Document ID: SEC-2014-0440-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGX Exchange, Inc.
Posted Date: 2014-03-18T04:00Z

[Federal Register Volume 79, Number 52 (Tuesday, March 18, 2014)]
[Notices]
[Pages 15166-15168]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-05840]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71692; File No. SR-EDGX-2014-04]

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

March 11, 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 March 5, 2014, 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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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) Increase the fee for orders yielding Flag D, 
which route or re-route orders to the New York Stock Exchange LLC 
(``NYSE''); (ii) decrease the fee for orders yielding Flag U, which 
route to LavaFlow, Inc. (``LavaFlow''); and (iii) increase the fee for 
orders yielding Flag RW, which route to the CBOE Stock Exchange, LLC 
(``CBSX'') and adds liquidity. 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) Increase 
the fee for orders yielding Flag D, which route or re-route to the 
NYSE; (ii) decrease the fee for orders yielding Flag U, which route to 
LavaFlow; and (iii) increase the fee for orders yielding Flag RW, which 
route to the CBSX and add liquidity.
Flag D
    In securities priced at or above $1.00, the Exchange currently 
charges a fee of $0.0025 per share for Members' orders that yield Flag 
D, which route or re-route orders to the NYSE. The Exchange proposes to 
amend its Fee Schedule to increase the fee for orders that yield Flag D 
to $0.0026 per share in securities priced at or above $1.00.\4\ The 
proposed change represents a pass through of the rate Direct Edge ECN 
LLC (d/b/a DE Route) (``DE Route''), the Exchange's affiliated routing 
broker-dealer, is charged for routing orders to the NYSE that remove 
liquidity when it does not qualify for a volume tiered reduced fee. The 
proposed change is in response to the NYSE's March 2014 fee change 
where the NYSE increased its fee from $0.0025 per share to $0.0026 per 
share for orders in securities priced at or above $1.00.\5\ When DE 
Route routes to and removes liquidity on the NYSE, it will now be 
charged a standard rate of $0.0026 per share.\6\ DE Route will pass 
through this rate it is charged on the NYSE to the Exchange and the 
Exchange, in turn, will pass through this rate to its Members.
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    \4\ The Exchange does not propose to amend its fee for orders 
that yield Flag D in securities priced below $1.00.
    \5\ See NYSE Trader Update dated February 26, 2014, http://www.nyse.com/pdfs/NYSE%20Client%20Notice%20Fees%2003%202014.pdf.
    \6\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered reduced fee on the NYSE, its rate for 
Flag D will not change.
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Flag U
    In securities priced at or above $1.00, the Exchange currently 
charges a fee of $0.0030 per share for Members' orders that yield Flag 
U, which route to LavaFlow. The Exchange proposes to amend its Fee 
Schedule to decrease the fee for orders that yield Flag U to $0.0028 
per share in securities priced at or above $1.00.\7\ The proposed 
change represents a pass through of the rate DE Route, the Exchange's 
affiliated routing broker-dealer, is charged for routing orders to 
LavaFlow that remove liquidity when it does not qualify for a volume 
tiered reduced fee. The proposed change is in response to LavaFlow's 
March 2014 fee change where LavaFlow decreased its fee from $0.0030 per 
share to $0.0028 per share for orders in securities priced at or above 
$1.00.\8\ When DE Route routes to and removes liquidity on LavaFlow, it 
will now be charged a standard rate of $0.0028 per share.\9\ DE Route 
will pass through this rate it is charged on LavaFlow to the Exchange 
and the Exchange, in turn, will pass through this rate to its Members.
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    \7\ The Exchange does not propose to amend its fee for orders 
that yield Flag U in securities priced below $1.00.
    \8\ See LavaFlow Pricing, available at https://www.lavatrading.com/solutions/pricing.php.
    \9\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered reduced fee on LavaFlow, its rate for 
Flag U will not change.
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Flag RW
    In securities priced at or above $1.00, the Exchange currently 
charges a fee of $0.0018 per share for Members' orders that yield Flag 
RW, which routes to the CBSX and adds liquidity. The Exchange does not 
currently charge a fee for orders in securities priced below $1.00 that 
yield Flag RW. The Exchange proposes to amend its Fee Schedule to 
increase the fee for orders that yield Flag RW to $0.0030 per share in 
securities priced at or above $1.00 and 0.30% of the trade's dollar 
value in securities priced below $1.00. 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 that add liquidity 
to CBSX when it does not qualify for a volume tiered reduced fee. The 
proposed change is in response to CBSX's March 2014 fee change where 
the CBSX increased its fee from $0.0018 per share to $0.0030 per share 
for orders in securities priced at or above $1.00

[[Page 15167]]

and instituted a charge of 0.30% of the trade's dollar value in 
securities priced below $1.00.\10\ When DE Route routes to and adds 
liquidity on the CBSX, it will now be charged a standard rate of 
$0.0030 per share or 0.30% of the trade's value, as described 
above.\11\ DE Route will pass through this rate it is charged on CBSX 
to the Exchange and the Exchange, in turn, will pass through this rate 
to its Members.
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    \10\ See CBSX, Information Circular IC14-011, http://www.cbsx.com/publish/InfoCir/IC14-011.pdf.
    \11\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered reduced fee on CBSX, its rate for Flag 
RW will not change.
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Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule on March 5, 2014.
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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Flag D
    The Exchange believes that its proposal to increase the fees for 
orders yielding Flag D represents an equitable allocation of reasonable 
dues, fees, and other charges among Members and other persons using its 
facilities. Prior to the NYSE's March 2014 fee change, the NYSE charged 
DE Route a fee of $0.0025 per share in securities priced at or above 
$1.00, which DE Route passed through to the Exchange and the Exchange 
charged its Members. When DE Route routes to the NYSE, it will now be 
charged a standard rate of $0.0026 per share. The Exchange does not 
levy additional fees or offer additional rebates for orders that it 
routes to the NYSE through DE Route. Therefore, the Exchange believes 
that the proposed change to Flag D is equitable and reasonable because 
it accounts for the pricing changes on the NYSE, which enables the 
Exchange to charge its Members the applicable pass-through rate. 
Lastly, the Exchange notes that routing through DE Route is voluntary 
and believes that the proposed change is non-discriminatory because it 
applies uniformly to all Members.
Flag U
    The Exchange believes that its proposal to decrease the fees for 
orders yielding Flag U represents an equitable allocation of reasonable 
dues, fees, and other charges among Members and other persons using its 
facilities. Prior to LavaFlow's March 2014 fee change, LavaFlow charged 
DE Route a fee of $0.0030 per share to remove liquidity in securities 
priced at or above $1.00, which DE Route passed through to the Exchange 
and the Exchange charged its Members. When DE Route routes to LavaFlow, 
it will now be charged a standard rate of $0.0028 per share. The 
Exchange does not levy additional fees or offer additional rebates for 
orders that it routes to LavaFlow through DE Route. Therefore, the 
Exchange believes that the proposed change to Flag U is equitable and 
reasonable because it accounts for the pricing changes on LavaFlow, 
which enables the Exchange to charge its Members the applicable pass-
through rate. Lastly, the Exchange notes that routing through DE Route 
is voluntary and believes that the proposed change is non-
discriminatory because it applies uniformly to all Members.
Flag RW
    The Exchange believes that its proposal to increase the fees for 
orders yielding Flag RW represents an equitable allocation of 
reasonable dues, fees, and other charges among Members and other 
persons using its facilities. Prior to CBSX's March 2014 fee change, 
CBSX charged DE Route a fee of $0.0018 per share to remove liquidity 
from CBSX in securities priced at or above $1.00 and no fee for 
securities priced below $1.00, which DE Route passed through to the 
Exchange and the Exchange charged its Members. When DE Route routes to 
and adds liquidity on the CBSX, it will now be charged a standard rate 
of $0.0030 per share or 0.30% of the trade's value, as described above. 
The Exchange does not levy additional fees or offer additional rebates 
for orders that it routes to CBSX through DE Route. Therefore, the 
Exchange believes that the proposed changes to Flag RW are equitable 
and reasonable because they account for the pricing changes on CBSX, 
which enables the Exchange to charge its Members the applicable pass-
through rate. Lastly, the Exchange notes that routing through DE Route 
is voluntary and believes that the proposed change is non-
discriminatory because it applies 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 EDGX'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.
    In particular, the Exchange believes that its proposal to pass 
through the amended fees for orders that yield Flags D, U, and RW would 
increase intermarket competition because it offers customers an 
alternative means to route to the NYSE, LavaFlow, and CBSX respectively 
for the same price that they would be charged if they entered orders on 
those trading centers 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 \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 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:

[[Page 15168]]

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-2014-04 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-EDGX-2014-04. 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-2014-04, and should be 
submitted on or before April 8, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-05840 Filed 3-17-14; 8:45 am]
BILLING CODE 8011-01-P