Document ID: SEC-2011-0511-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2011-04-13T04:00Z

[Federal Register Volume 76, Number 71 (Wednesday, April 13, 2011)]
[Notices]
[Pages 20750-20752]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-8910]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64253; File No. SR-EDGX-2011-09]

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

April 7, 2011.
    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 April 6, 2011, the EDGX Exchange, Inc. (the ``Exchange'' or the 
``EDGX'') filed with

[[Page 20751]]

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 EDGX Rule 15.1(a) and (c). 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.
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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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to reduce the rate on Flag T from $0.0020 per 
share to $0.0012 per share for routing using the ROUD/ROUE routing 
strategies, as defined in Rules 11.9(b)(3)(b) and 11.9(b)(3)(c)(i).
    EDGX Exchange proposes to implement this amendment to the Exchange 
fee schedule on April 6, 2011.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Exchange 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.
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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed reduced rate for Flag T 
(routing using ROUD/ROUE routing strategies) of $0.0012 per share is an 
equitable allocation of reasonable dues, fees, and other charges. Lower 
fees are directly correlated with a higher number of intermediate low 
cost destinations as the more intermediate low cost destinations that 
there are, there is a greater potential for an execution at a lower 
cost destination before reaching a higher cost destination. For 
example, the ROUQ routing strategy, as defined in Rule 
11.9(b)(3)(c)(iv),\6\ routes to the lowest number of low cost 
destinations compared to the ROUD/ROUE \7\ and ROUZ \8\ routing 
strategies. As a result, the Exchange charges a higher fee for such 
strategy of $0.0020 per share (flag Q). The ROUD/ROUE routing 
strategies route to a medium number of low cost destinations and the 
ROUZ routing strategy routes to the highest number of low costs 
destinations amongst these routing strategies. As a result, the 
Exchange will assess a proposed fee of $0.0012 per share for the ROUD/
ROUE routing strategies and assesses the lowest fee for the ROUZ 
routing strategy of $0.0010 per share. The more low cost destinations 
that an order routes to allows the Exchange to pass on the savings it 
receives from such destinations to its members in lower fees. 
Therefore, it is equitable that ROUQ has the highest fee of $0.0020 per 
share, while ROUD/ROUE has an intermediate fee of $0.0012 per share, 
and ROUZ has the lowest fee of the three strategies of $0.0010 per 
share. The Exchange also notes that a difference between ROUQ and ROUZ 
routing strategies is that the additional routing destinations in the 
ROUZ routing strategy are intermediate between the routing destinations 
in ROUQ. This also accounts for the differences in fees. Therefore, for 
each additional intermediate low cost destination that an order routes 
to, the prices of the strategies mentioned above (ROUQ, ROUD/ROUE, 
ROUZ) decrease accordingly.
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    \6\ See SR-EDGX-2011-08 (April 1, 2011).
    \7\ The Exchange notes that ROUD/ROUE routing strategies route 
to the identical number of low cost destinations.
    \8\ See SR-EDGX-2011-08 (April 1, 2011). See Rule 
11.9(b)(3)(c)(v).
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    The Exchange believes that the rate is reasonable when compared to 
other market centers using similar routing strategies. The comparable 
routing strategy to the ROUD/ROUE routing strategies is Parallel D or 
Parallel 2D with the DRT (Dark routing technique) option on BATS BZX 
Exchange (``BATS''). BATS charges $0.0020 per share for its DRT option. 
The Exchange believes that the proposed rebate is non-discriminatory in 
that it applies uniformly to all Members.
    The 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. The Exchange believes that the proposed rates are 
equitable 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 \9\ and Rule 19b-4(f)(2) \10\ 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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    \9\ 15 U.S.C. 78s(b)(3)(A).
    \10\ 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.

[[Page 20752]]

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-2011-09 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-2011-09. 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,\11\ 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-2011-09 and should be submitted on or before May 4, 2011.
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    \11\ 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.
    \12\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-8910 Filed 4-12-11; 8:45 am]
BILLING CODE 8011-01-P