Document ID: SEC-2015-0212-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2015-02-03T05:00Z

[Federal Register Volume 80, Number 22 (Tuesday, February 3, 2015)]
[Notices]
[Pages 5854-5856]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2015-02015]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74165; File No. SR-EDGX-2015-04]

Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Make 
Non-Substantive Amendments and Clarifications to the Fee Schedule

January 28, 2015.
    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 January 16, 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.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend its fees and rebates 
applicable to Members \5\ of the Exchange pursuant to EDGX Rule 15.1(a) 
and (c) (``Fee Schedule'') to make several non-substantive amendments 
and clarifications as part of its migration onto the same technology 
platform as its affiliated exchanges, BATS Exchange, Inc. (``BZX'') and 
BATS Y-Exchange, Inc. (``BYX'', collectively with BZX, ``BATS''). The 
proposed rule change does not amend any existing fees or rebates, nor 
do they alter the manner in which the Exchange assesses fees or 
calculates rebates.
---------------------------------------------------------------------------

    \5\ The term ``Member'' is defined as ``any registered broker or 
dealer, or any person associated with a registered broker or dealer, 
that has been admitted to membership in the Exchange. A Member will 
have the status of a ``member'' of the Exchange as that term is 
defined in Section 3(a)(3) of the Act.'' See Exchange Rule 1.5(n).
---------------------------------------------------------------------------

    The text of the proposed rule change is available at the Exchange's 
Web site at http://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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    Earlier this year, the Exchange and its affiliate, EDGA Exchange, 
Inc. (``EDGA'') received approval to effect a merger (the ``Merger'') 
of the Exchange's parent company, Direct Edge Holdings LLC, with BATS 
Global Markets, Inc., the parent of BATS (together with BATS, EDGA and 
EDGX, the ``BGM Affiliated Exchanges'').\6\ In the context of the 
Merger, the BGM Affiliated Exchanges are working to migrate EDGX and 
EDGA onto the BATS technology platform, and align certain system 
functionality and rules, retaining only intended differences between 
the BGM Affiliated Exchanges. As a result of these efforts, the 
Exchange proposes to make several non-substantive amendments and 
clarifications to its Fee Schedule as part of its migration onto the 
BATS technology platform. The Exchange notes that none of these changes 
substantively amend any fee or rebate, nor do they alter the manner in 
which the Exchange assesses fees or calculates rebates. Specifically, 
the Exchange is proposing the following:
---------------------------------------------------------------------------

    \6\ See Securities Exchange Act Release No. 71449 (January 30, 
2014), 79 FR 6961 (February 5, 2014) (SR-EDGX-2013-43; SR-EDGA-2013-
34).
---------------------------------------------------------------------------

     To eliminate the lead-in text that reads, ``Download in 
pdf format. Rebates & Charges for Adding, Removing or Routing Liquidity 
per share for Tape A, B, & C securities \1\'' and replace it with the 
heading, ``Transaction Fees.''
     Replace references to the term ``liquidity flag'' or 
``flag'' with the term ``fee code'' throughout the Fee Schedule.
     Amend the bullets under the renamed section, Transactions 
to: (i) Clarify that the rates apply to a Member's transactions by 
adding the term ``transactions''; and (ii) add a statement to clarify 
that, unless otherwise noted, all routing fees and rebates are for 
removing liquidity from the destination venue.
     Rename the section entitled, ``Liquidity Flags'' as ``Fee 
Codes and Associated Fees.'' The Exchange also proposes to: (i) Clarify 
under this section which fee codes apply to removing or adding 
liquidity on EDGX; (ii) amend certain terminology to ensure consistent 
phrasing and to align with similar language included in the BATS fee 
schedules; and (iii) amend: (a) Fee code O to clarify that it applies 
to orders routed to the listing market opening or re-opening cross; (b) 
fee code R to clarify

[[Page 5855]]

that the order is re-routed by the New York Stock Exchange, Inc. 
(``NYSE''); \7\ (c) fee codes Q, T, and Z to clarify that the order 
must be routed to a non-exchange destination; \8\ (d) delete fee code 
PI; (e) amend fee code RP to reflect a change to the name of the Route 
Peg order to the Supplemental Peg order; \9\ and (f) fee codes BY, RR, 
and SW to reflect the routing strategies that are to be added or 
removed upon migration of the Exchange onto BATS technology.\10\
---------------------------------------------------------------------------

    \7\ Previously, the Exchange would route re-routable orders to 
other exchanges in addition to the NYSE. This change is designed to 
reflect that the Exchange currently routes re-routable orders only 
to the NYSE.
    \8\ The Exchange notes that the routing strategies listed in the 
description of fee codes Q, T and Z route orders to both exchange 
and non-exchange destinations. The proposed rule change is intended 
to clarify that fee codes Q, T and Z will only be appended to an 
order when routed to a non-exchange destination pursuant to one of 
the listed routing strategies. Orders routed to an exchange 
destination pursuant to one of the listed routing strategies will 
include a different fee code.
    \9\ See Securities Exchange Act Release Nos. 74023 (January 9, 
2015), 80 FR 2163 (January 15, 2015) (SR-EDGX-2015-03); and 74028 
(January 9, 2015), 80 FR 2125 (January 15, 2015) (SR-EDGA-2015-03).
    \10\ Id.
---------------------------------------------------------------------------

     Amend fee code MM to clarify that, in addition to MidPoint 
Match Orders, the fee code is available to orders with a Hide Not Slide 
instruction or a Non-Displayed instruction that add liquidity at the 
midpoint of the NBBO. The Exchange also proposes to add footnote 11 to 
the Fee Schedule to clarify that an order with a Non-Displayed 
instruction will receive fee code MM where it executes against an order 
type that receives fee code MT. The order types eligible to receive fee 
code MT are discussed below.
     Amend fee code MT to clarify that, in addition to MidPoint 
Match orders, the fee code is available to orders with a Hide Not Slide 
Instruction and orders with a Non-Displayed and Post Only instruction 
that remove liquidity at the midpoint of the NBBO.
     Amend Flag HA to remove references to MidPoint Match 
orders, as they are included in Flags MM and MT, as described above.
     Amend the definitions of Average Daily Volume (``ADV'') 
and Total Consolidated Volume (``TCV'') to be substantially similar to 
the definitions for these terms in the BATS fee schedules. The only 
differences in the definitions are that the Exchange includes routed 
volume in its calculation of ADV and will exclude from its calculation 
of ADV and TCV shares added, removed, or routed on each trading day 
from January 12, 2015 up to and including January 16, 2015.\11\
---------------------------------------------------------------------------

    \11\ After January 16, 2015, the Exchange intends to submit a 
rule filing to the Commission to remove the provision to exclude 
from its calculation of ADV and TCV shares added, removed, or routed 
on each trading day from January 12, 2015 up to and including 
January 16, 2015 from its definitions of TCV and ADV.
---------------------------------------------------------------------------

     Amend the section entitled General Notes to mirror a 
similar section within the BATS fee schedules by: (i) Deleting the 
first three bullets regarding added flags, removal flags, and routed 
flags because, it is redundant as the description of each fee code 
indicates whether is it for added, removed or routed orders; (ii) 
adding a bullet stating that rebates and charges for adding, removing 
or routing liquidity are listed as per share rebates and charges; and 
(iii) making certain non-substantive changes to the current fifth 
bullet.
     Amend footnote 1 entitled Add Volume Tiers to amend the 
description under the tier's required criteria to align with similar 
description in the BATS fee schedules. The Exchange also proposes to 
amend the required criteria for Mega Tier 1 and the Investor Tier to 
clarify that a Member have an ``added liquidity'' as a percentage of 
``added plus removed liquidity'' of at least 85% and not a ratio as 
this portion of the criteria is incorrectly categorized as a ratio.
     Amend footnote 2 to clarify that the Tape B Step Up Tier 
to remove a redundant reference to ``Flags B and 4'' and amend the 
description under the tier's required criteria.
     Amend footnotes 3 and 7 to amend the description under 
each tier's criteria to align with similar descriptions in the BATS fee 
schedules.
     Amend footnote 4 entitled Retail Order Tier to remove the 
paragraph describing how a Member may qualify for a higher rebate or 
lower fee for orders utilizing fee code ZA as it is redundant and 
unnecessary given the current fifth bullet under the General Notes 
section of the Fee Schedule specifically states that to the extent a 
Member qualifies for higher rebates and/or lower fees than those 
provided by a tier for which such Member qualifies, the higher rebates 
and/or lower fees shall apply.
Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule on January 16, 2015.\12\
---------------------------------------------------------------------------

    \12\ The Exchange notes that the date of the Fee Schedule was 
amended to January 16, 2015 in a previously filed proposed rule 
change. See SR-EDGX-2015-01 (filed January 16, 2015).
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\13\ in general, and 
furthers the objectives of Section 6(b)(4),\14\ 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 Exchange believes that the proposed rates 
are equitable and non-discriminatory in that they apply uniformly to 
all Members.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the non-substantive clarifying changes 
to its Fee Schedule are reasonable because they are designed to provide 
greater transparency to Members with regard to how the Exchange 
assesses fees and provides rebates. The Exchange notes that none of the 
proposed non-substantive clarifying changes are designed to amend any 
fee or rebate, nor alter the manner in which it assesses fees or 
calculates rebates. In particular, the proposed amendments to fee codes 
MM and MT are reasonable and equitable because they conform to existing 
practice and do not modify the fees that the Exchange charges its 
Members for orders yielding these fee codes. The Exchange has 
historically in practice and will continue to apply fee codes MM and MT 
as described above when determining the applicable fee under its 
pricing structure. The Exchange believes that Members would benefit 
from clear guidance in its Fee Schedule that describes the manner in 
which the Exchange would assess fees and calculate rebates. The 
proposed rule change is also designed, in part, to align terminology 
and definitions with that included in the current BATS fee schedules in 
order to use consistent fee schedules across the BGM Affiliated 
Exchanges. These changes to the Fee Schedule are intended to provide 
greater harmonization between Exchange, BYX, and BZX fee schedules and 
make the Fee Schedule clearer and less confusing for investors, thereby 
eliminating potential investor confusion. As such, the proposed rule 
change would remove impediments to and perfect the mechanism of a free 
and open market and a national market system, and, in general, protect 
investors and the public interest.

[[Page 5856]]

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. The 
Exchange reiterates that the proposed rule change is being proposed in 
the context of the technology integration of the BGM Affiliated 
Exchanges and that the changes are entirely non-substantive. The 
proposed changes are not designed to have any impact on competition. 
Rather, they are intended to provide greater harmonization between 
Exchange, BYX, and BZX fee schedules and make the Fee Schedule clearer 
and less confusing for investors. 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.

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 \15\ and paragraph (f) of Rule 19b-4 
thereunder.\16\ 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.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2015-04 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number EDGX-2015-04. 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 EDGX-2015-04, and should be 
submitted on or before February 24, 2015.
---------------------------------------------------------------------------

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

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2015-02015 Filed 2-2-15; 8:45 am]
BILLING CODE 8011-01-P