Document ID: SEC-2013-0851-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGA Exchange, Inc.
Posted Date: 2013-05-07T04:00Z

[Federal Register Volume 78, Number 88 (Tuesday, May 7, 2013)]
[Notices]
[Pages 26667-26669]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-10703]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69481; File No. SR-EDGA-2013-11]

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

April 30, 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 April 23, 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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[[Page 26668]]

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\ and non-Members of the Exchange pursuant to EDGA Rule 
15.1(a) and (c). All of the changes described herein are applicable to 
EDGA Members and non-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
    In SR-EDGA-2010-06,\4\ the Exchange adopted an annual fee per 
physical port utilized by Members and non-Members to connect to the 
Exchange's System \5\ for order entry and the receipt of Exchange data, 
among other reasons. A physical port is a port used by a Member or non-
Member to connect into the Exchange at the data centers where Exchange 
servers are located. Physical port connections can occur either through 
an external telecommunication circuit or a cross-connection. The 
Exchange noted at the time of filing that other market centers provided 
similar services.\6\ In SR-EDGA-2013-03,\7\ the Exchange amended its 
fee schedule, effective February 1, 2013, to eliminate the option for 
Members and non-Members to pay for physical ports on an annual basis.
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    \4\ See Securities Exchange Act Release No. 62436 (July 1, 
2010), 75 FR 39600 (July 9, 2010) (SR-EDGA-2010-06).
    \5\ As defined in Exchange Rule 1.5(cc).
    \6\ See Securities Exchange Act Release No. 62436 (July 1, 
2010), 75 FR 39600 (July 9, 2010) (SR-EDGA-2010-06) (citing 
Securities Exchange Act Release No. 61545 (February 19, 2010), 75 FR 
8769 (February 25, 2010) (SR-BATS-2009-032) and Securities Exchange 
Act Release No. 62392 (June 28, 2010), 75 FR 38857 (July 6, 2010) 
(SR-NASDAQ-2010-077)).
    \7\ See Securities Exchange Act Release No. 68830 (February 5, 
2013), 78 FR 9749 (February 11, 2013) (SR-EDGA-2013-03).
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    The Exchange currently assesses the following physical port fees 
for Members and non-Members on a monthly basis: $500 per physical port 
that connects to the System via a 1 gigabyte Copper circuit; $750 per 
physical port that connects to the System via a 1 gigabyte Fiber 
circuit; and $1,000 per physical port that connects to the System via a 
10 gigabyte Fiber circuit.
    The Exchange proposes to amend its fee schedule to account for 
increased infrastructure costs associated with providing physical 
ports. As such, the Exchange proposes to amend its fee schedule, 
effective May 1, 2013, to assess the following physical port fees for 
Members and non-Members: (i) Increase the monthly fee per physical port 
that connects to the System via a 1 gigabyte Fiber circuit from $750 to 
$1,000; (ii) increase the monthly fee per 10 gigabyte Fiber circuit 
from $1,000 to $2,000. The Exchange notes that the fee charged per 1 
gigabyte Copper circuit will remain unchanged.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\8\ in general, and 
furthers the objectives of Section 6(b)(4),\9\ in particular, as it 
provides 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 proposal represents an equitable 
allocation of reasonable dues, fees, and other charges as its billing 
for port fees is reasonably constrained by competitive 
alternatives.\10\ If a particular exchange charges excessive fees for 
connectivity, affected Members and non-Members will opt to terminate 
their connectivity arrangements with that exchange, and adopt a 
possible range of alternative strategies, including routing to the 
applicable exchange through another participant or market center or 
taking that exchange's data indirectly. Accordingly, if the Exchange 
charges excessive fees, it would stand to lose not only connectivity 
revenues but also revenues associated with the execution of orders 
routed to it, and, to the extent applicable, market data revenues. The 
Exchange believes that this competitive dynamic imposes powerful 
restraints on the ability of any exchange to charge unreasonable fees 
for connectivity.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
    \10\ See Securities Exchange Act Release No. 69226 (March 25, 
2013), 78 FR 19350 (March 29, 2013) (SR-BATS-2013-018). See, e.g., 
Nasdaq Rule 7034(b); BATS BZX & BYX Exchange Fee Schedules, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf.
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    Furthermore, the proposed rule change is also an equitable 
allocation of reasonable dues, fees, and other charges as the Exchange 
believes that the increased fees obtained will enable it to cover its 
increased infrastructure costs associated with establishing physical 
ports to connect to the Exchange's systems at the Exchange's primary 
and secondary data centers. The additional revenue from the increased 
fees will also enable the Exchange to continue to maintain and improve 
its market technology and services. The Exchange believes that the 
proposed fees for 1 gigabyte Fiber circuit of $1,000 per month and for 
10 gigabyte Fiber circuit of $2,000 per month are reasonable in that 
they are in the same range as analogous fees charged by other 
exchanges, which are $1000 per month for 1 gigabyte connectivity and 
range from $2,500-$5,000 per month for 10 gigabyte circuits.\11\
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    \11\ See, e.g., Nasdaq Rule 7034(b); BATS BZX & BYX Exchange Fee 
Schedules, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf.
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    Finally, the Exchange believes that the proposed rates are 
equitable and non-discriminatory in that they apply uniformly to all 
Members and non-Members. Members and non-Members will continue to 
choose whether they want more than one physical port and choose the 
method of connectivity based on their specific needs.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. As discussed above, the 
Exchange believes that fees for connectivity are constrained by the 
robust competition for order flow among exchanges and non-exchange 
markets. Further, excessive fees for connectivity, including port fee 
access, would serve to impair an exchange's ability to compete for 
order flow rather than burdening competition. The proposal to increase 
the fees for physical connectivity would bring the fees charged by the 
Exchange closer to similar fees charged for physical connectivity by 
other exchanges.\12\
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    \12\ Id.

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[[Page 26669]]

    In addition, the proposed rule change does not impose any burden on 
intramarket competition as the fees are uniform for all Members and 
non-Members. The Exchange notes that Members and non-Members also have 
the ability to obtain access to these services without the need for an 
independent physical port connection, such as through alternative means 
of financial extranets and service bureaus that act as a conduit for 
orders entered by Members and non-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 \13\ and Rule 19b-4(f)(2) \14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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-2013-11 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-2013-11. 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-2013-11 and should be 
submitted on or before May 28, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Kevin M. O'Neill,
Deputy Secretary.
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    \15\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-10703 Filed 5-6-13; 8:45 am]
BILLING CODE 8011-01-P