maker to identify itself as a party that is willing to buy or 
sell securities on the Exchange and make continuous two-sided markets. 
The Exchange believes that this information will be beneficial to all 
Recipients and will aid in their trading decisions.
---------------------------------------------------------------------------

    \8\ See infra footnote 14.
---------------------------------------------------------------------------

    The Exchange intends to implement the proposed rule change on or 
about September 1, 2012. The Exchange first announced the Service to 
Members and non-Members in Direct Edge Trading Notice 12-25, 
published on June 27, 2012. As the Service is optional, there is no 
need for a phased implementation, as neither Recipients nor Members who 
wish to attribute their identity in the Service or wish to opt out of 
the Service will have to affect any material systems changes with 
regard to the Service.
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)(5) of the Act,\10\ which 
requires, among other things, that the Exchange's rules not be designed 
to unfairly discriminate between customers, issuers, brokers or dealers 
and 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. 
EDGA believes that this proposal is in keeping with those principles by 
promoting increased transparency through the dissemination of the 
additional Service and by announcing its availability via information 
circular. In addition, EDGA is making a voluntary decision to make this 
Service available.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    EDGA is not required by the Act in the first instance to make the 
Service available, unlike the best bid and offer which must be made 
available under the Act. EDGA chooses to make the Service available as 
proposed in order to improve market quality, to attract order flow, and 
to increase transparency. Once this filing becomes effective, EDGA will 
be required to continue making the Service available until such time as 
EDGA changes its rule.
    Furthermore, the proposal will benefit Recipients and help to 
promote transparency by providing additional information regarding 
quotations displayed on the Exchange by various Members and thereby aid 
Recipients in their trading decisions. Specifically, any Member that 
wishes to publicly disclose their identity (through their MPID) when 
quoting on the Exchange will be permitted to do so, and such attributed 
quotations will be analogous to the quotations they provide in other 
contexts (e.g., on the floor of a floor-based stock exchange or in the 
over-the-counter market through direct interaction). The proposed rule 
change also promotes transparency in that it will allow Recipients who 
wish to utilize the Service additional transparency into discerning the 
contra-party in a given execution.
    The proposed rule change is also consistent with Section 11A(a)(1) 
of the Act \11\ in that it seeks to assure fair competition among 
brokers and dealers by providing functionality that is consistent with 
that of functionality offered by the Exchange's competitors.\12\ The 
Exchange believes that the proposed rule change promotes just and 
equitable principles of trade in that it promotes uniformity across 
markets concerning the ability to display an attributed order on an 
exchange.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78k-1(a)(1).
    \12\ See infra footnote 14.
---------------------------------------------------------------------------

    Lastly, in adopting Regulation NMS, the Commission granted SROs and 
broker-dealers increased authority and flexibility to offer new and 
unique market data services to the public. The Commission believed this 
authority would expand the amount of data available to market 
participants, and also spur innovation and competition for the 
provision of market data. EdgeBook Attributed\SM\ appears to be 
precisely the sort of market data service that the Commission 
envisioned when it adopted Regulation NMS.\13\ The Service will allow 
Recipients to utilize a Service that will provide them a means to view 
attributed information on orders on the EDGA Book Feed.
---------------------------------------------------------------------------

    \13\ Securities and Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496 (June 29, 2005) (``[E]fficiency is promoted when 
broker-dealers who do not need the data beyond the prices, sizes, 
market center identifications of the NBBO and consolidated last sale 
information are not required to receive (and pay for) such data. The 
Commission also believes that efficiency is promoted when broker-
dealers may choose to receive (and pay for) additional market data 
based on their own internal analysis of the need for such data.'').
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended.
    There is significant competition for the provision of market data 
to market participants, as well as competition for the orders that 
generate that data. In introducing the proposed Service, the

[[Page 47152]]

Exchange would be providing one similar to those already offered by 
other market centers.\14\
---------------------------------------------------------------------------

    \14\ See Nasdaq Rules 4751(e)(1) and (2) and BATS Rules 
11.9(c)(14) and (15).
---------------------------------------------------------------------------

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 its Members or other interested 
parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing 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 for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) \15\ of the Act and Rule 19b-
4(f)(6)(iii) thereunder.\16\
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-4(f)(6) 
requires a self-regulatory organization to give the Commission 
written notice of its intent to file the proposed rule change at 
least five business days prior to the date of filing of the proposed 
rule change, or such shorter time as designated by the Commission. 
The Exchange has satisfied this requirement.
---------------------------------------------------------------------------

    At any time within 60 days 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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or 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-2012-34 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-2012-34. 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-2012-34 and should be 
submitted on or before August 28, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
---------------------------------------------------------------------------

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

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-19211 Filed 8-6-12; 8:45 am]
BILLING CODE 8011-01-P