Document ID: SEC-2013-1449-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2013-08-14T04:00Z

[Federal Register Volume 78, Number 157 (Wednesday, August 14, 2013)]
[Notices]
[Pages 49569-49572]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-19741]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70147; File No. SR-EDGX-2013-30]

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

August 8, 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 August 5, 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.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.

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[[Page 49570]]

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: (i) Amend the rates for flags BY and RY and (ii) 
amend the rates for flags RA and RR. 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 
www.directedge.com, at the Exchange's principal office, and at the 
Public Reference Room of the Commission.
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    \3\ As defined in 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) Amend the 
rates for flags BY and RY and (ii) amend the rates for flags RA and RR.
Fee/Rebate Changes for Flags BY and RY
    In securities priced at or above $1.00, the Exchange currently does 
not charge a fee or provide a rebate (free) for Members' orders that 
yield Flag BY, which routes to BATS Y-Exchange, Inc. (``BYX'') using 
routing strategies ROUC, ROUE or ROBY. The Exchange proposes to amend 
its Fee Schedule to provide a rebate of $0.0001 per share for Members' 
orders that yield Flag BY. The proposed change represents a pass 
through of the rate that Direct Edge ECN LLC (d/b/a DE Route) (``DE 
Route''), the Exchange's affiliated routing broker-dealer, is rebated 
for routing orders to BYX and do not qualify for a volume tiered 
discount. When DE Route routes to BYX, it is rebated a standard rate of 
$0.0001 per share.\4\ DE Route will pass through this rate on BYX to 
the Exchange and the Exchange, in turn, will pass through this rate to 
its Members. The Exchange notes that the proposed change is in response 
to BYX's August 2013 fee change where BYX updated the default rebate 
with no volume requirement it provides its customers, such as DE Route, 
from free to $0.0001 per share for orders that are routed to BYX.\5\
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    \4\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered discount on BYX, its rate for Flag BY 
will not change.
    \5\ See BATS BYX Exchange Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf.
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    In securities priced at or above $1.00, the Exchange currently 
assesses a fee of $0.0007 per share for Members' orders that yield Flag 
RY, which routes to BYX and adds liquidity. The Exchange proposes to 
amend its Fee Schedule to decrease this fee to $0.0003 per share for 
Members' orders that yield Flag RY. The proposed change represents a 
pass through of the rate that DE Route, the Exchange's affiliated 
routing broker-dealer, is charged for routing orders to BYX that do not 
qualify for a volume tiered discount. When DE Route routes to BYX, it 
is charged a standard rate of $0.0003 per share.\6\ DE Route will pass 
through this rate on BYX to the Exchange and the Exchange, in turn, 
will pass through this rate to its Members. The Exchange notes that the 
proposed change is in response to BYX's August 2013 fee change where 
BYX decreased the fee it charges its customers, such as DE Route, from 
a fee of $0.0007 per share to a fee of $0.0003 per share for orders 
that are routed to BYX.\7\
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    \6\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered discount on BYX, its rate for Flag RY 
will not change.
    \7\ See BATS BYX Exchange Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf.
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Fee/Rebate Changes for Flags RA and RR
    In securities priced at or above $1.00, the Exchange currently 
charges a fee of $0.0006 per share for Members' orders that yield Flag 
RA, which routes to EDGA Exchange, Inc. (``EGDA'') and adds liquidity. 
The Exchange proposes to amend its Fee Schedule to decrease this fee to 
$0.0005 per share for Members' orders that yield Flag RA. The proposed 
change represents a pass through of the rate that DE Route, the 
Exchange's affiliated routing broker-dealer, is rebated for routing 
orders to EDGA and do not qualify for a volume tiered discount. When DE 
Route routes to EDGA, it is charged a standard rate of $0.0005 per 
share.\8\ DE Route will pass through this rate on EDGA to the Exchange 
and the Exchange, in turn, will pass through this rate to its Members. 
The Exchange notes that the proposed change is in response to EDGA's 
August 2013 fee change where EDGA decreased the fee it charges its 
customers, such as DE Route, from a fee of $0.0006 per share to a fee 
of $0.0005 per share for orders that are routed to EDGA and add 
liquidity.\9\
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    \8\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered discount on RA, its rate for Flag RA 
will not change.
    \9\ See SR-EDGA-2013-21 (August 1, 2013).
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    In securities priced at or above $1.00, the Exchange currently 
provides a rebate of $0.0004 per share for Members' orders that yield 
Flag RR, which routes to EDGA using routing strategies IOCX or IOCT. 
The Exchange proposes to amend its Fee Schedule to decrease this rebate 
to $0.0002 per share for Members' orders that yield Flag RR. The 
proposed change represents a pass through of the rate that DE Route is 
rebated for routing orders to EDGA and do not qualify for a volume 
tiered discount. When DE Route routes to EDGA, it is rebated a standard 
rate of $0.0002 per share.\10\ DE Route will pass through this rate on 
EDGA to the Exchange and the Exchange, in turn, will pass through this 
rate to its Members. The Exchange notes that the proposed change is in 
response to EDGA's August 2013 fee change where EDGA decreased the 
rebate it provides its customers, such as DE Route, from a rebate of 
$0.0003 per share to a rebate of $0.0002 per share for orders that are 
routed to EDGA.\11\
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    \10\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered discount on RR, its rate for Flag RR 
will not change.
    \11\ See SR-EDGA-2013-21 (August 1, 2013).
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Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule on August 5, 2013.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\12\ in general, and 
furthers the objectives of Section 6(b)(4),\13\ 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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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).

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[[Page 49571]]

Fee/Rebate Changes for Flags BY and RY
    The Exchange believes that its proposal to provide a pass through 
rebate for Members' orders that yield Flag BY of $0.0001 per share 
represents an equitable allocation of reasonable dues, fees, and other 
charges among Members and other persons using its facilities because 
the Exchange does not levy additional fees or offer additional rebates 
for orders that it routes to BYX through DE Route. Prior to BYX's 
August 2013 fee change, BYX did not charge DE Route for orders yielding 
Flag BY, which DE Route passed through to the Exchange and the Exchange 
passed through to its Members in the form of no fee or rebate (free). 
In August 2013, BYX updated the default rebate it provides its 
customers, such as DE Route, from free to a rebate of $0.0001 per share 
for orders that are routed to BYX.\14\ Therefore, the Exchange believes 
that the proposed change in Flag BY to provide a rebate of $0.0001 per 
share is equitable and reasonable because it accounts for the pricing 
changes on BYX. In addition, the proposal allows the Exchange to 
continue to charge its Members a pass-through rate for orders that are 
routed to BYX using routing strategies ROUC, ROUE or ROBY using DE 
Route. The Exchange notes that routing through DE Route is voluntary. 
Lastly, the Exchange also believes that the proposed amendment is non-
discriminatory because it applies uniformly to all Members.
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    \14\ See BATS BYX Exchange Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf.
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    The Exchange believes that its proposal to decrease the pass 
through rate for Members' orders that yield Flag RY from $0.0007 to 
$0.0003 per share represents an equitable allocation of reasonable 
dues, fees, and other charges among Members and other persons using its 
facilities because the Exchange does not levy additional fees or offer 
additional rebates for orders that it routes to BYX through DE Route. 
Prior to BYX's August 2013 fee change, BYX charged DE Route a fee of 
$0.0007 per share for orders yielding Flag RY, which DE Route passed 
through to the Exchange and the Exchange passed through to its Members. 
In August 2013, BYX decreased the fee it charges its customers, such as 
DE Route, from a fee of $0.0007 per share to a fee of $0.0003 per share 
for orders that are routed to BYX.\15\ Therefore, the Exchange believes 
that the proposed change in Flag RY from a fee of $0.0007 per share to 
a fee of $0.0003 per share is equitable and reasonable because it 
accounts for the pricing changes on BYX. In addition, the proposal 
allows the Exchange to continue to charge its Members a pass-through 
rate for orders that are routed to BYX and add liquidity using DE 
Route. The Exchange notes that routing through DE Route is voluntary. 
Lastly, the Exchange also believes that the proposed amendment is non-
discriminatory because it applies uniformly to all Members.
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    \15\ See BATS BYX Exchange Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf.
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Fee/Rebate Changes for Flags RA and RR
    The Exchange believes that its proposal to decrease the pass 
through rate for Members' orders that yield Flag RA from $0.0006 to 
$0.0005 per share represents an equitable allocation of reasonable 
dues, fees, and other charges among Members and other persons using its 
facilities because the Exchange does not levy additional fees or offer 
additional rebates for orders that it routes to EDGA through DE Route. 
Prior to EDGA's August 2013 fee change, EDGA charged DE Route a fee of 
$0.0006 per share for orders yielding Flag RA, which DE Route passed 
through to the Exchange and the Exchange passed through to its Members. 
In August 2013, EDGA decreased the fee it charges its customers, such 
as DE Route, from a fee of $0.0006 per share to a fee of $0.0005 per 
share for orders that are routed to EDGA.\16\ Therefore, the Exchange 
believes that the proposed change in Flag RA from a fee of $0.0006 per 
share to a fee of $0.0005 per share is equitable and reasonable because 
it accounts for the pricing changes on EDGA. In addition, the proposal 
allows the Exchange to continue to charge its Members a pass-through 
rate for orders that are routed to EDGA and add liquidity using DE 
Route. The Exchange notes that routing through DE Route is voluntary. 
Lastly, the Exchange also believes that the proposed amendment is non-
discriminatory because it applies uniformly to all Members.
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    \16\ See SR-EDGA-2013-21 (August 1, 2013).
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    The Exchange believes that its proposal to decrease the rebate for 
Members' orders that yield Flag RR from $0.0004 to $0.0002 per share 
represents an equitable allocation of reasonable dues, fees, and other 
charges among Members and other persons using its facilities because 
the Exchange does not levy additional fees or offer additional rebates 
for orders that it routes to EDGA through DE Route. In August 2013, 
EDGA decreased the rebate it provides its customers, such as DE Route, 
from a rebate of $0.0003 per share to a rebate of $0.0002 per share for 
orders that are routed to EDGA.\17\ Therefore, the Exchange believes 
that the proposed change in Flag RR from a rebate of $0.0004 per share 
to a rebate of $0.0002 per share is equitable and reasonable because it 
accounts for the pricing changes on EDGA. In addition, the proposal 
allows the Exchange to continue to charge its Members a pass-through 
rate for orders that are routed to EDGA using routing strategies IOCX 
or IOCT using DE Route. The Exchange notes that routing through DE 
Route is voluntary. Lastly, the Exchange also believes that the 
proposed amendment is non-discriminatory because it applies uniformly 
to all Members.
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    \17\ See SR-EDGA-2013-21 (August 1, 2013).
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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

    These proposed rule changes do 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 any of these changes 
represent a significant departure from previous pricing offered by the 
Exchange or pricing offered by the Exchange's competitors. 
Additionally, Members may opt to disfavor EDGX's pricing if they 
believe that alternatives offer them better value. Accordingly, EDGX 
does not believe that the proposed changes will impair the ability of 
Members or competing venues to maintain their competitive standing in 
the financial markets.
Fee/Rebate Changes for Flags BY and RY
    The Exchange believes that its proposal to pass through a rebate of 
$0.0001 per share for Members' orders that yield Flag BY would increase 
intermarket competition because it

[[Page 49572]]

offers customers an alternative means to route to BYX for the same 
price as entering orders on BYX directly. The Exchange believes that 
its proposal would not burden intramarket competition because the 
proposed rate would apply uniformly to all Members.
    The Exchange believes that its proposal to pass through a fee of 
$0.0003 per share for Members' orders that yield Flag RY would increase 
intermarket competition because it offers customers an alternative 
means to route to BYX for the same price as entering orders on BYX 
directly. The Exchange believes that its proposal would not burden 
intramarket competition because the proposed rate would apply uniformly 
to all Members.
Fee/Rebate Changes for Flags RA and RR
    The Exchange believes that its proposal to pass through a fee of 
$0.0005 per share for Members' orders that yield Flag RA would increase 
intermarket competition because it offers customers an alternative 
means to route to EDGA for the same price as entering orders on EDGA 
directly. The Exchange believes that its proposal would not burden 
intramarket competition because the proposed rate would apply uniformly 
to all Members.
    The Exchange believes that its proposal to pass through a rebate of 
$0.0002 per share for Members' orders that yield Flag RR would increase 
intermarket competition because it offers customers an alternative 
means to route to EDGA for the same price as entering orders on EDGA 
directly. The Exchange believes that its proposal would not burden 
intramarket competition because the proposed rate would apply uniformly 
to all Members.

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 \18\ and Rule 19b-4(f)(2) \19\ 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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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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-EDGX-2013-30 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-2013-30. 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-EDGX-2013-30 and should be 
submitted on or before September 4, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-19741 Filed 8-13-13; 8:45 am]
BILLING CODE 8011-01-P