Document ID: SEC-2011-0331-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: EDGA Exchange, Inc.
Posted Date: 2011-03-10T05:00Z

[Federal Register Volume 76, Number 47 (Thursday, March 10, 2011)]
[Notices]
[Pages 13254-13255]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-5443]

[[Page 13254]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-64037; File No. SR-EDGA-2011-06]

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

March 4, 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 March 1, 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

1. Purpose
New Tier Rate for Adding Liquidity
    The fee for adding liquidity on EDGA is currently $0.00025 per 
share for securities at or above $1.00. The Exchange proposes to create 
a tier (indicated in footnote 11) to state that if members, on a daily 
basis, measured monthly, post 0.9% of the Total Consolidated Volume 
(``TCV'') in average daily volume to EDGA, they will be charged 
$0.00005 per share. TCV is defined (in proposed footnote 11) as volume 
reported by all exchanges and trade reporting facilities to the 
consolidated transaction reporting plans for Tapes A, B, and C 
securities for the month prior to the month in which the fees are 
calculated. So, when the calculation of TCV is done for March 2011 
billing for February 2011 trading activity, the appropriate TCV is 
based on February 2011 figures.\4\
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    \4\ The Commission notes that the Exchange's proposed tier 
became effective with respect to trading activity taking place on or 
after the filing of the proposed rule change.
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Proposed Changes Associated With Routing to BATS BYX Exchange
    Currently, the BY flag is yielded when an order is routed to BATS 
BYX Exchange and removes liquidity using order types ROUC and ROBY, as 
defined in Exchange Rules 11.9(b)(3)(a) and (g). The Exchange proposes 
to add footnote 12 to the fee schedule to describe that stocks priced 
below $1.00 will be charged $0.0010 per share. In addition, the 
Exchange proposes to increase the rebate from $0.0003 to $0.0004 when 
an order is routed to BATS BYX Exchange and removes liquidity.
    EDGA Exchange proposes to implement these amendments to the 
Exchange fee schedule on March 1, 2011.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\5\ in general, and 
furthers the objectives of Section 6(b)(4),\6\ 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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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the fee associated with the BY flag 
($0.0010 per share) for stocks priced below $1 represents an equitable 
allocation of reasonable dues, fees, and other charges since it 
reflects a pass through of the BATS fee for removing liquidity. EDGA 
believes that it is reasonable and equitable to pass on these fees to 
its members.
    The proposed increased rebate when an order is routed to BATS BYX 
Exchange and removes liquidity (from $0.0003 to $0.0004 per share) is 
designed to incentivize Members to use this routing strategy to 
increase volume on EDGA. Such increased volume increases potential 
revenue to the Exchange, and would allow the Exchange to spread its 
administrative and infrastructure costs over a greater number of 
shares, leading to lower per share costs. These lower per share costs 
would allow the Exchange to pass on the savings to Members in the form 
an increased rebate. The increased liquidity also benefits all 
investors by deepening EDGA's liquidity pool, supporting the quality of 
price discovery, promoting market transparency and improving investor 
protection.
    This proposed rate represents a discount over the pass through rate 
of $0.0003 per share currently provided. The Exchange also believes 
that this fee structure is an equitable allocation of reasonable dues, 
fees, and other charges in that it applies uniformly to all Members and 
the increased rebate for removing liquidity from BATS is consistent 
with the processing of similar routing strategies by EDGA's 
competitors.\7\
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    \7\ See BATS 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 Exchange believes that the new tier rate of $0.00005 per share 
for Members who on a daily basis, measured monthly, post 0.9% of the 
Total Consolidated Volume (``TCV'') in average daily volume to EDGA 
represents a fair and equitable allocation of reasonable dues, fees, 
and other charges as it is aimed at incentivizing liquidity for high 
volume providers, which results in increased volume on EDGA. Such 
increased volume increases potential revenue to the Exchange, and would 
allow the Exchange to spread its administrative and infrastructure 
costs over a greater number of shares, leading to lower per share 
costs. The decreased per share costs allows the Exchange to share its 
savings with its Members in

[[Page 13255]]

the form of such lower tier rate. The increased liquidity also benefits 
all investors by deepening EDGA's liquidity pool, supporting the 
quality of price discovery, promoting market transparency and improving 
investor protection. Volume-based discounts such as the reduced 
execution fee proposed here have been widely adopted in the cash 
equities markets, and are equitable because they are open to all 
members on an equal basis and provide discounts that are reasonably 
related to the value to an exchange's market quality associated with 
higher levels of market activity, such as higher levels of liquidity 
provision and introduction of higher volumes of orders into the price 
and volume discovery processes.
    In addition, the new tier rate is equitable in that higher fees on 
the Exchange are directly correlated with less stringent criteria. For 
example, the INET tiered fee, as indicated in footnote 7/flag 2, of 
$0.0030 per share has less stringent criteria, and is a higher fee than 
the new proposed fee. For example, based on average TCV for January 
2011 (8.0 billion), in order for a Member to qualify for the INET fee 
of $0.0030, the Member would have to route to Nasdaq less than 
5,000,000 shares of average daily volume. In order to qualify for the 
proposed lower fee of $0.00005 per share, which has more stringent 
criteria than the INET fee, the Member would have to post 72 million 
shares on EDGA (0.9% of TCV in average daily volume).
    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 \8\ and Rule 19b-4(f)(2) \9\ 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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    \8\ 15 U.S.C. 78s(b)(3)(A).
    \9\ 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-2011-06 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-2011-06. 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,\10\ 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-
EDGA-2011-06 and should be submitted on or before March 31, 2011.
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    \10\ 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 EDGA, and at the 
Commission's Public Reference Room.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\11\
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    \11\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-5443 Filed 3-9-11; 8:45 am]
BILLING CODE 8011-01-P