Document ID: SEC-2012-0938-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2012-06-13T04:00Z

[Federal Register Volume 77, Number 114 (Wednesday, June 13, 2012)]
[Notices]
[Pages 35453-35455]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-14341]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67158; File No. SR-EDGX-2012-19]

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

June 7, 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 May 31, 2012 the 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). All 
of the changes described herein are applicable to EDGX Members. The 
text of the proposed rule change is available on the Exchange's 
Internet Web site at http://

[[Page 35454]]

www.directedge.com, at the Exchange's principal office, and at the 
Public Reference Room of the Commission.
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    \3\ A Member is any registered broker or dealer, or any person 
associated with a registered broker or dealer, that has been 
admitted to membership in the Exchange.
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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

Purpose
    The Exchange proposes to amend the percentage associated with the 
``added liquidity'' to ``removed liquidity'' ratio in part (ii) of the 
Investor Tier (Footnote 13) from 70% to 60% and pluralize ``Member.'' 
Therefore, Footnote 13, will read, ``Members can qualify for an 
Investor Tier and be provided a rebate of $0.0030 per share if they 
meet the following criteria: (i) On a daily basis, measured monthly, 
posts an ADV of at least 8 million shares on EDGX where added flags are 
defined as B, HA, V, Y, MM, 3, or 4; (ii) have an ``added liquidity'' 
to ``removed liquidity'' ratio of at least 60% where added flags are 
defined as B, HA, V, Y, MM, 3, or 4 and removal flags are defined as 
BB, MT, N, W, PI, or 6; and (iii) have a message-to-trade ratio of less 
than 6:1.''
Codification of Late Fees
    Currently, the Exchange charges additional fees to Members that 
fail to pay all dues, fees, assessments and charges owed to the 
Exchange by the prescribed due date. Exchange Rule 15.1(a) states that 
the Exchange may prescribe such reasonable dues, fees, assessments or 
other charges as it may, in the Exchange discretion, deem appropriate. 
In addition, paragraph 13 of the Exchange's User Agreement,\4\ which is 
signed by all Members as part of their membership in the Exchange, also 
provides that the Member agrees to pay the Exchange a late charge of 1% 
per month on all past due amounts that are not the subject of a 
legitimate and bona fide dispute. The Exchange proposes to codify this 
language in Footnote d on its fee schedule stating that the Exchange 
will assess a charge of 1% per month on the past due portion of the 
balance on a Member's account that is past due. This fee will begin to 
accrue on a daily basis for items not paid within the 30 day payment 
terms until the item is paid in full. Late fees incurred will be 
included as line items on subsequent invoices.
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    \4\ See the User Agreement posted to the Exchange's Web site at: 
http://www.directedge.com/Portals/0/docs/MembDocs/EDGX%20Complete%20Exch%20Appl%201%20%28V%202.0%29.pdf.
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    The Exchange proposes to implement these amendments to its fee 
schedule on June 1, 2012.
Basis
    The Exchange believes that the proposed rule changes are consistent 
with the objectives of Section 6 of the Act,\5\ in general, and 
furthers the objectives of Section 6(b)(4),\6\ 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.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
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    The Exchange proposes to amend the percentage associated with the 
``added liquidity'' to ``removed liquidity'' ratio in part (ii) of the 
Investor Tier (Footnote 13) from 70% to 60% because the Exchange 
believes that a ratio of at least 60% represents a more appropriate 
criterion for Members to qualify for a rebate of $0.0030 per share 
associated with the Investor Tier. The Exchange believes the proposed 
ratio incentivizes Members to direct a high quality order flow to the 
Exchange because the Exchange believes that such high quality liquidity 
provisions will encourage price discovery and market transparency and 
improve investor protection by encouraging growth in liquidity. In 
addition, the Exchange also believes that the proposal is non-
discriminatory because it applies uniformly to all Members.
    In order to provide additional transparency to Members, the 
Exchange proposes to codify its existing policy regarding late fees in 
Footnote d of the fee schedule. The Exchange believes that by including 
proposed Footnote d it will help to promote market transparency and 
improve investor protection by displaying the Exchange's policy 
regarding late fees to Members on its fee schedule along with the 
Exchange's other rebates and charges. The Exchange also notes that it 
is equitable and reasonable to charge a Member a late fee on past due 
balances because it offsets administrative and collection costs 
associated with past due accounts and incentivizes Members to pay on 
time in accordance with the terms of the Member's User Agreement. In 
addition, a late fee of 1% is reasonable because it is in line with the 
late fees assessed by other exchanges.\7\ The Exchange believes that 
the proposal is non-discriminatory because it applies to all Members.
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    \7\ See also, the late fees listed on the Chicago Board Options 
Exchange's fee schedule at: http://www.cboe.com/publish/feeschedule/CBOEFeeSchedule.pdf; and NASDAQ Rule 7032 regarding late fees.
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    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 rates are 
equitable and non-discriminatory in that they apply uniformly to all 
Members. The Exchange believes the fees and credits remain competitive 
with those charged by other venues and therefore continue to be 
reasonable and equitably allocated to Members.

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

    The proposed rule change does not 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 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) of the Act \8\ and Rule 19b-4(f)(2)\9\ 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

[[Page 35455]]

investors, or otherwise in furtherance of the purposes of the Act.
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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 17 CFR 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-2012-19 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-2012-19. 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-2012-19 and should be 
submitted on or before July 5, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-14341 Filed 6-12-12; 8:45 am]
BILLING CODE 8011-01-P