Document ID: SEC-2012-1069-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2012-07-05T04:00Z

[Federal Register Volume 77, Number 129 (Thursday, July 5, 2012)]
[Notices]
[Pages 39749-39751]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-16435]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67298; File No. SR-EDGX-2012-22]

Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
New Simultaneous Routing Functionality

June 28, 2012.
    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 June 19, 2012, EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which items have been prepared by the Exchange. 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

    EDGX proposes to modify existing routing options contained in EDGX 
Rule 11.9(b)(3) to provide Users \3\ with new simultaneous routing 
functionality as a means by which Members' orders may be routed to 
certain destinations on the System routing table. The text of the 
proposed rule change is attached as Exhibit 5 and is available on the 
Exchange's 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 Rule 1.5(ee).
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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 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 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's current list of routing options is codified in Rule 
11.9(b)(3). In this filing, the Exchange proposes to amend paragraph 
(3) of Rule 11.9(b) to indicate that the Exchange reserves the right to 
route orders both sequentially and simultaneously. This amendment 
allows for simultaneous routing to certain destinations on the System 
routing table. With respect to Rules 11.9(b)(3)(a), (b), (h), and (m), 
specifically, the Exchange currently sends orders to certain 
destinations on the System routing table only in a sequential manner. 
For example, if an order cannot be filled after checking for available 
shares on the Exchange's book, the Exchange will route such order to 
certain destinations on the System routing table one at a time until 
all such destinations are exhausted, the order is cancelled, or the 
order is filled. As a result of the proposed change in functionality, 
which would allow such

[[Page 39750]]

orders to be sent either sequentially or simultaneously, language in 
paragraph (3) of Rule 11.9(b) will be amended to account for the fact 
that the Exchange reserves the right to ``route orders simultaneously 
or sequentially''. Other routing strategies in Rule 11.9(b) are already 
written broadly enough to allow for both sequential or simultaneous 
routing of orders, which the Exchange operates in a discretionary 
manner depending on the type of venues with which the order flow is 
routed to.\4\ Therefore, this amendment simply deletes the word 
``sequentially'' from Rules 11.9(b)(3)(a), (b), (h), and (m) so that 
the Exchange has the discretion to do simultaneous or sequential 
routing as to these strategies.
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    \4\ Regarding simultaneous routing, the Exchange may, for 
example, use a pro-rata mechanism to allocate the number of shares 
from the parent order (i.e., a child order) among multiple dark 
pools where each applicable venue will be assigned a relative weight 
based on a variety of factors including, but not limited to, 
latency, liquidity and transaction costs.
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    Simultaneous routing is an improvement on the current sequential 
manner in which orders are filled because it allows an order to be 
broken up into child orders to be sent to multiple destinations at one 
time instead of to one venue after another. Doing so has the potential 
to improve an order's fill rate, as well as reduce latency. The 
Exchange believes that the proposed introduction of this functionality 
will provide Users with increased access to multiple sources of 
liquidity and greater flexibility in routing orders, without having to 
develop their own complicated routing strategies. The Exchange also 
believes the proposed modification will provide additional specificity 
to the Exchange's rulebook regarding routing strategies and will 
further enhance transparency with respect to Exchange routing 
offerings.
    The Exchange will notify its Members in an information circular of 
(a) the exact implementation date of this rule change, which will be no 
later than July 31, 2012; and (b) the manner in which certain routing 
options may function (i.e., sequentially or simultaneously), in an 
effort to afford Members with transparency regarding the same.
2. Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b)(5) of the Act,\5\ which requires the rules of an 
exchange 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. More specifically, the Exchange believes that the 
proposed rule change will improve an order's fill rate as well as 
reduce latency. The proposed rule change will thus contribute to 
perfecting the mechanism of a free and open market and a national 
market system, and is also consistent with the protection of investors 
and the public interest. The proposed rule change and resulting 
information circulars that the Exchange will issue will afford Members 
transparency into how various routing options may function (whether 
simultaneous or sequential).
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    \5\ 15 U.S.C. 78f(b)(5).
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the proposed rule change does not (i) Significantly affect 
the protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act \6\ and Rule 19b-4(f)(6) 
thereunder.\7\
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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written 
notice of its intent to file the proposed rule change along with a 
brief description and the text of the proposed rule change, at least 
five business days prior to the date of filing of the proposed rule 
change, or such shorter time as designated by the Commission.
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    A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the 
Act \8\ normally does not become operative for 30 days after the date 
of its filing. However, Rule 19b-4(f)(6) \9\ permits the Commission to 
designate a shorter time if such action is consistent with the 
protection of investors and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposal 
may become operative immediately upon filing, noting that similar 
functionality is already offered by other market centers.\10\ The 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Therefore, the Commission designates the proposal operative upon 
filing.\11\
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    \8\ 17 CFR 240.19b-4(f)(6).
    \9\ 17 CFR 240.19b-4(f)(6).
    \10\ See BATS Rule 11.13(a)(3)(B)-(D) (routing strategies listed 
in these rules may be routed simultaneously).
    \11\ For purposes only of waiving the 30-day operative delay, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

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-2012-22 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-EDGX-2012-22. 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

[[Page 39751]]

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 a.m. and 3 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-2012-22 and should be submitted on or before July 
26, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
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    \12\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-16435 Filed 7-3-12; 8:45 am]
BILLING CODE 8011-01-P