Document ID: SEC-2014-1009-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGA Exchange, Inc.
Posted Date: 2014-06-18T04:00Z

[Federal Register Volume 79, Number 117 (Wednesday, June 18, 2014)]
[Notices]
[Pages 34808-34810]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-14231]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72375; File No. SR-EDGA-2014-14]

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

June 12, 2014.
    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 2, 2014, 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) 
(``Fee Schedule'') to: (i) Delete Flag RC, which routes to the National 
Stock Exchange, Inc. (``NSX'') and adds Liquidity; and (ii) make a 
corrective change to the definition of Average Daily Trading Volume 
(``ADV'') to state that ADV includes shared routed by the Exchange. The 
text of the proposed rule change is available on the Exchange's 
Internet Web site at www.directedge.com, at the Exchange's principal 
office, and at the Public Reference Room of the Commission.
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    \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).
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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
    The Exchange proposes to amend its Fee Schedule to: (i) Delete Flag 
RC, which routes to the NSX and adds liquidity; and (ii) make a 
corrective change to the definition of ADV to state that ADV includes 
shared routed by the Exchange.
Flag RC
    The Exchange proposes to amend its Fee Schedule to delete Flag RC, 
which routes to the NSX and adds liquidity, in response to the NSX's 
announcement that it will cease market operations and its last day of 
trading will be Friday, May 30, 2014.\4\ The Exchange currently

[[Page 34809]]

charges a fee of $0.0001 per share in securities priced at or above 
$1.00 and no fee in securities priced below $1.00 for Members' orders 
that yield Flag RC. The fee for orders that yield Flag RC represents a 
pass through of the rate that DE Route, the Exchange's affiliated 
routing broker-dealer, is charged for routing orders that add liquidity 
to NSX. As of June 1, 2014, the Exchange, via DE Route, will no longer 
be able to route orders to NSX because it ceased operations, and, 
therefore, proposes to remove Flag RC from its Fee Schedule.
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    \4\ See Securities Exchange Act Release No. 72107 (May 6, 2014), 
79 FR 27017 (May 12, 2014) (SR-NSX-2014-14) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change to Cease Trading on 
Its Trading System).
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ADV
    The Exchange proposes to make a corrective change to the definition 
of ADV to state that a Member's ADV does include shares that are routed 
to other trading centers. The Exchange determines the liquidity adding 
rebate that it will provide to Members based on the Exchange's tiered 
pricing structure based on the calculation of ADV, and/or average daily 
Total Consolidated Volume.\5\ On May 1, 2014, the Exchange harmonized 
its definition of ADV with that contained in the BATS Exchange, Inc. 
(``BATS'') and BATS-Y Exchange, Inc. (``BYX'') fee schedules by 
amending the definitions of ADV to state that routed shares are not 
included in ADV calculation.\6\
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    \5\ As provided in the Fee Schedule, ``TCV'' is currently 
defined 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, excluding volume on any day that the Exchange 
experiences an Exchange System Disruption or the Russell 
Reconstitution Day.
    \6\ See Securities Exchange Act Release No. 72002 (April 23, 
2014), 79 FR 24028 (April 29, 2014) (SR-EDGX-2014-10). The Exchange 
also amended the definition of ADV to exclude shares on: (i) Any day 
that the Exchange's system experiences a disruption that lasts for 
more than 60 minutes during Regular Trading Hours (``Exchange System 
Disruption''); and (ii) the last Friday in June (the ``Russell 
Reconstitution Day''). Id.
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    The Exchange's Fee Schedule currently states that certain routed 
flags are considered when determining the liquidity adding rebate that 
the Exchange will provide to Members based on its tiered pricing 
structure.\7\ In harmonizing its definition of ADV with BATS and BYX, 
the Exchange mistakenly included a provision that excluded routed 
shares from the definition of ADV, thereby creating a conflict with the 
above provision in the Fee Schedule stating that certain routed flags 
are considered when determining the liquidity adding rebate under its 
tiered pricing structure. The Exchange now seeks to make a corrective 
change to the definition of ADV to state that routed orders are 
included in a Member's ADV calculation. The proposed rule change is 
designed to resolve a conflict in the Fee Schedule between the 
definition of ADV and the inclusion of orders that yield certain routed 
flags when determining the liquidity adding rebate under its tiered 
pricing structure. The Exchange notes that its proposal conforms to an 
existing practice and does not modify the fees or rebate that the 
Exchange has been providing its Members for achieving tier-based 
pricing.
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    \7\ The Exchange's Fee Schedule states that the following routed 
flags are counted towards tiers: A, C, D, F, G, I, J, K, L, M, O, P, 
Q, R, S, T, U, X, Z, 2, 7, 8, 9, 10, BY, CL, PX, RA, RB, RC, RM, RR, 
RS, RT, RW, RX, RY, RZ and SW. See the Exchange's Fee Schedule 
available at http://www.directedge.com/Trading/EDGAFeeSchedule.aspx 
(dated May 1, 2014).
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Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule on June 2, 2014
2. Statutory Basis
    The Exchange believes that the proposed rule change is 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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Flag RC
    The Exchange believes that its proposal to delete Flag RC in its 
Fee Schedule represents an equitable allocation of reasonable dues, 
fees, and other charges among Members and other persons using its 
facilities. The proposed change is in response to NSX's announcement 
that it will cease market operations and its last day of trading will 
Friday, May 30, 2014.\10\ As of June 1, 2014, the Exchange, via DE 
Route, will no longer be able to route orders to NSX and, therefore, 
proposes to remove Flag RC from its Fee Schedule. The Exchange believes 
that the proposed amendment is intended to make the Fee Schedule 
clearer and less confusing for investors and eliminate potential 
investor confusion, thereby removing impediments to and perfecting the 
mechanism of a free and open market and a national market system, and, 
in general, protecting investors and the public interest.
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    \10\ See Securities Exchange Act Release No. 72107 (May 6, 
2014), 79 FR 27017 (May 12, 2014) (SR-NSX-2014-14) (Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change to Cease Trading 
on Its Trading System).
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ADV
    The Exchange believes that correcting an inadvertent error in the 
definition of ADV with regard to routed orders is reasonable because it 
will increase the level of transparency on the Exchange's Fee Schedule 
and improve the Exchange's ability to effectively convey the criteria 
necessary to achieve tier-based pricing and resolve a conflict in the 
Fee Schedule between the definition of ADV and the inclusion of orders 
that certain routed flags when determining the liquidity adding rebate 
under its tiered pricing structure. The Exchange notes that its 
proposal conforms to an existing practice and does not modify the 
rebates or fees that the Exchange provides its Members for achieving 
tier-based pricing. The Exchange has historically in practice and will 
continue to include routed shares when calculating a Member's ADV by 
including orders that yield certain routed flags when determining the 
liquidity adding rebate under its tiered pricing structure. Other than 
this correction, which resolves a conflict in the Fee Schedule, the 
remainder of the definition of ADV would remain unchanged. Lastly, the 
Exchange also believes that these proposed amendments are non-
discriminatory because they apply uniformly to all Members.

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

    The Exchange believes its proposed amendments to its Fee Schedule 
would 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 the proposed change represents a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. Additionally, Members may opt to 
disfavor EDGA's pricing if they believe that alternatives offer them 
better value. 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.
Flag RC
    The Exchange believes that its proposal to delete Flag RC in its 
Fee Schedule would not affect intermarket nor intramarket competition 
because this change is not designed to amend any fee or rebate or alter 
the manner in which the Exchange assesses fees or

[[Page 34810]]

calculates rebates. It is simply proposed in response to NSX 
announcement that it will cease market operations and its last day of 
trading will be Friday, May 30, 2014.\11\
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    \11\ See Securities Exchange Act Release No. 72107 (May 6, 
2014), 79 FR 27017 (May 12, 2014) (SR-NSX-2014-14) (Notice of Filing 
and Immediate Effectiveness of Proposed Rule Change to Cease Trading 
on Its Trading System).
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ADV
    The Exchange believes that correcting an inadvertent error in the 
definition of ADV would not impose a burden on intermarket or 
intramarket competition because it simply conforms to an existing 
practice by resolving a conflict in the Fee Schedule and does not 
modify the rebates or fees that the Exchange provides its Members for 
achieving tier-based pricing. The Exchange has historically in practice 
and will continue to include routed shares when calculating a Member's 
ADV by including orders that yield certain routed flags when 
determining the liquidity adding rebate under its tiered pricing 
structure. Other than this correction, the remainder of the definition 
of ADV would remain unchanged.

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 \12\ and Rule 19b-4(f)(2) \13\ 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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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-2014-14 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 SR-EDGA-2014-14. 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-EDGA-2014-14, and should be 
submitted on or before July 9, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-14231 Filed 6-17-14; 8:45 am]
BILLING CODE 8011-01-P