[Federal Register Volume 77, Number 35 (Wednesday, February 22, 2012)]
[Notices]
[Pages 10595-10598]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-4007]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66402; File No. SR-EDGX-2012-05]


Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
an Offering of a New Historical Data Feed Service to Members and Non-
Members

February 15, 2012.
    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 February 10, 2012, EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. 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 is filing with the U.S. Securities and Exchange 
Commission (the ``Commission'') a proposed rule change to offer a new 
historical data feed service (the ``Service'') to Members \3\ and non-
Members of the

[[Page 10596]]

Exchange. In connection with the same, the Exchange is proposing to 
amend its fee schedule applicable to Members and non-Members of the 
Exchange pursuant to Exchange Rules 15.1(a) and (c). The Exchange 
intends to implement the proposed rule change on February 13, 2012. The 
text of the proposed rule change is available on the Exchange's 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\ A Member is any 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 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 proposes to begin offering a new Service, namely 
EdgeBook Cloud, that will allow Members and non-Members of the Exchange 
(collectively, referred to as purchasers (``Purchasers'') to obtain and 
query historical trade and quote data (``historical data'') 
representing the real-time data feed previously disseminated through 
the EDGX Exchange book by the Exchange. The historical data service 
will provide Purchasers with data in a user-friendly, flexible manner 
for specified fees. Such Service will include the following three 
separate offerings:
EdgeBook Cloud Replay
    The EdgeBook Cloud Replay offering will allow Members and non-
Members of the Exchange to download a Multicast or Unicast \4\ 
formatted replay of each trading day. The downloaded file will contain 
the exact messages that were disseminated via the Exchange book feed 
during the day requested, including any orders, executions, 
cancellations and status messages. Purchasers of the offering will be 
able to choose to obtain data grouped by different periods, including a 
rolling thirty day subscription or a calendar month request of as many 
months as desired. The initial launch of the service on February 13, 
2012, will provide data from June 2011 until the present, with 
additional releases offered thereafter to provide data from October 
2010 to the present.
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    \4\ In computer networking, multicast is the delivery of a 
message or information to a group of destination computers 
simultaneously in a single transmission from the source. Unicast 
transmission is the sending of messages to a single network 
destination identified by a unique address. For EdgeBook Cloud, the 
protocol used is relevant in that the message formats vary between 
the Unicast and Multicast disseminated feeds, and subscribers to the 
Service may want to download historical data in the same format 
currently used to receive the real-time market data feed.
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    The Exchange is proposing to charge to Purchasers a fee of $500/
month for the rolling thirty day replay \5\ and, for a calendar month 
request, the Exchange is proposing to charge $500/month requested with 
a cap of $2500 if less than or equal to 1TB of data is requested. If a 
Purchaser requests more than 1TB of data, it will be charged an 
additional $2500 flat fee.\6\
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    \5\ There is no physical delivery associated with this 
particular EdgeBook Cloud Replay offering and, thus, no delivery 
charges will apply to it.
    \6\ Although the size of the dataset can vary from day to day 
based on market activity, the average size per day is 3.5GB, and the 
data is then compressed to roughly 25% of that size, or .88GB, based 
on the compression technique chosen by the Purchaser. The compressed 
data size is used for evaluating appropriate fees.
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EdgeBook Cloud FlexDownload
    Purchasers of the EdgeBook Cloud FlexDownload (``FlexDownload'') 
offering will be able to submit customized queries of trade or quote 
information for EDGX, and will be able to specify the time and symbol 
parameters, as well as other attributes to be retrieved. The requested 
data will be presented in a text file that can be easily imported into 
any tool for analysis. FlexDownload is a subscription-based offering 
that permits the Purchaser to choose a subscription level depending on 
the amount of data (in gigabytes) it estimates that it will download on 
a monthly basis. If a Purchaser downloads more data than is included in 
the subscription, an overage charge will be assessed for each 
additional gigabyte of data downloaded in that month.
    Specifically, the Exchange is proposing to charge $750/month for up 
to and including 200GB of data, $1500/month for greater than 200GB of 
data but less than or equal to 800GB of data, and $2500/month for 
greater than 800GB but less than or equal to 1TB of data. For the first 
two levels ($750 and $1500/month for FlexDownload), the Exchange is 
proposing to charge a $5/GB overage charge for any overage beyond paid 
subscription. For the third level ($2500/month), the Exchange is 
proposing to charge a $3/GB overage charge beyond the paid subscription 
level.
EdgeBook Cloud Snapshot
    The EdgeBook Cloud Snapshot offering \7\ will provide standard 
queries that can be accessed on-demand directly by a user, or through 
an Application Programming Interface (``API'') \8\ that permits query 
results to be downloaded into a Purchaser's database or displayed on 
their Web site. Standard queries include various quote and trade 
requests, as well as a combined quote and trade view for a requested 
symbol. The offering is subscription-based; the subscription level will 
be determined based on the number of ``Hits'' \9\ a Purchaser will use 
within the month. The number of Hits can increase based on the number 
of days or the Activity Level \10\ of the security. The Activity Level 
is high, medium or low, based on the average quotes and trades per day 
(reviewed over a three month period), and relates to a multiplier that 
increases Hit quantity. For example, if a Purchaser queries a symbol 
for two days, the Purchaser would be charged for two days (or two Hits) 
multiplied by a high Activity Level of three, for a total of six Hits. 
If a Purchaser uses more Hits than subscribed to for two consecutive 
months, the Purchaser's subscription will be automatically upgraded to 
the next level for the upcoming month. However, the Purchaser will be 
able, at

[[Page 10597]]

any time, to request a downgrade or upgrade to any other subscription 
level.
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    \7\ There are no physical deliveries associated with any of the 
EdgeBook Cloud Snapshot offerings and, thus, no delivery charges 
will apply to them.
    \8\ An API facilitates information sharing by acting as a ``go-
between'' that enables a software program to interact with other 
software.
    \9\ A Hit is defined as a query for a symbol/day.
    \10\ An Activity Level is a multiplier that is related to the 
total quantity of quotes and trades, on the Exchange, of a given 
security relative to the quantity of quotes and trades of all other 
securities trading on the Exchange. Activity Levels are High (3), 
Medium (2), or Low (1), and are determined on a monthly basis 
pursuant to a review of the previous three month's activity for the 
security. For a security to be considered Level 1, the combined 
quotes and trades on the Exchange must be less than .05% of the 
total quantity of quotes and trades on the Exchange for the calendar 
month. For a Level 2 security, the combined quotes and trades on the 
Exchange must be greater than .05% and less than .25% of the total 
for the calendar month. Finally, for a Level 3 security, the 
combined quotes and trades on the Exchange must be greater than .25% 
of the total for the calendar month. The security Activity Levels 
for each of the three previous months are then averaged to create 
the final Activity Level multiplier for the security. Direct Edge 
will notify Purchasers in advance of any changes to the percentage 
bands. Activity Levels are posted on the EdgeBook Cloud Web site so 
Purchasers may determine their potential costs for requesting data 
prior to doing so.
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    As described in the Exchange's fee schedule, the Exchange is 
proposing to charge $100 per 500 Hits per month, $250/2,500 Hits per 
month, $500/10,000 Hits/month, $750/50,000 Hits per month, and $1,000 
per 250,000 Hits/month.
    Historical data can be used to support many applications, including 
financial market research and analysis, back-testing of new trading 
strategies to gauge effectiveness, and quality control checks of 
changes to trading or data dissemination software. The Exchange 
proposes to make the Service readily available to its Members and non-
Members to download historical data through secure Internet 
connections. To compensate the Exchange for the costs of storage and 
data dissemination associated with providing the Service, the Exchange 
proposes to charge users monthly fees for the ability to download and 
query the historical data. The proposed fees vary based on the type of 
offering provided, as set forth in Exhibit 5, and as described above. 
Furthermore, historical data can be retrieved in many forms, including 
an FTP download, a distribution to an Amazon S3 account or, for some of 
the subscription levels, a delivery of an external disk drive through 
postal mail and, if the Purchaser requests external disk drive 
delivery, it will be charged at cost for the media and the delivery 
charge. All such fees and costs relate to the provision of the Service 
offerings, i.e., the ability to query the historical data in the 
manners offered. The data itself remains available at no cost to 
Members and non-Members of the Exchange.
Additional Discussion Regarding the Proposed Historical Data Services
    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations (``SROs'') and broker-dealers increased authority and 
flexibility to offer new and unique market data services to the public. 
The Commission believed this authority would expand the amount of data 
available to consumers, and also spur innovation and competition for 
the provision of market data. EdgeBook Cloud appears to be precisely 
the sort of market data service that the Commission envisioned when it 
adopted Regulation NMS. The Service will offer Exchange-specific data 
in a new form not previously available to market data consumers, yet in 
a manner similar to that provided by other market centers.\11\ It will 
allow market participants to purchase a Service that may be used to 
query historical data from the Exchange while at the same time enabling 
the Exchange to better cover its infrastructure costs and to improve 
its market technology and services. Finally, EdgeBook Cloud will better 
enable market participants to conduct Exchange-specific analyses to 
meet their needs.
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    \11\ See infra, footnote 14.
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    The Exchange intends to implement the proposed rule change on 
February 13, 2012.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act in general and furthers the 
objectives of Section 6(b)(4) \12\ in particular, as it is designed to 
provide for the equitable allocation of reasonable dues, fees and other 
charges among Members and non-Members using its facilities. First, the 
Service is optional and fees charged for the Service will be the same 
for both Members and non-Members. Second, the Service will be provided 
in a variety of packages, including on an ongoing or an as-needed 
basis, intended to allow purchase of such access in the manner that 
best meets the needs of, and is most cost efficient for, the Purchaser. 
The fees reflect the differing offerings that any Purchaser may choose. 
In addition, higher fees are associated with increasing amounts of data 
(i.e., more gigabytes) requested by the Purchaser of the Service or 
more hits/month, depending on the Service, as described above, as 
increasing amounts of data requested require the Exchange to utilize 
more infrastructure/storage to accommodate the Purchaser's requests. 
Further, to the extent subscribers do subscribe to/purchase the 
Service, they will avoid the costs of storing the data themselves.\13\ 
Third, the revenue generated by the Service will pay for the 
development, marketing, technical infrastructure and operating costs of 
an important tool for market participants and researchers to use for 
purposes of analysis and testing. Profits generated above these costs 
will help offset the costs that the Exchange incurs in operating and 
regulating a highly efficient and reliable platform for the trading of 
U.S. equities. This increased revenue stream will allow the Exchange to 
offer an innovative Service at a reasonable rate, consistent with other 
SROs who provide market data products.\14\
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    \12\ 15 U.S.C. 78f(b)(4).
    \13\ The Exchange notes that this statement is in no way 
intended to relieve Purchasers of their obligations with respect to 
maintaining books and records pursuant to applicable securities 
laws.
    \14\ See Nasdaq Rule 7022. See also www.nyxdata.com for 
information regarding NYSE OpenBook History and ArcaBook FTP, 
historical data products offered by the NYSE and NYSE Arca, 
respectively. See also Securities Exchange Act Release No. 55790 
(May 21, 2007), 72 FR 29565 (May 29, 2007) (SR-NASDAQ-2007-039). See 
also Securities Exchange Act Release No. 52112 (July 22, 2005), 70 
FR 43917 (July 29, 2005) (SR-NASD-2005-060). See also Securities 
Exchange Act Release No. 63351 (Nov. 19, 2010), 75 FR 73140 (Nov. 
29, 2010) (SR-Phlx-2011-154). See also Securities Exchange Act 
Release No. 61885 (Apr. 9, 2010), 75 FR 20018 (Apr. 16, 2010) (SR-
BATS-2010-002) (order approving proposed rule change to offer 
certain BATS Exchange Data Products).
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    The Exchange also believes that the proposed fees are consistent 
with Section 6(b)(5) of the Act,\15\ which requires, among other 
things, that the Exchange's rules not be designed to unfairly 
discriminate between customers, issuers, brokers or dealers.
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    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that the fees proposed for the Service are 
equitable because the Service is purely optional and because the data 
itself can be obtained at no cost whether or not a Member or non-Member 
subscribes to the Service.\16\ Purchase of the Service is not a 
prerequisite for participation on the Exchange, nor is membership to 
the Exchange a prerequisite to purchase of the Service. Only those 
Purchasers that deem the product to be of sufficient overall value and 
usefulness will purchase it. Moreover, the fees will apply uniformly to 
all Purchasers of the Service irrespective of whether the Purchaser is 
a Member of the Exchange.
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    \16\ On a daily basis, a real-time data feed is disseminated by 
the Exchange. Members and non-Members of the Exchange can opt to 
gather such data and use it to create an historical record 
themselves rather than subscribe to the Service for the purpose of 
obtaining and querying historical data.
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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 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.

[[Page 10598]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Because the foregoing proposed rule change does not significantly 
affect the protection of investors or the public interest, does not 
impose any significant burden on competition, and, by its terms, does 
not become operative for 30 days from the date on which it was filed, 
or such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-
4(f)(6) thereunder.\18\
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's intent to file the proposed rule change, along with a 
brief description and text of 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 the five-day prefiling requirement.
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    The Exchange has requested that the Commission waive the 30-day 
operative delay. The Commission believes that waiver of the operative 
delay is consistent with the protection of investors and the public 
interest because the proposal will give Purchasers the ability to 
better organize and sort historical trade and quote data and is 
substantially similar to those of other exchanges.\19\ Further, waiver 
of the operative delay would provide access to historical trade and 
quote data without delay. Therefore, the Commission designates the 
proposal operative upon filing.\20\
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    \19\ See supra note 14.
    \20\ For 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 the 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.

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 email to [email protected]. Please include 
File Number SR-EDGX-2012-05 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-2012-05. 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 
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-2012-05 and should be 
submitted on or before March 14, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-4007 Filed 2-21-12; 8:45 am]
BILLING CODE 8011-01-P