Document ID: SEC-2013-1913-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2013-11-12T05:00Z

[Federal Register Volume 78, Number 218 (Tuesday, November 12, 2013)]
[Notices]
[Pages 67430-67432]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-26956]

[[Page 67430]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70811; File No. SR-EDGX-2013-42]

Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Amendments to the EDGX Exchange, Inc. Fee Schedule

November 5, 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 November 1, 2013, EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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 EDGX Rule 15.1(a) and (c) 
(``Fee Schedule'') to: (i) Increase the fee for orders yielding Flag K, 
which routes to NASDAQ OMX PSX (``PSX'') using ROUC or ROUE routing 
strategies; and (ii) decrease the fee for orders yielding Flag RW, 
which routes to the CBOE Stock Exchange (``CBSX'') and adds liquidity. 
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\ The term ``Member'' is defined as ``any registered broker or 
dealer, or any person associated with a registered broker or dealer, 
that has been admitted to membership in the Exchange. A Member will 
have the status of a ``member'' of the Exchange as that term is 
defined in Section 3(a)(3) of the Act.'' See 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) increase 
the fee for orders yielding Flag K, which routes to PSX using ROUC or 
ROUE routing strategies; and (ii) decrease the fee for orders yielding 
Flag RW, which routes to CBSX and adds liquidity.
Flag K
    In securities priced at or above $1.00, the Exchange currently 
assesses a fee of $0.0028 per share for Members' orders that yield Flag 
K, which routes to PSX using ROUC or ROUE routing strategies. The 
Exchange proposes to amend its Fee Schedule to increase this fee to 
$0.0030 per share from $0.0028 per share for Members' orders that yield 
Flag K. 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 charged for routing orders to PSX 
when it does not qualify for a volume tiered reduced fee. The Exchange 
notes that the proposed change is in response to PSX's November 2013 
fee change where PSX increased the fee to remove liquidity via routable 
order types it charges its customers, from a fee of $0.0028 per share 
to a fee of $0.0030 per share for orders that are routed to PSX.\4\ 
When DE Route routes to PSX, it is charged a standard rate of $0.0030 
per share.\5\ DE Route will pass through this rate on PSX to the 
Exchange and the Exchange, in turn, will pass through this rate to its 
Members.
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    \4\ See PSX, NASDAQ OMX PSX Pricing List, http://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing. See also SR-PHLX-
2013-111.
    \5\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered reduced fee on PSX, its rate for Flag 
K will not change.
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Flag RW
    In securities priced at or above $1.00, the Exchange currently 
assesses a fee of $0.0050 per share for Members' orders that yield Flag 
RW, which routes to CBSX and adds liquidity. The Exchange proposes to 
amend its Fee Schedule to decrease this fee from $0.0050 per share to 
$0.0018 per share for Members' orders that yield Flag RW. 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 CBSX when it does not qualify for a volume tiered reduced 
fee. The Exchange notes that the proposed change is in response to 
CBSX's November 2013 fee change where CBSX decreased the fee it charges 
its customers, such as DE Route, from a fee of $0.0050 per share to a 
fee of $0.0018 per share for orders that are routed to CBSX in select 
symbols.\6\ Prior to CBSX's November 2013 fee change, CBSX charged DE 
Route a fee of $0.0050 per share to remove [sic] liquidity from CBSX 
for maker transactions in select symbols and a fee of $0.0018 for all 
other symbols. DE Route charged its Members the higher possible fee of 
$0.0050 per share.\7\ In November 2013, CBSX removed the list of select 
symbols from its fee schedule, thereby decreasing the fee it charges 
its customers, such as DE Route, to remove [sic] liquidity from CBSX in 
select symbols from a fee of $0.0050 per share to a fee of $0.0018 per 
share.\8\ Therefore, when DE Route routes to CBSX, it is now charged a 
standard rate of $0.0018 per share for all symbols.\9\ DE Route will 
pass through this rate on CBSX to the Exchange and the Exchange, in 
turn, will pass through this rate to its Members.
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    \6\ See CBSX, CBOE Stock Exchange (CBSX) Fees Schedule, http://www.cboe.com/publish/cbsxfeeschedule/cbsxfeeschedule.pdf. See also 
SR-CBOE-2013-105.
    \7\ Securities Exchange Act Release No. 69916 (July 2, 2013), 78 
FR 41158 (July 9, 2013) (SR-CBOE-2013-065). Prior to November 1, 
2013, CBSX listed the select symbols in footnote 6 to its fee 
schedule. CBSX, CBOE Stock Exchange (CBSX) Fees Schedule, http://www.cboe.com/publish/cbsxfeeschedule/cbsxfeeschedule.pdf. In its 
filing with the Commission, the Exchange noted that, due to internal 
system limitations, the Exchange would assess a flat fee for all 
orders that yield Flag RW. Securities Exchange Act Release No. 34-
70134 (August 8, 2013), 78 FR 49561 (August 14, 2013) (SR-EDGX-2013-
26).
    \8\ See CBSX, CBOE Stock Exchange (CBSX) Fees Schedule, http://www.cboe.com/publish/cbsxfeeschedule/cbsxfeeschedule.pdf. See also 
SR-CBOE-2013-105.
    \9\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered reduced fee on CBSX, its rate for Flag 
RW will not change.
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Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule on November 1, 2013.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\10\ in general, and 
furthers the objectives of Section 6(b)(4),\11\ in particular, as it is 
designed to provide for the equitable

[[Page 67431]]

allocation of reasonable dues, fees and other charges among its Members 
and other persons using its facilities.
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    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
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Flag K
    The Exchange believes that its proposal to increase the pass 
through fee for Members' orders that yield Flag K from $0.0028 per 
share to $0.0030 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 PSX through DE Route. Prior to PSX's November 2013 fee change, PSX 
charged its members a fee of $0.0028 per share to remove liquidity from 
PSX using routable order types and charged DE Route a fee of $0.0030 
per share to remove liquidity using non-routable order types, which DE 
Route passed through to the Exchange and the Exchange charged a 
discounted fee of $0.0028 to its Members. In November 2013, PSX 
increased the fee it charges its customers, to remove liquidity from 
PSX using routable order types from a fee of $0.0028 per share to a fee 
of $0.0030 per share.\12\ Therefore, the Exchange believes that the 
proposed change in Flag K from a fee of $0.0028 per share to a fee of 
$0.0030 per share is equitable and reasonable because it accounts for 
the pricing changes on PSX. In addition, the proposal allows the 
Exchange to charge its Members a pass-through rate for orders that are 
routed to PSX. Furthermore, 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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    \12\ See PSX, NASDAQ OMX PSX Pricing List, http://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing. See also SR-PHLX-
2013-111.
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Flag RW
    The Exchange believes that its proposal to decrease the pass 
through fee for Members' orders that yield Flag RW from $0.0050 per 
share to $0.0018 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 CBSX through DE Route. Prior to CBSX's November 2013 fee change, 
CBSX charged DE Route a fee of $0.0050 per share to remove [sic] 
liquidity from CBSX for maker transactions in select symbols and a fee 
of $0.0018 per share for all other symbols, which DE Route passed 
through to the Exchange and the Exchange charged its Members the higher 
possible fee of $0.0050 per share.\13\ In November 2013, CBSX removed 
the list of select symbols from its fee schedule, thereby decreasing 
the fee it charges its customers, such as DE Route, to remove [sic] 
liquidity from CBSX in select symbols from a fee of $0.0050 per share 
to a fee of $0.0018 per share.\14\ Therefore, the Exchange believes 
that the proposed change in Flag RW from a fee of $0.0050 per share to 
a fee of $0.0018 per share is equitable and reasonable because it 
accounts for the pricing changes on CBSX. In addition, the proposal 
allows the Exchange to charge its Members a pass-through rate for 
orders that are routed to CBSX. Furthermore, 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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    \13\ Securities Exchange Act Release No. 69916 (July 2, 2013), 
78 FR 41158 (July 9, 2013) (SR-CBOE-2013-065). Prior to November 1, 
2013, CBSX listed the select symbols in footnote 6 to its fee 
schedule. CBSX, CBOE Stock Exchange (CBSX) Fees Schedule, http://www.cboe.com/publish/cbsxfeeschedule/cbsxfeeschedule.pdf. In its 
filing with the Commission, the Exchange noted that, due to internal 
system limitations, the Exchange would assess a flat fee for all 
orders that yield Flag RW. Securities Exchange Act Release No. 34-
70134 (August 8, 2013), 78 FR 49561 (August 14, 2013) (SR-EDGX-2013-
26).
    \14\ See CBSX, CBOE Stock Exchange (CBSX) Fees Schedule, http://www.cboe.com/publish/cbsxfeeschedule/cbsxfeeschedule.pdf. See also 
SR-CBOE-2013-105.
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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 EDGX's pricing if they 
believe that alternatives offer them better value. Accordingly, the 
Exchange 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.
Flag K
    The Exchange believes that its proposal to pass through a fee of 
$0.0030 per share for Members' orders that yield Flag K would increase 
intermarket competition because it offers customers an alternative 
means to route to PSX for the same price as entering orders on PSX 
directly. The Exchange believes that its proposal would not burden 
intramarket competition because the proposed rate would apply uniformly 
to all Members.
Flag RW
    The Exchange believes that its proposal to pass through a fee of 
$0.0018 per share for Members' orders that yield Flag RW would increase 
intermarket competition because it offers customers an alternative 
means to route to CBSX for the same price as entering orders on CBSX 
directly. The Exchange believes that its proposal would not burden 
intramarket competition because the proposed rate would 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 \15\ and Rule 19b-4(f)(2) \16\ 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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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 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-EDGX-2013-42 on the subject line.

[[Page 67432]]

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-EDGX-2013-42. 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-EDGX-2013-42 and should be 
submitted on or before December 3, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-26956 Filed 11-8-13; 8:45 am]
BILLING CODE 8011-01-P