Document ID: SEC-2016-0041-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2016-01-08T05:00Z

[Federal Register Volume 81, Number 5 (Friday, January 8, 2016)]
[Notices]
[Pages 987-989]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-102]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76816; File No. SR-EDGX-2015-67]

Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Fees for Use of EDGX Exchange, Inc.

January 4, 2016.
    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 December 22, 2015, 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 Exchange. The 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the fee schedule applicable 
to Members \5\ and non-members of the Exchange pursuant to EDGX Rules 
15.1(a) and (c) (``Fee Schedule'') to adopt a new tier called the 
Investor Depth Tier under footnote 1.
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    \5\ The term ``Member'' is defined as ``any registered broker or 
dealer that has been admitted to membership in the Exchange.'' See 
Exchange Rule 1.5(n).
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    The text of the proposed rule change is available at the Exchange's 
Web site at www.batstrading.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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 Exchange 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 Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Currently, the Exchange determines the liquidity adding rebate that 
it will provide to Members using the Exchange's tiered pricing 
structure. Under such pricing structure, a Member will receive a rebate 
of anywhere between $0.0025 and $0.0035 per share executed, depending 
on the volume tier for which such Member qualifies. The Exchange 
proposes to adopt a new tier called the Investor Depth Tier under 
footnote 1 of the Fee Schedule. Members who would qualify for the 
Investor Depth Tier would receive a rebate of $0.0033 per share where 
they: (i) Add an ADV \6\ of at least 0.15% of the TCV; \7\ (ii) have an 
``added liquidity'' as a percentage of ``added plus removed liquidity'' 
of at least 85%; and (3) add an ADV of at least 500,000 share as Non-
displayed \8\ orders that yield fee code HA.\9\ The Exchange proposes 
to implement this amendment to its Fee Schedule on January 4, 2016.\10\
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    \6\ As defined in the Exchange's Fee Schedule available at 
http://batstrading.com/support/fee_schedule/edgx/.
    \7\ Id.
    \8\ See Exchange Rule 11.6(e)(2).
    \9\ Fee code HA is appended to Non-displayed orders that add 
liquidity on the Exchange. See the Exchange's Fee Schedule available 
at http://batstrading.com/support/fee_schedule/edgx/.
    \10\ The Exchange notes that the Fee Schedule's date was amended 
to January 4, 2016 in file no. SR-EDGX-2015-62. See Securities 
Exchange Act Release No. 76713 (December 21, 2015).

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[[Page 988]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\11\ in general, and 
furthers the objectives of Section 6(b)(4),\12\ 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. 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 tier is equitable and non-discriminatory in it would apply 
uniformly to all Members. The Exchange believes the rates remain 
competitive with those charged by other venues and, therefore, 
reasonable and equitably allocated to Members.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
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    Volume-based rebates such as that proposed herein have been widely 
adopted by equities and options exchanges and are equitable because 
they are open to all Members on an equal basis and provide additional 
benefits or discounts that are reasonably related to: (i) The value to 
an exchange's market quality; (ii) associated higher levels of market 
activity, such as higher levels of liquidity provision and/or growth 
patterns; and (iii) introduction of higher volumes of orders into the 
price and volume discovery processes. The Exchange believes that the 
proposed tier is a reasonable, fair and equitable, and not unfairly 
discriminatory allocation of fees and rebates because they will provide 
Members with an additional incentive to reach certain thresholds on the 
Exchange.
    In particular, the Exchange believes the addition of the Investor 
Depth Tier is a reasonable means to encourage Members to increase their 
liquidity on the Exchange. The Exchange further believes that the 
proposed Investor Depth Tier represents an equitable allocation of 
reasonable dues, fees, and other charges because the thresholds 
necessary to achieve the tier encourages Members to add displayed 
liquidity to the EDGX Book \13\ each month, as only the displayed 
liquidity in this tier is awarded the rebate of $0.0033 per share. This 
tier also recognizes the contribution that non-displayed liquidity 
provides to the marketplace, including: (i) Adding needed depth to the 
EDGX market; (ii) providing price support/depth of liquidity; and (iii) 
increasing diversity of liquidity to EDGX. The increased liquidity 
benefits all investors by deepening EDGX'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.
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    \13\ The EDGX Book is the System's electronic file of orders. 
See Exchange Rule 1.5(d).
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    The Exchange also notes that the criteria and rebate under the 
Investor Depth Tier is equitable and reasonable as compared to other 
tiers offered by the Exchange. For example, under the Investor Tier 
Members may receive a rebate of $0.0032 per share where they (i) add an 
ADV of at least 0.15% of the TCV; and (ii) have an ``added liquidity'' 
as a percentage of ``added plus removed liquidity'' of at least 85%. 
These thresholds mirror the first two thresholds required to meet the 
proposed Investor Depth Tier. However, in order to achieve the higher 
rebate of $0.0033 per share provided by the proposed Investor Depth 
Tier, Members must also add an ADV of at least 500,000 share as Non-
displayed orders that yield fee code HA.\14\ Therefore, the Exchange 
believes the proposed Investor Depth Tier is consistent with Section 
6(b)(4) \15\ of the Act as the more stringent criteria correlates with 
the tier's higher rebate.
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    \14\ The Exchange notes that Market Depth Tiers 1 and 2 under 
footnote 1 also require that Members add an ADV of certain number of 
shares as Non-displayed orders that yield fee code HA, in addition 
other added ADV requirements.
    \15\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe its proposed amendment to its Fee 
Schedule would 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 the proposed change represents a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. Additionally, Members may opt to 
disfavor the Exchange's pricing if they believe that alternatives offer 
them better value. Accordingly, the Exchange does not believe that the 
proposed change will impair the ability of Members or competing venues 
to maintain their competitive standing in the financial markets.
    The Exchange does not believe that the proposed new tier would 
burden competition, but instead, enhances competition, as it is 
intended to increase the competitiveness of and draw additional volume 
to the Exchange. As stated above, the Exchange 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 structures to be 
unreasonable or excessive. The proposed change is generally intended to 
enhance the rebates for liquidity added to the Exchange, which is 
intended to draw additional liquidity to the Exchange. The Exchange 
does not believe the proposed tier would burden intramarket competition 
as it would apply to all Members uniformly.

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 \16\ and paragraph (f) of Rule 19b-4 
thereunder.\17\ At any time within 60 days of the filing of the 
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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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f).
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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 No. SR-EDGX-2015-67 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange

[[Page 989]]

Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File No. SR-EDGX-2015-67. 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 such filing will also 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 No. SR-EDGX-2015-67 and should be 
submitted on or before January 29, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-102 Filed 1-7-16; 8:45 am]
 BILLING CODE 8011-01-P