Document ID: SEC-2013-2154-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2013-12-18T05:00Z

[Federal Register Volume 78, Number 243 (Wednesday, December 18, 2013)]
[Notices]
[Pages 76682-76684]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-30042]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71058; File No. SR-EDGX-2013-46]

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

December 12, 2013.
    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 December 6, 2013, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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) 
(``Fee Schedule'') to exclude odd lot transactions from its definition 
of Total Consolidated Volume (``TCV''), which is used to determine 
whether a Member is eligible for certain pricing tiers. The text of the 
proposed rule change is available on the Exchange's Web site at 
www.directedge.com, at the Exchange's principal office, on the 
Commission's Web site at www.sec.gov, and at the Public Reference Room 
of the Commission.
---------------------------------------------------------------------------

    \3\ 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).
---------------------------------------------------------------------------

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 currently defines TCV as ``the volume reported by all 
exchanges and trade reporting facilities to the consolidated 
transaction reporting plans for Tapes A, B and C securities for the 
month in which the fees are calculated.'' \4\ An odd lot transaction, 
which is generally an execution of less than 100 shares,\5\ is 
currently not reported to the consolidated tape, and therefore, not 
included in the Exchange's calculation of TCV. Beginning December 9, 
2013, odd lot transactions will be reported to the consolidated 
tape.\6\ The Exchange, therefore, proposes to amend its Fee Schedule to 
exclude odd lot transactions from its definition of TCV, which is used 
to determine whether a Member is eligible for certain pricing tiers, 
through January 31, 2014. The proposal would allow Members additional 
time to adjust to the potential impact of including odd lot 
transactions within consolidated volumes. Odd lots will continue to be 
included in each Member's average daily trading volume (``ADV'') as 
they are today.
---------------------------------------------------------------------------

    \4\ See Exchange Fee Schedule available at http://www.directedge.com/Trading/EDGXFeeSchedule.aspx  (December 2, 2013)
    \5\ See Exchange Rule 11.6.
    \6\ See Securities Exchange Act Release No. 70794 (October 31, 
2013), 78 FR 66789 (November 6, 2013) (SR-CTA-2013-05) (Order 
Approving the Eighteenth Substantive Amendment to the Second 
Restatement of the CTA Plan). See also Securities Exchange Act 
Release No. 70793 (October 31, 2013), 78 FR 66788 (November 6, 2013) 
(File No. S7-24-89) (Order Approving Amendment No. 30 to the Joint 
Self-Regulatory Organization Plan Governing the Collection, 
Consolidation and Dissemination of Quotation and Transaction 
Information for Nasdaq-Listed Securities Traded on Exchanges on an 
Unlisted Trading Privileges Basis). See also Securities Exchange Act 
Release No. 70898 (November 19, 2013) (SR-NYSE-2013-75). See also 
announcements regarding December 9, 2013 implementation date, 
available at https://cta.nyxdata.com/cta/popup/news/2385 and http://www.nasdaqtrader.com/TraderNews.aspx?id=uva2013-11. If the inclusion 
of odd lot transactions in the consolidated tape is delayed to a 
date after December 9, 2013, the manner of inclusion or exclusion of 
odd lot transactions described in this proposal for purposes of 
billing on the Exchange would similarly take effect on such later 
date.
---------------------------------------------------------------------------

    The Exchange provides Members with the opportunity to qualify for a 
pricing tier based on its [sic] level of activity during a particular 
month. Each tier provides a Member with increased rebates or lower fees 
for adding or removing liquidity in the Exchange. Certain tiers use a 
specific percentage of TCV during the billing cycle as a threshold that 
a Member must meet or exceed to qualify for a particular tier. For 
example, to qualify for the Mega Tier 2 and receive a rebate of $0.0032 
per share and fee of $0.0029 per share, a Member must: add or route at 
least 4,000,000 shares of ADV prior to 9:30 a.m. or after 4:00 p.m. 
(includes all flags except 6); and add a minimum of 0.20% of the TCV on 
a daily basis measured monthly, including during both market hours and 
pre and post-trading hours. To qualify for Market Depth Tier 1 and 
receive a rebate of $0.00325 per share, a Member must: add greater than 
or equal to 0.85% of the TCV in ADV on EDGX in total; and add at least 
4 million shares as Non-Displayed Orders that yield Flag HA.
    The proposal to exclude odd lot transactions from the TCV 
calculation is intended to allow Members additional time to adjust to 
the potential impact of including odd lot transactions within

[[Page 76683]]

consolidated volumes. The proposed rule change is not intended to 
address any other issues and the Exchange is not aware of any problems 
that Members would have in complying with the proposed rule change.
Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule on December 9, 2013. The amendments would be effective through 
January 31, 2014.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\7\ in general, and 
furthers the objectives of Section 6(b)(4),\8\ 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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes its proposal to exclude odd lot transactions 
from its TCV calculation is reasonable because it allows the Exchange 
to maintain, albeit temporarily, the status quo when measuring a 
Member's activity and whether they [sic] satisfy the criteria necessary 
to achieve preferred pricing under each pricing tier. Absent this 
change, the denominator of tier threshold calculation (i.e., TCV) would 
increase immediately when odd lot transactions begin to be reported to 
the consolidated tape and a Member would need to immediately increase 
their [sic] own activity (i.e., the numerator) to continue to qualify 
for the tier. However, such an increase in the Member's activity would 
not result in a corresponding benefit to the Member because the 
Exchange is not proposing to change the tier rates. The Exchange 
anticipates that the eventual impact on determining tier qualifications 
would be minimal when odd lot transactions begin to be included in the 
TCV. Nonetheless, the Exchange believes that it is reasonable to 
provide Members with a limited transition period to adapt to such 
impact.
    The proposed rule change is also equitable and not unfairly 
discriminatory because it would apply to all Members uniformly. In 
addition, the inclusion of odd lots in the TCV calculation would occur 
for all Members on February 1, 2014, after the same nearly two month 
transition period.

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. The Exchange does not believe that this change represent [sic] 
a significant departure from previous pricing offered by the Exchange 
or pricing offered by the Exchange's competitors. The proposed rule 
change is designed to provide consistency to Members by allowing the 
Exchange to maintain, albeit temporarily, the status quo when measuring 
a Member's activity and whether they [sic] satisfy the criteria 
necessary to achieve preferred pricing under each pricing tier. The 
proposal to exclude odd lot transactions from the TCV calculation is 
intended to allow Members additional time to adjust to the potential 
impact of including odd lot transactions within consolidated volumes. 
Accordingly, the Exchange does not believe that the proposed change 
will impair the ability of Members or competing venues to maintain 
their competitive standing in the financial markets.
    This proposed rule change is also designed to maintain intermarket 
competition by eliminating the potential for Members to immediately 
fail to qualify for a tier due to the inclusion of odd lot transactions 
in the consolidated tape beginning December 9, 2013. Other exchanges 
have also announced their intention of [sic] filed proposed rule 
changes to exclude odd lot transactions from the consolidated volume 
calculations from December 9, 2013 thru [sic] January 31, 2014.\9\ The 
proposal is also designed to maintain intramarket completion by 
maintaining consistent calculations amongst exchanges.
---------------------------------------------------------------------------

    \9\ See File No. SR-NYSE-2013-78 (proposal by the New York Stock 
Exchange, Inc. (``NYSE'') to amend its price list to exclude odd lot 
transactions from its consolidated average daily trading volume 
calculations thru January 31, 2014); see also, BATS Exchange, Inc. 
and BATS-Y Exchange, Inc. Tier Calculation Update available at 
http://cdn.batstrading.com/resources/fee_schedule/BATS-BZX-Exchange-and-BYX-Exchange-Tier-Calculation-Update-Effective-December-9-2013.pdf (announcing intention to exclude odd lot 
transactions from its consolidated average daily trading volume 
calculations thru [sic] January 31, 2014).
---------------------------------------------------------------------------

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 \10\ and Rule 19b-4(f)(2) \11\ 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.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 17 CFR 240.19b-4 (f)(2).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposal 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-2013-46 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-2013-46. 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.,

[[Page 76684]]

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-2013-46 and should be 
submitted on or before January 8, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
---------------------------------------------------------------------------

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

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-30042 Filed 12-17-13; 8:45 am]
BILLING CODE 8011-01-P