Document ID: SEC-2010-1247-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2010-08-16T04:00Z

[Federal Register: August 16, 2010 (Volume 75, Number 157)]
[Notices]               
[Page 50019-50020]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr16au10-124]                         

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62680; File No. SR-EDGX-2010-06]

 
Self-Regulatory Organizations; EDGX Exchange, Inc.; Order 
Approving Proposed Rule Change to Amend the EDGX Fee Schedule to Impose 
Fees for Physical Ports Used To Connect To EDGX Exchange

August 10, 2010.

I. Introduction

    On July 1, 2010, the EDGX Exchange, Inc. (``EDGX'' or ``Exchange'') 
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 
amend its fee schedule to begin charging an annual fee to Members and 
non-members for certain physical ports used to connect to the 
Exchange's systems. The proposed rule change was published for comment 
in the Federal Register on July 9, 2010.\3\ The Commission received no 
comment letters regarding the proposal. This order approves the 
proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 62437 (July 1, 
2010), 75 FR 39599.
---------------------------------------------------------------------------

II. Description of the Proposal

    The Exchange proposes to begin charging an annual fee to Members 
and non-members for physical ports used to connect to the Exchange's 
systems for purposes that include order entry and the receipt of 
Exchange data. 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.\4\ Physical port connections can occur either through an 
external telecommunication circuit or a cross-connection. Currently, 
Members and non-members have a number of alternative methods available 
to them for connecting to the Exchange without the need to obtain an 
independent physical connection, including the use of financial 
extranets or service bureaus. The Exchange believes that some Members 
and non-members may wish to connect directly to the Exchange's systems 
with their own dedicated circuit connection. To support their 
requirements and the associated infrastructure costs related to direct 
circuit connectivity, EDGX proposes to charge Members and non-members 
the following annual fees based on the connectivity service type:
---------------------------------------------------------------------------

    \4\ Non-members may include non-member service bureaus that act 
as a conduit for orders entered by Exchange Members that are their 
customers, as well as sponsored participants and market data 
recipients.

------------------------------------------------------------------------
                                                          Annual fee per
                 Connection service type                   physical port
------------------------------------------------------------------------
1 Gb Copper.............................................           5,000
1 Gb Fiber..............................................           7,500
10 Gb Fiber.............................................          10,000
------------------------------------------------------------------------

    Only one physical port is required to access all services for EDGX. 
However, Members and non-members may choose more than one physical port 
and different connection service types based on their needs. The 
Exchange notes that other market centers provide similar services to 
their Members and non-members.\5\
---------------------------------------------------------------------------

    \5\ See Securities Exchange Act Release No. 61545 (February 19, 
2010), 75 FR 8769 (February 25, 2010) (order approving File No. SR-
BATS-2009-032). See also Securities Exchange Act Release No. 62392 
(June 28, 2010), 75 FR 38857 (July 6, 2010) (notice of filing of 
File No. SR-Nasdaq-2010-077).
---------------------------------------------------------------------------

    The Exchange believes that the proposal will offer market 
participants additional EDGX connectivity choices, providing for 
greater access to EDGX while allowing each market participant to choose 
the method of connectivity based on its specific needs.

III. Discussion

    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.\6\ 
Specifically, the Commission finds that the proposal is consistent with 
Section 6(b)(4) of the Act,\7\ which requires the equitable allocation 
of reasonable dues, fees and other charges among its members and other 
persons using its facilities, and Section 6(b)(5) of the Act,\8\ which 
requires, among other things, 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. The 
Commission also finds that the proposed rule change is consistent with 
Section 6(b)(8) of the Act,\9\ which requires that the rules of an 
exchange not impose a burden on competition not necessary or 
appropriate in furtherance of the purpose of the Act. Finally, the 
Commission finds that the proposed rule change is consistent with Rule 
603(a) of Regulation NMS,\10\ which requires an exclusive processor 
that distributes information with respect to quotations for or 
transactions in an NMS stock to do so on terms that are fair and 
reasonable and not unreasonably discriminatory.
---------------------------------------------------------------------------

    \6\ In approving this proposed rule change, the Commission has 
considered the proposed rule's impact on efficiency, competition, 
and capital formation. See 15 U.S.C. 78c(f).
    \7\ 15 U.S.C. 78f(b)(4).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ 15 U.S.C. 78f(b)(8).
    \10\ 17 CFR 242.603(a).
---------------------------------------------------------------------------

    The Commission believes that the proposed physical port fees are 
equitably allocated among Members and non-members and do not unfairly 
or

[[Page 50020]]

unreasonably discriminate between customers, issuers, brokers, or 
dealers because the proposed physical port fees do not distinguish 
among the type of participant but rather are the same for all Members 
and non-members. The Commission also believes that EDGX was subject to 
significant competitive pressure to act equitably, fairly, and 
reasonably in setting the physical port fees, in light of the highly 
competitive nature of the market for execution and routing 
services.\11\
---------------------------------------------------------------------------

    \11\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770 (December 9, 2008) (File No. SR-NYSEArca-2006-
21).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\12\ that the proposed rule change (SR-EDGX-2010-06) be, and hereby 
is, approved.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-20103 Filed 8-13-10; 8:45 am]
BILLING CODE 8010-01-P