Document ID: SEC-2013-1455-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGA Exchange, Inc.
Posted Date: 2013-08-14T04:00Z

[Federal Register Volume 78, Number 157 (Wednesday, August 14, 2013)]
[Notices]
[Pages 49574-49577]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-19692]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70146; File No. SR-EDGA-2013-21]

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 8, 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 August 1, 2013, 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: (i) Amend its standard rates; (ii) amend the 
rates for flags BY and RY; and (iii) amend the reduced rates provided 
by the tiers in Footnote 4. 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.
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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
    The Exchange proposes to amend its Fee Schedule to: (i) amend its 
standard rates; (ii) amend the rates for flags BY and RY; and (iii) 
amend the reduced rates provided by the tiers in Footnote 4.
Standard Rate Changes
    The Exchange currently charges Members a standard \4\ rate of 
$0.0006

[[Page 49575]]

per share for Members' orders that add liquidity for securities priced 
at or above $1.00. The Exchange proposes to decrease the standard rate 
from $0.0006 per share to $0.0005 per share for Members' orders that 
add liquidity and make conforming changes to flags that add liquidity 
(flags B, V, Y, 3 and 4). The Exchange will continue to assess no 
charge for Members' orders that add liquidity in securities priced 
below $1.00. The Exchange notes that flags B, V, Y, 3 and 4 will remain 
subject to volume tiered pricing.
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    \4\ Where ``standard'' refers to the standard rate that the 
Exchange charges its Members for orders that add, remove, or route 
liquidity from the Exchange absent Members qualifying for additional 
volume tiered pricing. The Exchange maintains standard rates for 
securities at or above $1.00 and securities priced below $1.00 for 
orders that add, remove, and route liquidity. The Exchange notes 
that a Member may qualify for a higher rebate if the Member 
satisfies the volume tier requirements outlined in Footnotes 1, 2, 3 
and 4 of the Fee Schedule for securities priced at or above $1.00. 
The Exchange notes that the volume from securities priced below 
$1.00 contributes toward volume tiered requirements for securities 
priced at or above $1.00 as outlined in Footnotes 1, 2, 3 and 4 of 
the Fee Schedule. Unless otherwise stated in Footnotes 1 and 2 of 
the Fee Schedule, the Exchange does not offer volume tiered pricing 
for securities priced below $1.00.
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    The Exchange currently offers Members a standard rebate of $0.0003 
per share for Members' orders that remove liquidity for securities 
priced at or above $1.00. The Exchange proposes to decrease the 
standard rebate from $0.0003 per share to $0.0002 per share for 
Members' orders that remove liquidity and make conforming changes to 
flags that remove liquidity (flags N, W, 6, BB, CR, PR, and XR). The 
Exchange will continue to assess no charge for Members' orders that 
remove liquidity in securities priced below $1.00. The Exchange notes 
that flags N, W, 6, BB, CR, PR, and XR will also remain subject to 
volume tiered pricing.
Fee/Rebate Changes for Flags BY and RY
    In securities priced at or above $1.00, the Exchange currently 
provides a rebate of $0.0005 per share for Members' orders that yield 
Flag BY, which routes to BATS Y-Exchange, Inc. (``BYX'') using routing 
strategies ROUC, ROUE, ROBY, ROBB or ROCO. The Exchange proposes to 
amend its Fee Schedule to decrease this rebate to $0.0001 per share for 
Members' orders that yield Flag BY. The proposed change represents a 
pass through of the rate that Direct Edge ECN LLC (d/b/a DE Route) 
(``DE Route''), the Exchange's affiliated routing broker-dealer, is 
rebated for routing orders to BYX and do not qualify for a volume 
tiered discount. When DE Route routes to BYX, it is rebated a standard 
rate of $0.0001 per share.\5\ DE Route will pass through this rate on 
BYX to the Exchange and the Exchange, in turn, will pass through this 
rate to its Members. The Exchange notes that the proposed change is in 
response to BYX's August 2013 fee change where BYX decreased the rebate 
it provides its customers, such as DE Route, from a rebate of $0.0005 
per share to a rebate of $0.0001 per share for orders that are routed 
to BYX.\6\
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    \5\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered discount on BYX, its rate for Flag BY 
will not change.
    \6\ See BATS BYX Exchange Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf.
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    In securities priced at or above $1.00, the Exchange currently 
assesses a fee of $0.0007 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 decrease this fee to $0.0003 per share for 
Members' orders that yield Flag RY. The proposed change represents a 
pass through of the rate that DE Route, the Exchange's affiliated 
routing broker-dealer, is charged for routing orders to BYX and do not 
qualify for a volume tiered discount. When DE Route routes to BYX, it 
is charged a standard rate of $0.0003 per share.\7\ DE Route will pass 
through this rate on BYX to the Exchange and the Exchange, in turn, 
will pass through this rate to its Members. The Exchange notes that the 
proposed change is in response to BYX's August 2013 fee change where 
BYX decreased the fee it charges its customers, such as DE Route, from 
a fee of $0.0007 per share to a fee of $0.0003 per share for orders 
that are routed to BYX.\8\
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    \7\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered discount on BYX, its rate for Flag RY 
will not change.
    \8\ See BATS BYX Exchange Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf.
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Changes to Tiers in Footnote 4
    The Exchange proposes to amend the Step-up Tier in Footnote 4 of 
its Fee Schedule. Currently, a Member, at a Market Participant 
Identifier (``MPID'') level, will qualify for the ``Step-up Tier'' by 
posting more than 0.10% of the Total Consolidated Volume (``TCV'') on 
EDGA, on a daily basis, measured monthly, more than that MPID's 
December 2012 added TCV (the ``December Baseline''). The volume 
generated from non-displayed flags that add liquidity will count 
towards the Step-up Tier. If the MPID meets this criterion, then the 
Exchange will assess that MPID a reduced charge of $0.0004 per share 
for Flags B, V, Y, 3 and 4. The Exchange notes that where a MPID's 
December Baseline is zero, the Exchange will apply a default baseline 
of 10 million shares. The Exchange proposes to amend the reduced charge 
provided by this tier from $0.0004 per share to $0.0003 per share to 
move in lock step and be $0.0002 less than the proposed standard rate 
of $0.0005 per share for adding liquidity for securities priced at or 
above $1.00.
    The Exchange proposes to make conforming changes to the other tiers 
in Footnote 4 of the Fee Schedule since the standard rate for adding 
liquidity is now proposed to be $0.0005 per share and therefore, the 
rates for Volume Tiers 1 and 2 in Footnote 4, as described below, are 
proposed to move in lock step and continue to be $0.0002 less than the 
proposed standard rate of $0.0005 per share.
Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule on August 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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Standard Rate Changes
    The Exchange believes that its proposal to assess a charge of 
$0.0005 per share for Members' orders that add liquidity, yielding 
flags B, V, Y, 3 and 4, is an equitable allocation of reasonable dues, 
fees and other charges. The Exchange believes its proposal to decrease 
the rate it charges Members to add liquidity by $0.0001 per share will 
incentivize Members to add liquidity to the Exchange, which will 
support the quality of price discovery and promote market transparency. 
The Exchange's proposed standard rate of $0.0005 per share for adding 
liquidity is reasonable because it is comparable to BYX's standard rate 
of 0.0003 per share for adding liquidity.\11\ In addition, the 
Exchange's proposals do not modify the Exchange's taker/maker spread of 
$0.0003 per share, which the Exchange believes is reasonable because it 
is comparable to BYX's taker/maker spread range of $0.0002 per share to

[[Page 49576]]

(-$0.0002 per share).\12\ The Exchange will allocate the revenue 
generated from the spread of $0.0003 per share to offset its 
administrative and infrastructure costs associated with operating a 
national securities exchange. Lastly, the Exchange believes that the 
proposed amendment is non-discriminatory in that it applies uniformly 
to all Members.
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    \11\ See BATS BYX Exchange Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf.
    \12\ See BATS BYX Exchange Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf. The Exchange also notes that because it proposes 
to amend the rate for adding liquidity to $0.0005 per share and the 
rebate for removing liquidity to $0.0002 per share, the Exchange's 
maker/taker spread remains $0.0003 per share. Therefore, since the 
Exchange's overall maker/taker spread remains constant, the 
Exchange's rates for internalization remain unchanged.
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    The Exchange believes that its proposal to offer a rebate of 
$0.0002 per share for Members' orders that remove liquidity, yielding 
flags N, W, 6, BB, CR, PR, and XR, is an equitable allocation of 
reasonable dues, fees and other charges because it enables the Exchange 
to retain additional funds to offset increased administrative, 
regulatory, and other infrastructure costs associated with operating an 
exchange. The Exchange's proposed standard rebate of $0.0002 per share 
for removing liquidity is reasonable because it is comparable to BATS 
BYX's standard rebate of 0.0001 for removing liquidity and NASDASQ OMX 
BX's (``BX'') standard rebate of $0.0004 per share for removing 
liquidity.\13\ In addition, the Exchange's proposals do not modify the 
Exchange's taker/maker spread of $0.0003 per share, which the Exchange 
believes is reasonable because it is comparable to BYX's taker/maker 
spread range of $0.0002 per share to (-$0.0002 per share).\14\ The 
Exchange will allocate the revenue generated from the spread of $0.0003 
per share to offset its administrative and infrastructure costs 
associated with operating a national securities exchange. Lastly, the 
Exchange believes that the proposed amendment is non-discriminatory in 
that it applies uniformly to all Members.
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    \13\ See BATS BYX Exchange Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf; see also NASDAQ OMX BX, NASDAQ OMX BX Price 
List--Trading & Connectivity, http://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing.
    \14\ See BATS BYX Exchange Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf.
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Fee/Rebate Changes for Flags BY and RY
    The Exchange believes that its proposal to decrease the pass 
through rebate for Members' orders that yield Flag BY from $0.0005 to 
$0.0001 per share represents an equitable allocation of reasonable 
dues, fees, and other charges among Members 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 August 2013 fee change, BYX provided DE Route a rebate 
of $0.0005 per share for orders yielding Flag BY, which DE Route passed 
through to the Exchange and the Exchange passed through to its Members. 
In August 2013, BYX decreased the rebate it provides its customers, 
such as DE Route, from a rebate of $0.0005 per share to a rebate of 
$0.0001 per share for orders that are routed to BYX.\15\ Therefore, the 
Exchange believes that the proposed change in Flag BY from a rebate of 
$0.0005 per share to a rebate of $0.0001 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 using 
routing strategies ROUC, ROUE, ROBY, ROBB or ROCO 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.
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    \15\ See BATS BYX Exchange 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 decrease the pass 
through rate for Members' orders that yield Flag RY from $0.0007 to 
$0.0003 per share represents an equitable allocation of reasonable 
dues, fees, and other charges among Members 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 August 2013 fee change, BYX charged DE Route a fee of 
$0.0007 per share for orders yielding Flag RY, which DE Route passed 
through to the Exchange and the Exchange passed through to its Members. 
In August 2013, BYX decreased the fee it charges its customers, such as 
DE Route, from a fee of $0.0007 per share to a fee of $0.0003 per share 
for orders that are routed to BYX.\16\ Therefore, the Exchange believes 
that the proposed change in Flag RY from a fee of $0.0007 per share to 
a fee of $0.0003 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.
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    \16\ See BATS BYX Exchange Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf.
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Changes to Tiers in Footnote 4
    The reduction in fees from $0.0004 per share to $0.0003 per share 
for all tiers in Footnote 4 of the Exchange's Fee Schedule are an 
equitable allocation of reasonable dues, fees, and other charges since 
the rates are designed to move in lock-step and be $0.0002 per share 
less than the proposed standard rate for adding liquidity of $0.0005 
per share. These proposed rates are designed to increase volume on the 
Exchange and increase potential revenue to the Exchange, and allows 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 in turn would allow the Exchange to pass on the savings 
to Members in the form of lower fees. The increased liquidity 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 incentives such as the ones 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.
    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.

[[Page 49577]]

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 the Exchange's competitors. 
Additionally, Members may opt to disfavor EDGA's pricing if they 
believe that alternatives offer them better value. Accordingly, EDGA 
does not believe that the proposed changes will impair the ability of 
Members or competing venues to maintain their competitive standing in 
the financial markets.
Standard Rate Changes
    Regarding the Exchange's proposal to decrease the standard rate to 
$0.0005 per share for Members' orders that add liquidity, the Exchange 
believes its proposal increases competition because the proposed rate 
is comparable to the rates charged by BYX and BX [sic] for orders that 
add liquidity. The Exchange believes that its proposal will have no 
burden on intramarket competition as the rates apply uniformly to all 
Members.
    Regarding the Exchange's proposal to decrease the standard rebate 
to $0.0002 per share for Members' orders that remove liquidity, the 
Exchange believes its proposal increases competition because the 
proposed rate is comparable to the rates charged by BATS BYX for orders 
that remove liquidity.\17\ The Exchange believes that its proposal will 
have no burden on intramarket competition as the rates apply uniformly 
to all Members.
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    \17\ See BATS BYX Exchange Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf; see also NASDAQ OMX BX, NASDAQ OMX BX Price 
List--Trading & Connectivity, http://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing.
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Fee/Rebate Changes for Flags BY and RY
    The Exchange believes that its proposal to pass through a rebate of 
$0.0001 per share for Members' orders that yield Flag BY would increase 
intermarket competition because it offers customers an alternative 
means to route to BYX 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 to pass through a fee of 
$0.0003 per share for Members' orders that yield Flag RY would increase 
intermarket competition because it offers customers an alternative 
means to route to BYX 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.
Changes to Tiers in Footnote 4
    Regarding the Exchange's proposal to make conforming pricing 
changes to all tiers in Footnote 4 of the Fee Schedule, the Exchange 
believes its proposal increases competition because the proposed rate 
is comparable to the rates charged by BATS BYX for orders that add 
liquidity. The Exchange believes that its proposal will have no burden 
on intramarket competition as the rates apply uniformly to all Members.

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 \18\ and Rule 19b-4(f)(2) \19\ 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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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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-2013-21 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-2013-21. 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-2013-21 and should be 
submitted on or before September 4, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-19692 Filed 8-13-13; 8:45 am]
BILLING CODE 8011-01-P