Document ID: SEC-2010-1386-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2010-09-10T04:00Z

[Federal Register: September 10, 2010 (Volume 75, Number 175)]
[Notices]               
[Page 55385-55386]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr10se10-103]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-62846; File No. SR-EDGX-2010-12]

 
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

September 3, 2010.
    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 August 31, 2010, the EDGX Exchange, Inc. (the ``Exchange'' or 
the ``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 the 
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) to 
(i) add a price guarantee to footnote 1 of its fee schedule; and (ii) 
make other technical amendments to its fee schedule.
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    \3\ A Member is any registered broker or dealer that has been 
admitted to membership in the Exchange.
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    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://www.directedge.com, on the Commission's Web 
site at http://www.sec.gov, 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 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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to make several amendments to its fee 
schedule. First, it proposes to add a price guarantee to footnote 1 of 
the schedule. This guarantee would state that ``Any Member meeting the 
following criteria: (i) Adding 10,000,000 shares or more of liquidity 
to EDGX, (ii) where such added liquidity on EDGX is at least 5,000,000 
shares greater than the previous calendar month; and (iii) but for the 
liquidity added on EDGX, such Member would have qualified for a better 
rebate with respect to liquidity added on another exchange or ECN that 
the Member previously qualified for in the three calendar months prior 
to meeting the above-described criteria in (i) and (ii), shall be 
reimbursed the difference between the rebate received and the rebate 
potentially received, so long as source documentation evidencing the 
above is provided to the Exchange within fifteen (15) calendar days 
from the end of the relevant month. A Member can only receive 
reimbursement with respect to two consecutive calendar months. With 
respect to the second calendar month's reimbursement, the relevant 
period in determining whether criteria (iii) is satisfied is the period 
three calendar months prior to the first of the two consecutive 
calendar months the Member meets the above-described criteria in (i) 
and (ii).''
    The Exchange believes that the price guarantee, as described above, 
is equitable in that it is available to all Members migrating volumes 
to the Exchange. Furthermore, the price guarantee limits the increase 
in a Members' execution costs associating with failing to meet the 
volume thresholds of other exchanges and ECNs while a Member is in the 
process of migrating volumes from one exchange to another. The Exchange 
believes that the difficulty in transitioning volume has incentivized 
Members to leave volume on certain exchanges and ECNs rather than 
incurring the costs of migrating volumes to the Exchange. By 
facilitating

[[Page 55386]]

the migration of volumes in the short term through this guarantee, the 
Exchange minimizes the cost of Members pursuing the most economic 
execution cost model. The resulting migration of Members' volumes to 
the Exchange will reduce the fixed costs associated with the Exchange 
supporting its overall volumes and reduce costs on a per share basis. 
This will, in turn, facilitate the Exchange's ability to maintain lower 
transactional costs for all Members.
    Secondly, the Exchange proposes to make a technical amendment to 
the schedule. The Exchange proposes to delete references in footnote 1 
that describe how certain volume thresholds were pro-rated for the 
month of July 2010 as these descriptions are no longer relevant.
    EDGX Exchange proposes to implement these amendments to the 
Exchange fee schedule on September 1, 2010.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\4\ in general, and 
furthers the objectives of Section 6(b)(4),\5\ 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 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. Specifically, the Exchange believes that the 
price guarantee, as described above, facilitates the migration of 
volumes to the Exchange by subsidizing the cost of migrating volumes to 
the Exchange. Finally, the Exchange believes that the proposed rates 
are equitable 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 those members that opt to direct orders to the Exchange 
rather than competing venues.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4).
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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 Regarding 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 \6\ and Rule 19b-4(f)(2) \7\ 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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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-EDGX-2010-12 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-2010-12. This file 
number should be included on the subject line if e-mail 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 
a.m. and 3 p.m. Copies of such 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 publicly available. All 
submissions should refer to File Number SR-EDGX-2010-12 and should be 
submitted on or before October 1, 2010.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\8\
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    \8\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-22598 Filed 9-9-10; 8:45 am]
BILLING CODE 8010-01-P