[Federal Register Volume 76, Number 21 (Tuesday, February 1, 2011)]
[Notices]
[Pages 5636-5639]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-2132]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63779; File No. SR-EDGX-2011-01]
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule 11.9
January 26, 2011.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on January 21, 2011, the EDGX Exchange, Inc. (the ``Exchange'' or
``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 Exchange. The Exchange
has designated the proposed rule change as constituting a non-
controversial rule change under Rule 19b-4(f)(6) under the Act,\3\
which renders the proposal effective upon filing with the Commission.
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.
\3\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to amend Rule 11.9 to add its routing
options, which are currently contained in its fee schedule, to the rule
and to introduce additional options to the rule. The text of the
proposed rule change is attached as Exhibit 5 and is available on the
Exchange's Web site at http://www.directedge.com, at the Exchange's
principal office, and at the Public Reference Room of the Commission.
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 Exchange 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's current fee schedule contains a list of routing
options. The Exchange proposes to move the current list of routing
options from the fee schedule and codify it in Rule 11.9(a)(3). In
addition, the Exchange proposes to amend the existing routing option
descriptions to provide additional clarity and introduce additional
routing options to Rule 11.9(a)(3).
The Exchange intends to implement the rule change upon filing with
the Commission with respect to all routing options, except ROOC, which
the Exchange intends to implement on or about February 14, 2011.
[[Page 5637]]
First, the Exchange proposes to move its discussion of available
routing options, which is located at the end of the fee schedule, and
codify it in Rule 11.9(b)(3)(a)-(r).
Currently, the fee schedule has the following descriptions of
routing strategies:
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ROUQ................................... sweeps the EDGX book, then
routes to other destination
centers.
ROUC................................... sweeps the EDGX book, then
sequentially sweeps the
balance, if any, to the
following destinations: other
destination centers, then
Nasdaq OMX BX, NYSE, and the
remainder posts to EDGX.
ROUD................................... sweeps the EDGX book before
being routed to other
destination centers.
ROUE................................... sweeps the EDGX book, then
other destination centers, and
any remainder routes to other
market centers.
ROUZ................................... sweeps the EDGX book before
interacting with solicited
orders on a price/time
priority basis.
INET................................... sweeps the EDGX book and
removes liquidity from Nasdaq,
if the order is marketable, or
posts on Nasdaq, if the order
is non-marketable.
ROBA................................... sweeps the EDGX book and routes
to BATS BZX Exchange as an
immediate or cancel (IOC)
order, with the remainder
being cancelled if there is no
execution.
ROBX................................... sweeps the EDGX book and routes
to Nasdaq BX Exchange as an
immediate or cancel (IOC)
order, with the remainder
being cancelled if there is no
execution.
ROBY................................... sweeps the EDGX book and routes
to BATS BYX Exchange as an
immediate or cancel (IOC)
order, with the remainder
being cancelled if there is no
execution.
------------------------------------------------------------------------
The Exchange proposes to amend Rule 11.9(b)(2) to cross-reference
the routing options listed in proposed Rule 11.9(b)(3), as described in
more detail below.
The Exchange proposes to describe how its routing options work in
Rule 11.9(b)(3). The Exchange's system (``System'') provides a variety
of routing options. Routing options may be combined with all available
order types and times-in-force, with the exception of order types and
times-in-force whose terms are inconsistent with the terms of a
particular routing option. The System will consider the quotations only
of accessible markets. The term ``System routing table'' refers to the
proprietary process for determining the specific trading venues to
which the System routes orders and the order in which it routes them.
The Exchange reserves the right to maintain a different System routing
table for different routing options and to modify the System routing
table at any time without notice. The System routing options are
described in more detail below.
The ROUC strategy currently states that under this strategy an
order sweeps the book then sequentially sweeps the balance, if any, to
the following destinations: Other destination centers, then Nasdaq OMX
BX, NYSE, and the remainder posts to EDGX. The Exchange proposes to
amend the description to state that it is a routing option under which
an order checks the System for available shares and then is sent
sequentially to destinations on the System routing table, Nasdaq OMX
BX, and NYSE. If shares remain unexecuted after routing, they are
posted on the Exchange's book. The Exchange will place this proposed
description in Rule 11.9(b)(3)(a).
The ROUD strategy description states that it sweeps the book before
being routed to other destination centers. The Exchange proposes to
revise this description to state that it checks the System for
available shares and then is sent sequentially to destinations on the
System routing table. The ROUE routing strategy currently states that
it sweeps the book, then other destination centers, and any remainder
routes to other market centers. The Exchange proposes to revise this
description to state that an order routed under this strategy checks
the System for available shares, and then is sent to destinations on
the System routing table. The revised descriptions of the ROUD and ROUE
routing strategies, as described above, will be placed in proposed
Rules 11.9(b)(3)(b)-(c).
The INET strategy is currently described as a strategy that sweeps
the EDGX book and removes liquidity from Nasdaq, if the order is
marketable, or posts on Nasdaq, if the order is non-marketable. The
Exchange proposes to revise the description to read that ``such an
order checks the System for available shares and then is sent to
Nasdaq. If shares remain unexecuted after routing, they are posted on
Nasdaq book.'' The proposed description of the INET routing strategy,
as described above, will be placed in proposed Rule 11.9(b)(3)(d).
The Exchange's current description of the ROBA strategy states that
it is a strategy under which an order sweeps the book and routes to
BATS BZX Exchange as an immediate or cancel (IOC) order, with the
remainder being cancelled if there is no execution. The Exchange
proposes to revise such description to read that such order checks the
System for available shares and then is sent to BATS BZX Exchange as an
IOC order. If shares remain unexecuted after routing, they are
cancelled. The proposed description will be placed in Rule
11.9(b)(3)(e).
ROBX is currently described as a strategy under which an order
sweeps the book and routes to Nasdaq BX Exchange as an IOC order, with
the remainder being cancelled if there is no execution. This
description is proposed to be revised to read that such order ``checks
the System for available shares and then is sent to Nasdaq BX Exchange
as an immediate or cancel (IOC) order. If shares remain unexecuted
after routing, they are cancelled.''
ROBY is currently described as a strategy under which an order
sweeps the EDGX book and routes to BATS BYX Exchange as an immediate or
cancel (IOC) order, with the remainder being cancelled if there is no
execution. This description is proposed to be revised to state that
such order ``checks the System for available shares and then is sent to
BATS BYX Exchange as an IOC order. If shares remain unexecuted after
routing, they are cancelled.'' The revised descriptions of the ROBX and
ROBY strategies are proposed to be placed in Rules 11.9(b)(3)(f)-(g).
The Exchange proposes to codify the following strategies in Rule
11.9(b)(3)(h)-(r) as well:
In proposed rule 11.9(b)(3)(h), the Exchange proposes to describe
the ROUT routing option as a routing option under which an order checks
the System for available shares, and then is sent to destinations on
the System routing table.
In proposed rule 11.9(b)(3)(i), the Exchange proposes to describe
the ROUX routing option under which an order checks the System for
available shares and then is sent to destinations on the System routing
table.
In proposed rule 11.9(b)(3)(j), the Exchange proposes to describe
the RDOT routing option as a routing option under which an order checks
the System for available shares, and then is sent sequentially to
destinations on the System routing table. If shares remain unexecuted
after routing, they are sent to the NYSE.
In proposed rule 11.9(b)(3)(k), the Exchange proposes to describe
the
[[Page 5638]]
RDOX routing option under which an order checks the System for
available shares, and then is sent to the NYSE.
In proposed rule 11.9(b)(3)(l), the Exchange proposes to describe
the ROLF routing option under which an order checks the System for
available shares, and then is sent to LavaFlow ECN.
In proposed rule 11.9(b)(3)(m), the Exchange proposes to describe
the ROPA routing option under which an order checks the System for
available shares and then is sent to NYSE Arca as an immediate or
cancel order (IOC). If shares remain unexecuted after routing, they are
cancelled.
In proposed rule 11.9(b)(3)(n), the Exchange proposes to describe
the IOCX routing option under which an order checks the System for
available shares and then is sent to EDGA.
In proposed rule 11.9(b)(3)(o), the Exchange proposes to describe
the IOCT routing option under which an order checks the System for
available shares and then is sent sequentially to destinations on the
System routing table. If shares remain unexecuted after routing, they
are sent to EDGA.
In proposed rule 11.9(b)(3)(p), the Exchange proposes to describe
the ROOC 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 described in proposed Rule 11.9(b)(3)(h),
above.
The Exchange also proposes to introduce the SWPA and SWPB routing
strategies and add them to proposed Rules 11.9(b)(3)(q)-(r). Under the
SWPA strategy, an order would check the System for available shares and
then would be sent to Protected Quotations and only for displayed size.
Under this strategy, orders would not have to contain sufficient size
to execute against all Protected Quotations (emphasis added). If any
shares remain unexecuted, such remainder will be cancelled back to the
User. Under the SWPB routing strategy, an order would check the System
for available shares and then is sent to Protected Quotations and only
for displayed size. Under this strategy, orders would have to contain
sufficient size to execute against all Protected Quotations. The entire
SWPB order will be cancelled back to the User immediately if at the
time of entry there is insufficient quantity in the SWPB order to
fulfill the displayed size of all Protected Quotations. The Exchange
believes that the proposed introduction of the SWPA/B routing options
will provide market participants with greater flexibility in routing
orders consistent with Regulation NMS. This proposed rule change is
similar to NASDAQ Rule 4758(a)(1)(A)(vi) (NASDAQ's ``MOPP'' strategy)
and BATS Exchange, Inc. Rule 11.13(a)(3)(D) (``Parallel T'').\4\
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\4\ See, e.g., NASDAQ Rule 4758, BATS Rule 11.13(a)(3)(D).
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In addition, the Exchange also believes that the proposed
introduction of the routing options, described above, will provide
market participants with greater flexibility in routing orders, without
having to develop their own complicated routing strategies.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b)(5) of the Act,\5\ which requires the rules of an
exchange to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system and, in general, to protect investors and the
public interest. The proposed change to introduce the routing options
described above will provide market participants with greater
flexibility in routing orders without developing complicated order
routing strategies on their own. In addition, it will provide
additional clarity and specificity to the Exchange's rules regarding
routing strategies and will further enhance transparency with respect
to Exchange routing offerings.
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\5\ 15 U.S.C. 78f(b)(5).
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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 Regarding 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
Because the foregoing proposed rule change: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) by its terms does not become operative for 30 days after the
date of this filing, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest, the proposed rule change has become effective pursuant to
Section 19(b)(3)(A) \6\ of the Act and Rule 19b-4(f)(6) thereunder.\7\
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(f)(6).
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A proposed rule change filed under 19b-4(f)(6) normally may not
become operative prior to 30 days after the date of filing.\8\ However,
Rule 19b-4(f)(6)(iii) \9\ permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. The Exchange has requested that the Commission
waive the 30-day operative delay. The Exchange notes that waiver of
this requirement will allow the Exchange to immediately offer Exchange
Users new routing strategies, and with respect to the ROOC option, as
soon as the technology for such strategy is completed. The Commission
believes that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest because such waiver
would allow the new routing strategies to become immediately available,
and, with respect to the ROOC option, available on or about February
14, 2011, and would immediately provide additional clarity and
specificity to the Exchange's rules regarding routing strategies and
further enhance transparency with respect to Exchange routing
offerings. For this reason, the Commission designates the proposed rule
change to be operative upon filing with the Commission.\10\
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\8\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
\9\ Id.
\10\ For the purposes only of waiving the 30-day operative
delay, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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.
[[Page 5639]]
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 [email protected]. Please include
File Number SR-EDGX-2011-01 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-2011-01. 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 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 a.m. and 3
p.m. Copies of such 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 publicly available. All submissions
should refer to File Number SR-EDGX-2011-01 and should be submitted on
or before February 22, 2011.
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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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-2132 Filed 1-31-11; 8:45 am]
BILLING CODE 8011-01-P