Document ID: SEC-2010-1561-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2010-10-14T04:00Z

[Federal Register: October 14, 2010 (Volume 75, Number 198)]
[Notices]               
[Page 63227-63228]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr14oc10-124]                         

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-63054; File No. SR-EDGX-2010-13]

 
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

October 6, 2010.
    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 September 30, 2010, the EDGX Exchange, Inc. (the ``Exchange'' 
or the ``EDGX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II 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

    EDGX Exchange, Inc. (``Exchange'' or ``EDGX'') proposes to amend 
its fees and rebates applicable to Members \3\ of the Exchange pursuant 
to EDGX Rule 15.1(a) and (c).
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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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    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 http://www.directedge.com.

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 proposes to make several amendments to its fee 
schedule. First, it proposes to increase the fee for removing liquidity 
from $0.0029 per share to $0.0030 per share. Conforming amendments have 
been made to the B, V, Y, 3, and 4 Flags (``add liquidity'' flags) to 
reflect this change. Secondly, it proposes to decrease the rebate for 
adding liquidity from $0.0029 per share to $0.0026 per share. 
Conforming amendments have been made to the N, W, and 6 flags (``remove 
liquidity'' flags) to reflect this change. The Exchange believes that 
these rate changes will enable it to maintain a competitive position 
with regards to other away market centers.
    Secondly, the Exchange proposes to incorporate a three tier rebate 
structure. The Exchange proposes to introduce the Mega Tier, which 
modifies the rebate incorporated in footnote 1 of the fee schedule. 
There are two alternative ways a Member can qualify for the Mega Tier 
rebate. First, footnote 1 of the fee schedule currently provides that 
Members can qualify for a rebate of $0.0032 per share for all liquidity 
posted on EDGX if they add or route at least 5,000,000 shares of 
average daily volume prior to 9:30 AM or after 4:00 PM (includes all 
flags except 6) AND add a minimum of 50,000,000 shares of average daily 
volume on EDGX in total. The Exchange proposes to amend the 50,000,000 
share minimum to 25,000,000 shares. Secondly, footnote 1 further 
provides that Members will be provided a $0.0031 rebate per share for 
liquidity added on EDGX if the Member on a daily basis, measured 
monthly, posts 0.75% of the Total Consolidated Volume (``TCV'') in 
average daily volume. TCV is defined as volume reported by all 
exchanges and trade reporting facilities to the consolidated 
transaction reporting plans for Tapes A, B and C securities. The 
Exchange proposes to increase this rebate to $0.0032 per share.
    Next, the Exchange proposes to introduce the Ultra Tier, in which a 
Member will be provided a $0.0031 rebate per share for liquidity added 
on EDGX if the Member posts 0.50% of TCV in average daily volume to 
EDGX, as measured on a monthly basis.
    Finally, the Exchange propose to introduce the Super Tier, in which 
a Member will be provided a $0.0030 rebate per share for liquidity 
added on EDGX if the Member posts 10,000,000 shares or more of average 
daily volume to EDGX, as measured on a monthly basis.
    The Exchange believes that the above pricing is appropriate since 
higher rebates are directly correlated with more stringent criteria. 
The Mega Tier rebate ($0.0032 per share) has the most stringent 
criteria, and is $0.0001 greater than the Ultra Tier rebate ($0.0031 
per share) and $0.0002 greater than the Super Tier rebate ($0.0030 per 
share). For example, based on average TCV for August 2010 (7.2 
billion), in order for a Member to qualify for the Mega Tier, the 
Member would have to post 54 million shares on EDGX. In order to 
qualify for the Ultra Tier, which has less stringent criteria than the 
Mega Tier, the Member would have to post 36 million shares on EDGX. 
Finally, the Super Tier has the least stringent criteria. In order for 
a Member to qualify for this rebate, the Member would have to post 10 
million shares on EDGX. In addition, these rebates also result, in 
part, from lower administrative costs associated with higher volume.
    Finally, the Exchange proposes to make a clarifying amendment to 
the price guarantee language found in footnote 1 of the schedule to 
clarify that the share amounts are based upon average daily volume.
    EDGX Exchange proposes to implement these amendments to the 
Exchange fee schedule on October 1, 2010.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\4\ in general, and 
furthers the objectives of Section 6(b)(4),\5\ 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

[[Page 63228]]

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 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. Finally, the Exchange believes that the proposed rates are 
equitable in that they apply uniformly to all Members. In addition, the 
rebates provided result, in part, from lower administrative costs 
associated with higher volume. 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 those 
members that opt to direct orders to the Exchange rather than competing 
venues.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4).
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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 \6\ and Rule 19b-4(f)(2) \7\ 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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    \6\ 15 U.S.C. 78s(b)(3)(A).
    \7\ 17 CFR 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 e-mail to rule-comments@sec.gov. Please include 
File Number SR-EDGX-2010-13 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-2010-13. This file 
number should be included on the subject line if e-mail 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,\8\ 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-EDGX-2010-13 and should be 
submitted on or before November 4, 2010.
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    \8\ The text of the proposed rule change is available on 
Exchange's Web site at http://www.directedge.com, on the 
Commission's Web site at http://www.sec.gov, at EDGX, and at the 
Commission's Public Reference Room.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\9\
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    \9\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-25744 Filed 10-13-10; 8:45 am]
BILLING CODE 8011-01-P