Document ID: SEC-2012-1145-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGA Exchange, Inc.
Posted Date: 2012-07-16T04:00Z

[Federal Register Volume 77, Number 136 (Monday, July 16, 2012)]
[Notices]
[Pages 41847-41849]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-17198]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-67380; File No. SR-EDGA-2012-29]

Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Amendments to the EDGA Exchange, Inc. Fee Schedule

July 10, 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 29, 2012, EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') 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 EDGA Rule 15.1(a) and (c). All 
of the changes described herein are applicable to EDGA Members. The 
text of the proposed rule change is available on the Exchange's 
Internet Web site at http://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

1. Purpose
    Flag DM is yielded where non-displayed orders add or remove 
liquidity using the Mid-Point Discretionary order type.\4\ In order to 
provide additional transparency to Members and for the reasons 
discussed below, Flag DM is proposed to be bifurcated into two flags: 
Flag DM (adds liquidity in the discretionary range) and Flag DT 
(removes liquidity in the discretionary range). The Exchange proposes 
to continue to charge a fee of $0.0005 per share for Flags DM and 
DT.\5\
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    \4\ See Securities Exchange Act Release No. 67226 (June 20, 
2012), 77 FR 38113 (June 26, 2012) (SR-EDGA-2012-22).
    \5\ See SR-EDGA-2012-24 (June 19, 2012) (describing the 
Exchange's proposal to amend its fee schedule pursuant to Rule 
15.1(a) and (c) regarding Flag DM).
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    In addition, the Exchange proposes to delete Footnote 18 that is 
appended to Flag DM in the fee schedule because the proposed Flags DM 
and DT will count towards volume tiers as the Exchange can now 
differentiate between non-displayed liquidity that adds liquidity in 
the discretionary range from non-displayed liquidity that removes 
liquidity in the discretionary range.\6\
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    \6\ See SR-EDGA-2012-24 (June 19, 2012) (where the Exchange 
excluded the volume generated from Flag DM from counting towards the 
volume tiers because a Member could potentially receive Flag DM if 
the Member either added or removed liquidity using the Midpoint 
Discretionary Order).
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    The Exchange also proposes to amend Flag K to only apply to 
Members' orders routed to NASDAQ OMX PSX (``PSX'') using the ROUC or 
ROUE routing strategy as defined in Rule 11.9(b)(3). The Exchange 
proposes to reduce the rate from $0.0025 per share to $0.0005 per 
share, which represents a pass-through of the Exchange's rate for 
routing orders to PSX, in response to the proposed pricing changes in 
PSX's pending filing with the Commission.\7\ Accordingly, where 
Members' orders are routed to the BATS BZX Exchange (``BATS BZX'') 
using the ROBA routing strategy (EDGA + BATS), the Exchange proposes to 
apply Flag X, which is yielded when Members route orders through EDGA 
and the Exchange assesses a charge of $0.0029 per share.
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    \7\ See PSX's Equity Trader Alert 2012-28 at http://www.nasdaqtrader.com/TraderNews.aspx?id=ETA2012-28 (discussing PSX's 
pending fee changes effective July 2, 2012).
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    Similarly, the Exchange also proposes to amend the rate for Flag 
RS, which is yielded when Members route orders to PSX that add 
liquidity. The Exchange proposes to amend the pricing for Flag RS from 
a rebate of $0.0024 per share to a charge of $0.0005 per share in 
response to PSX's pending filing, which represents a pass-through of 
the Exchange's rate for routing orders to PSX.
    The Exchange proposes to implement these amendments to its fee 
schedule on July 1, 2012.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with the objectives of Section 6 of the Act,\8\ in general, and 
furthers the objectives of Section 6(b)(4),\9\ 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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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed technical amendment to 
bifurcate Flag DM into Flags DM and DT promotes market transparency and 
improves investor protection by adding additional transparency to its 
fee schedule by more precisely delineating for Members whether they are 
``adders of liquidity'' or ``removers of liquidity'' for purposes of 
Members' non-displayed orders using the Mid-Point Discretionary order 
type. In addition, the Exchange believes that counting Flags DM and DT 
towards volume tiers is reasonable and equitable as the Exchange can 
now differentiate between non-displayed liquidity that adds liquidity 
in the discretionary range from non-displayed liquidity that removes 
liquidity in the discretionary range, as explained above. Including 
Flags DM and DT in volume tiers allows their associated volume to be 
tracked by the Exchange in the appropriate tier(s), which may incent 
Members to increase use of the volume tiers in the fee

[[Page 41848]]

schedule. Such volume will increase potential revenue to the Exchange, 
and would allow the Exchange to spread its administrative and 
infrastructure costs over a greater number of shares, leading to lower 
per share costs. These lower per share costs would allow the Exchange 
to pass on the savings to Members in the form of higher rebates/lower 
costs. The increased liquidity also benefits all investors by deepening 
EDGA'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. The Exchange also believes that proposed change is non-
discriminatory because it applies uniformly to all Members.
    The rates and rebates associated with routing orders to PSX on the 
Exchange's fee schedule are pass-through rates. Currently, PSX charges 
the Exchange $0.0025 per share for Members' orders that are routed to 
PSX using the ROUC or ROUE routing strategy and the Exchange charges 
its Members $0.0025 per share as a pass-through. Therefore, the 
Exchange believes that the proposed reduction from $0.0025 per share to 
$0.0005 per share is equitable and reasonable because PSX is reducing 
the rate it charges the Exchange for routing to PSX to $0.0005. 
Currently, PSX provides the Exchange a rebate of $0.0024 per share for 
Members' orders that are routed to PSX and add liquidity and the 
Exchange rebates Members $0.0024 per share as a pass-through (Flag RS). 
Therefore, the Exchange believes that the proposed reduction from a 
rebate of $0.0024 per share to a charge of $0.0005 per share is 
equitable and reasonable because PSX is increasing the rate it charges 
the Exchange for routing to PSX to $0.0005 per share. In addition, the 
Exchange also believes that the proposed pass-through of this rate is 
non-discriminatory because it applies uniformly to all Members.
    The Exchange believes that increasing the charge assessed for 
Members' orders that are routed to BATS BZX using the ROBA routing 
strategy (EDGA + BATS) from $0.0025 per share to $0.0029 per share 
(yielding Flag X) is equitable and reasonable because the Exchange is 
removing the $0.0004 per share incentive it previously associated with 
this routing strategy and replacing it with a straight pass-through of 
the charge BATS BZX assesses the Exchange for removing liquidity from 
the BZX Exchange order book.\10\ Accordingly, the Exchange will assess 
a charge of $0.0029 per share for Members' orders that route to BATS 
BZX using the ROBA routing strategy as well as other routed orders that 
yield Flag X. In addition, the Exchange also believes that the proposed 
pass-through of this rate is non-discriminatory because it applies 
uniformly to all Members.
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    \10\ See BATS BZX fee schedule at http://batstrading.com/FeeSchedule/.
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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 \11\ and Rule 19b-4(f)(2) \12\ 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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-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-EDGA-2012-29 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-EDGA-2012-29. 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 
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-EDGA-2012-29 and should be 
submitted on or before August 6, 2012.

[[Page 41849]]

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-17198 Filed 7-13-12; 8:45 am]
BILLING CODE 8011-01-P