Document ID: SEC-2010-1451-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2010-09-23T04:00Z

[Federal Register: September 23, 2010 (Volume 75, Number 184)]
[Notices]               
[Page 58003-58004]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr23se10-110]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62929; File No. SR-EDGX-2010-09]

 
Self-Regulatory Organizations; EDGX Exchange, Inc.; Order 
Approving a Proposed Rule Change Relating to a Revenue Sharing Program 
With Correlix, Inc.

September 17, 2010.
    On July 28, 2010, EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to establish a revenue sharing program with 
Correlix, Inc. (``Correlix''). The proposed rule change was published 
for comment in the Federal Register on August 13, 2010.\3\ The 
Commission received no comment letters on the proposal. This order 
approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 62682 (August 10, 
2010), 75 FR 50029.
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    In its proposal, EDGX described real-time analytical tools offered 
by Correlix to measure the latency of orders to and from the System, 
and also described the terms of the pricing and the revenue sharing 
agreement between Correlix and the Exchange. In addition, the Exchange 
represented that under the agreement, EDGX will receive 30% of the 
total monthly subscription fees received by Correlix from parties who 
have contracted directly with Correlix to use their RaceTeam latency 
measurement service for the Exchange. According to the Exchange, EDGX 
will not bill or contract with any Correlix RaceTeam customer directly.
    Pricing for the Correlix RaceTeam product for the Exchange varies 
depending on the depth of latency information requested, the number of 
unique MPIDs subscribed by the customer, and the number of ports 
available for monitoring by Correlix. For boundary-level Exchange 
latency information,\4\ the fee will be an initial $1,500 monthly base 
fee for the first 25 ports associated in aggregate with any of the 
MPIDs selected by the Member for latency monitoring. For each 
additional 25 ports associated in aggregate with any of the MPIDs 
selected by the Member for latency monitoring, an additional monthly 
charge of $750 will be assessed. For match-level Exchange latency 
information,\5\ the fee will be an initial $2,000 monthly base fee for 
the first 25 ports associated in aggregate with any of the MPIDs 
selected for latency monitoring, and an additional $1000 per month for 
each additional 25 ports associated in aggregate with any of the MPIDs 
selected for latency monitoring.
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    \4\ The time that elapses from an order message's receipt by an 
Exchange device until the time that a matching engine 
acknowledgement with respect to such order message is transmitted 
from the Exchange device back to the user. For market data, the time 
measurement will be from the time that the market data engine 
receives a market data update until the time that the market data 
update is transmitted from the Exchange device back to the user.
    \5\ In addition to the boundary-level Exchange latency 
information, match level information will also provide further 
elapsed time detail for messaging between Exchange internal systems.
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    According to the Exchange, Correlix will see an individualized 
unique Exchange-generated identifier that will allow Correlix RaceTeam 
to determine round-trip order time,\6\ from the time the order reaches 
the Exchange extranet, through the Exchange matching engine, and back 
out of the Exchange extranet. In its proposal, the Exchange represented 
that the RaceTeam product offering does not measure latency outside of 
the Exchange extranet. Further, EDGX stated that the unique identifier 
serves as a technological information barrier so that the RaceTeam data 
collector will only be able to view data for Correlix RaceTeam 
subscriber firms related to latency. Accordingly, Correlix will not see 
subscriber's individual order detail such as security, price or size; 
individual RaceTeam subscribers' logins will restrict access to only 
their own latency data; and Correlix will not see specific information 
regarding the trading activity of non-subscribers.
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    \6\ According to EDGX, the product measures latency of orders 
regardless of whether the orders are rejected, executed, or 
partially executed.
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    After careful review, the Commission finds that the proposed rule 
change is consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange.\7\ 
In particular, the Commission finds that the proposed rule change is 
consistent with Section

[[Page 58004]]

6(b)(4) of the Act,\8\ which requires that the rules of a national 
securities exchange provide for the equitable allocation of reasonable 
dues, fees and other charges among its members and issuers and other 
persons using its facilities, and with Section 6(b)(5) of the Act,\9\ 
which requires, among other things, that that the rules of a national 
securities exchange be designed to promote just and equitable 
principles of trade, 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, and not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \7\ In approving this proposal, the Commission has considered 
the proposed rule's impact on efficiency, competition, and capital 
formation. See 15 U.S.C. 78c(f).
    \8\ 15 U.S.C. 78f(b)(4).
    \9\ 15 U.S.C. 78f(b)(5).
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    Pursuant to the arrangement, EDGX makes the RaceTeam product 
uniformly available to all customers who voluntarily request it and pay 
the fees as detailed in the proposal, pursuant to a standard non-
discriminatory pricing schedule. In addition, the Commission believes 
that the proposal will further the protection of investors and the 
public interest because: (1) Correlix will only be able to view data 
related to latency for Correlix RaceTeam subscriber firms; (2) Correlix 
will not see a subscriber's individual order detail such as security, 
price or size; (3) individual RaceTeam subscribers' logins will 
restrict access to only their own latency data; and (4) Correlix will 
not see specific information regarding the trading activity of non-
subscribers.
    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\10\ that the proposed rule change (SR-EDGX-2010-09) be, and hereby 
is, approved.
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    \10\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-23755 Filed 9-22-10; 8:45 am]
BILLING CODE 8010-01-P