Document ID: SEC-2011-0858-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGA Exchange, Inc.
Posted Date: 2011-06-20T04:00Z

[Federal Register Volume 76, Number 118 (Monday, June 20, 2011)]
[Notices]
[Pages 35924-35926]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-15265]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64675; File No. SR-EDGA-2011-18]

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 15, 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 June 3, 2011, the EDGA Exchange, Inc. (the ``Exchange'' or the 
``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). All 
of the changes described herein are applicable to EDGA 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

Purpose
    In SR-EDGA-2011-16,\4\ the Exchange filed for immediate 
effectiveness a rule filing to amend Rule 11.9 to introduce three 
additional routing strategies to the rule. These routing strategies 
included ROBB and ROCO, which were added to Rules 11.9(b)(3)(c)(vi)-
(vii), respectively, and SWPC, which was added to Rule 11.9(b)(3)(q).
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    \4\ See SR-EDGA-2011-16 (May 5, 2011).
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    ROBB/ROCO are routing options whereby orders check the System for 
available shares and then are sent to destinations on the System 
routing table. If shares remain unexecuted after routing, they are 
posted on the book, unless otherwise instructed by the User.\5\ The 
difference between the latter two routing strategies lies in the 
difference in the System routing tables for the ROBB/ROCO strategies.
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    \5\ As defined in Rule 1.5(cc).
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    SWPC is a routing option under which an order checks the System for 
available shares and then is sent to only Protected Quotations and only 
for displayed size. To the extent that any portion of the order is 
unexecuted, the remainder is posted on the book at the

[[Page 35925]]

order's limit price. The entire SWPC order will not be cancelled back 
to the User immediately if at the time of entry there is an 
insufficient share quantity in the SWPC order to fulfill the displayed 
size of all Protected Quotations. This routing option is similar to the 
strategies set forth in NASDAQ Rule 4758(a)(1)(A)(vi) (``NASDAQ's 
``MOPP'' strategy) and BATS Exchange, Inc. Rule 11.13(a)(3)(D) 
(``Parallel T'').\6\
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    \6\ See, e.g., NASDAQ Rule 4758, BATS Rule 11.13(a)(3)(D).
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    The Exchange proposes to add the ROBB and ROCO strategies to the 
description of Flag BY and assign it a rebate of $0.0004 per share 
(i.e, routed to BATS BYX Exchange, removes liquidity) since they are 
additional strategies that route orders to the BATS BYX Exchange 
(``BYX'') for the purpose of removing liquidity.
    In addition, the Exchange also proposes to add the ROCO routing 
strategy to the description of Flag MT and assign it a fee of $0.00012 
per share since it routes orders to EDGX Mid-Point Match (``MPM'').
    Additionally, the Exchange proposes to add the SWPC routing 
strategy to Flag SW and assign it a fee of $0.0031 per share for 
removal of liquidity from all market centers except from the New York 
Stock Exchange (NYSE). For any orders that use the SWPC strategy that 
remove liquidity from the NYSE, the Exchange will continue to assign 
them a Flag D and charge a fee of $0.0023 per share. This is further 
clarified in footnote 8 to the EDGA fee schedule.
    Finally, the Exchange proposes to add the ROOC routing strategy, as 
defined in EDGA Rule 11.9(b)(3)(n),\7\ to the description of the RT 
flag so that the ROOC strategy yields the RT flag and is assessed a 
rate of $0.0025 per share for any routed executions other than 
executions adding liquidity at the opening or closing sessions. In 
addition, the Exchange proposes to add clarifying language to footnote 
10 of the fee schedule to clarify that footnote 10 only applies to the 
ROUT routing strategy and not to the ROOC routing strategy.
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    \7\ Rule 11.9(b)(3)(n) defines a ROOC as a routing option for 
orders that the entering firm wishes to designate for participation 
in the opening or closing process of a primary listing market (NYSE, 
Nasdaq, NYSE Amex, or NYSE Arca) if received before the opening/
closing time of such market. If shares remain unexecuted after 
attempting to execute in the opening or closing process, they are 
either posted to the book, executed, or routed like a ROUT routing 
option, as defined in Rule 11.9(b)(3)(c).
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    The Exchange proposes to implement these amendments to its fee 
schedule on June 6, 2011.
Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Exchange 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. The fee of $0.0012 per share for the MT Flag for orders 
that are routing using the ROCO routing strategy represents a pass 
through of the EDGX fee for removing liquidity from MPM, as indicated 
in the EDGX fee schedule for Flag MT. The $0.0012 per share is 
competitive and superior to comparable exchange standard removal rates 
of $0.0030 per share (Nasdaq), $0.0030 per share (NYSE Arca), $0.0023 
per share (NYSE), and $0.0028 per share (BATS BZX). The fee is also 
equitable as it is competitive with other fees assessed for similar 
routing strategies to ROCO that access low cost destinations, such as 
ROUZ, as defined in Rule 11.9(b)(3)(c)(v) (yields Flag Z, $0.0010 per 
share) and ROUD/ROUE, as defined in Rules 11.9(b)(3)(b) and 
11.9(b)(3)(c)(i) (Flag T, $0.0012 per share). The Exchange believes 
that the proposed fee is non-discriminatory in that it applies 
uniformly to all Members.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the rebate of $0.0004 per share for 
routing to BYX and removing liquidity using routing strategies ROBB/
ROCO is an equitable allocation of reasonable dues, fees, and other 
charges among its members and other person using its facilities. When 
EDGA routes to BYX and removes liquidity, BYX rebates EDGA $0.0003 per 
share. If a member uses EDGA to route to BYX using one of the listed 
routing strategies (including ROBB/ROCO, as proposed), EDGA provides a 
$0.0001 discount per share. The Exchange believes that this discounted 
rate would incentivize Members to first route through EDGA to reach BYX 
and would thereby increase liquidity on EDGA. This type of rate is also 
similar to other rates that EDGA charges, such as ``one-under'' pricing 
for routing to Nasdaq using the INET routing strategy and is consistent 
with the processing of similar routing strategies by EDGA's 
competitors.\10\ The Exchange believes that the proposed rebate is non-
discriminatory in that it applies uniformly to all Members.
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    \10\ See footnote 7 of the EDGA fee schedule. See also BATS BZX 
fee schedule: Discounted Destination Specific Routing (``One 
Under'') to NYSE, NYSE ARCA and NASDAQ. See Securities Exchange Act 
Release No. 62858, 75 FR 55838 (September 14, 2010) (SR-BATS-2010-
023) (modifying the BATS fee schedule in order to amend the fees for 
its BATS + NYSE Arca destination specific routing option to continue 
to offer a ``one under'' pricing model).
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    The fee of $0.0031 per share for the SWPC routing strategy is an 
equitable allocation of reasonable dues, fees, and other charges in 
that the SWPC routing strategy is limited in its interaction with other 
Member orders as it only executes to the extent a Member order is at 
the Protected Quotation. As a result, compared to other routing 
strategies that always sweep the EDGA book before routing out, such as 
ROBA (fee of $0.0025 per share), the SWPC fee is higher. Secondly, the 
fee is equitable when compared to other similar type strategies of 
EDGA's competitors. As noted in SR-EDGA-2011-16 (May 5, 2011), the SWPC 
routing strategy is based on Nasdaq's MOPP strategy and BATS BZX/BYX 
Exchange Parallel T routing strategy.\11\ Specifically, Nasdaq charges 
$0.0035 per share for the MOPP strategy and BATS charges $0.0033 per 
share for the Parallel T strategy. EDGA's rate is even more competitive 
than these. Finally, the SWPC routing strategy is similar in 
functionality to SWPA/SWPB, both of which are charged $0.0031 per 
share.\12\ The lower fee charged for removing liquidity from the NYSE 
($0.0023 per share) is consistent with the processing of similar 
routing strategies by EDGA's competitors. Secondly, of the major market 
centers, the NYSE fees for removing liquidity itself are lower, and 
EDGA is thus able to pass back such lower rates to its Members.
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    \11\ See, e.g., NASDAQ Rule 4758 and BATS Rule 11.13.
    \12\ See Securities Exchange Act Release No. 63820, 76 FR 7608 
(February 10, 2011) (SR-EDGA-2011-02).
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    The Exchange believes that assessing a fee of $0.0025 per share for 
Members using the ROOC routing strategy, as defined in EDGA Rule 
11.9(b)(3)(n), for any routed executions other than executions adding 
liquidity at the opening or closing sessions of primary listing 
markets, is an equitable allocation of reasonable dues, fees, and other 
charges among its members and other person using its facilities. The 
rate represents a flat, low cost routing rate for EDGA members. The 
flat-rate provides simplicity for customers instead of passing through 
the actual rates that EDGA receives from various destinations on its 
schedule. This type of rate is similar to other rates that EDGA 
charges, such as the flat rates for the ROUT routing strategy (yielding 
Flag RT and priced at $.0025 per share) and for Flag 7 executions 
($0.0027 per

[[Page 35926]]

share). In this rate, EDGA takes into account the rates that it is 
charged or rebated when routing to other destinations. It is also 
consistent with the processing of similar routing strategies by EDGA's 
competitors, such as Nasdaq's DOTM routing strategy \13\ for which 
Nasdaq charges $0.0030 per share.
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    \13\ Nasdaq's DOTM routing strategy posts on a primary listing 
market for the open and then acts like Nasdaq's STGY routing 
strategy for the rest of the trading session. See NASDAQ Rule 4758. 
[sic]
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    The rate is also equitable in that for any routed executions other 
than adding liquidity at the opening or closing sessions of primary 
listing markets, the ROOC routing strategy acts like an ROUT routing 
strategy, as defined in Rule 11.9(b)(3)(c). As a result, it is assessed 
an identical fee to the ROUT routing strategy. The Exchange believes 
that the proposed rebate is non-discriminatory in that it applies 
uniformly to all Members.
    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 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) [sic] of the Act \14\ and Rule 19b-4(f)(2) \15\ 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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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-EDGA-2011-18 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-EDGA-2011-18. 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, 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 website 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-EDGA-2011-18 and should be 
submitted on or before July 11, 2011.

    For the Commission, by the Division of Market Regulation, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-15265 Filed 6-17-11; 8:45 am]
BILLING CODE 8011-01-P