[Federal Register Volume 77, Number 51 (Thursday, March 15, 2012)]
[Notices]
[Pages 15407-15409]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-6237]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66559; File No. SR-EDGA-2012-07]


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 9, 2012.
    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 February 29, 2012 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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, at the Exchange's 
principal office, and at the Public Reference Room of the Commission.
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

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 make a technical amendment to the 
description of Footnote 9 and Flag CL to reflect the Commission's 
approval of the BATS BZX Exchange (``BATS BZX'') as a primary listing 
exchange.\4\ Therefore, Footnote 9 will state that Flag O will be 
yielded and a fee of $0.0005 per share will be assessed if an order is 
routed to NYSE Arca & BATS BZX's closing process. This fee in footnote 
9 ($0.0005 per share) gives a flat rate for the NYSE Arca & BATS BZX's 
closing processes, which is lower than other primary listing markets. 
Flag CL will apply to orders routed to a primary listing market's 
closing process except NYSE Arca and BATS BZX. In addition, the 
Exchange proposes to revise the descriptions on Flags CL, 8, and 9 to 
broaden their applicability to several routing strategies rather than 
just ROOC.\5\ Therefore, the Exchange proposes that Flag CL state 
``Routed to listing market closing process except NYSE Arca & BATS 
BZX.'' The Exchange proposes conforming amendments to Flags 8 and 9 to 
delete the ROOC routing strategy from the descriptions of these flags.
---------------------------------------------------------------------------

    \4\ See Securities and Exchange Act Release No. 65225 (August 
30, 2011), 76 FR 55148 (September 6, 2011) (SR-BATS-2011-018).
    \5\ See EDGA Exchange Rule 11.9(b)(3)(n).
---------------------------------------------------------------------------

    The Exchange proposes to delete Flag H, which represents all non-
displayed orders that add or remove liquidity, and bifurcate it by 
replacing it with Flags HA and HR. Flag HA will identify all non-
displayed orders that add liquidity to EDGA and the Exchange will 
assess a fee of $0.0010 per share. Flag HR will identify all non-
displayed orders that remove liquidity from EDGA and the Exchange will 
assess a fee of $0.0010 per share. Additionally, footnote 2 is proposed 
to be revised to read ``rate contingent upon Member adding or removing 
(emphasis added) greater than 1,000,000 shares hidden on a daily basis 
* * * '' as both Flags HA and HR count toward this tier since they are 
both forms of hidden liquidity. This change allows Members who utilize 
both forms of hidden liquidity (add and remove) to satisfy this tier. 
Footnote 4 is proposed to be clarified that only non-displayed orders 
that add liquidity count toward the following tier listed there: ``If a 
Member, on a daily basis, measured monthly, posts more than 1% of the 
Total Consolidated Volume (``TCV'') in average daily volume on EDGA, 
including all non-displayed orders (H Flag), then the Member will 
receive a rebate of $0.0005 per share. TCV is defined 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. If a Member, on a daily basis, measured monthly, posts more 
than .25% of the TCV on EDGA, including all non-displayed orders (H 
Flag), and removes more than .25% of TCV in average daily volume, then 
the Member will receive a rebate of $0.0005 per share.'' To correspond 
with these changes, footnotes 2 and 4 are proposed to be appended to 
Flag HA and footnote 2 is proposed to be appended to Flag HR. Finally, 
the references to the yielded flags (B, H, V, Y, 3-4) in text of 
footnotes 2 and 4 [sic] are duplicative of the footnotes next to the 
applicable Flags in the fee schedule and are therefore proposed to be 
deleted to simplify the schedule.
    The Exchange proposes to amend Flag 9 and add new Flag 10 to its 
fee schedule. At this time, NYSE Arca offers its Members a rebate of 
$0.0021 for orders that add liquidity on Tapes A or C and a rebate of 
$0.0022 for orders that add liquidity on Tape B. The Exchange proposes 
to amend Flag 9 to account for the pass-through of the NYSE Arca rebate 
for adding liquidity through Tapes A or C and to create Flag 10 to 
account for the pass-through of the NYSE Arca rebate for adding 
liquidity on Tape B. Finally, the Exchange proposes to make technical 
amendments to Flags N, 3, and 9 to replace the ``and'' connector with 
``or'' (i.e., ``Tapes A or C'' instead of ``Tapes A and C'') to make 
these references accurate.
    The Exchange proposes to add Flag PA for orders that utilize the 
midpoint routing strategy RMPT \6\ and add

[[Page 15408]]

liquidity to EDGA. The Exchange proposes to assess a charge of $0.0010 
per share.
---------------------------------------------------------------------------

    \6\ See SR-EDGA-2012-06 (February 24, 2012).
---------------------------------------------------------------------------

    The Exchange proposes to add Flag PT for orders that utilize the 
midpoint routing strategy RMPT \7\ and remove liquidity. The Exchange 
proposes to assess a charge of $0.0010 per share.
---------------------------------------------------------------------------

    \7\ Id.
---------------------------------------------------------------------------

    The Exchange proposes to add Flag PX for orders that utilize the 
midpoint routing strategy RMPT \8\ and are routed to other destinations 
on the Exchange's System routing table. The Exchange proposes to assess 
a charge of $0.0020 per share.
---------------------------------------------------------------------------

    \8\ Id.
---------------------------------------------------------------------------

    In SR-EDGA-2011-39,\9\ the Exchange amended several routing options 
contained in Rule 11.9(b)(3) to allow Users \10\ more discretion if 
shares remain unexecuted after routing. In particular, Rule 
11.9(b)(3)(c)(i)-(iii) was amended to provide that Users may elect that 
any remainder of an order be posted to another destination on the 
System routing table. In conjunction with this amendment, the Exchange 
proposes to create the following new flags: \11\
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 65902 (December 6, 
2011), 76 FR 77286 (December 12, 2011).
    \10\ As defined in EDGA Exchange Rule 1.5(cc) [sic].
    \11\ These flags account for all postable destinations that are 
not already accounted for by other flags on the fee schedule.
---------------------------------------------------------------------------

    The Exchange proposes to add Flag RB for orders that are routed 
from EDGA to Nasdaq OMX BX and add liquidity. The Exchange proposes to 
assess a charge of $0.0018 per share to account for the pass-through of 
the Nasdaq OMX BX fee for adding liquidity.
    The Exchange proposes to add Flag RC for orders that are routed 
from EDGA to the National Stock Exchange, Inc. (``NSX'') and add 
liquidity. The Exchange proposes to offer Members a rebate of $0.0026 
per share to account for the pass-through of the NSX rebate for adding 
liquidity.
    The Exchange proposes to add Flag RM for orders that are routed 
from EDGA to the Chicago Stock Exchange, Inc. (``CHX'') and add 
liquidity. The Exchange proposes to assess no charge to account for the 
pass-through of the CHX fee for adding liquidity.
    The Exchange proposes to add Flag RS for orders that are routed 
from EDGA to the Nasdaq OMX PSX (``PSX'') and add liquidity. The 
Exchange proposes to offer Members a rebate of $0.0024 per share to 
account for the pass-through of the PSX rebate for adding liquidity.
    The Exchange proposes to add Flag RW for orders that are routed 
from EDGA to the CBOE Stock Exchange, LLC (``CBSX'') and add liquidity. 
The Exchange proposes to assess a charge of $0.0017 per share to 
account for the pass-through of the CBSX fee for adding liquidity.
    The Exchange proposes to add Flag RY for orders that are routed 
from EDGA to the BATS BYX and add liquidity. The Exchange proposes to 
assess a charge of $0.0003 per share to account for the pass-through of 
the BATS BYX fee for adding liquidity.
    The Exchange proposes to add Flag RZ for orders that are routed 
from EDGA to the BATS BZX that add liquidity. The Exchange proposes to 
offer Members a rebate of $0.0025 per share to account for the pass-
through of the BATS BZX rebate for adding liquidity to BATS BZX.
    The Exchange proposes to implement these amendments to its fee 
schedule on March 1, 2012.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are 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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed technical amendments to 
Footnotes 2 and 4 and Flags 3, 9, and N add additional transparency to 
its fee schedule for investors. The Exchange believes that the proposed 
technical amendments to Footnote 9 and Flag CL to include BATS BZX as 
one of the primary listing exchanges adds additional transparency to 
its fee schedule for investors as it brings the schedule up-to-date to 
account for a new listing exchange. The Exchange also believes that the 
amendments to Flags 8, 9, and CL to remove the specific ``ROOC routing 
strategy'' from those flags descriptions provides additional 
transparency to the fee schedule by broadening those flags 
applicability to several routing strategies. This encourages Members to 
utilize the Exchange to route to various destinations. The Exchange 
believes that the proposed amendment to delete Flag H and replace it 
with Flags HA and HR support the quality of price discovery, promote 
market transparency and improve investor protection by adding 
additional transparency to its fee schedule for Members by more 
precisely delineating for Members whether they have posted hidden 
liquidity or removed hidden liquidity.
    In addition, the amendment to footnote 2 to allow Members that 
remove hidden liquidity (Flag HR), rather than just add hidden 
liquidity (Flag HA), to achieve a favorable rate of $0.0010 per share 
opens this tier to those Members who remove hidden liquidity. The 
Exchange believes that providing an additional way to achieve the lower 
fee of $0.0010 per share (instead of $0.0030 per share) represents an 
equitable allocation of reasonable dues, fees, and other charges since 
it allows Members another means to achieve this lower fee and 
encourages Members to add to or remove liquidity from EDGA which is 
greater than 1,000,000 shares hidden on a daily basis. 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 of lower fees.
    The Exchange believes that the rate for flags PA/PT (the RMPT 
routing strategy adding/removing liquidity) is designed to provide for 
the equitable allocation of reasonable dues, fees and other charges 
among its members and other person using its facilities. The rate of 
$0.0010 for Mid-Point Peg Orders routed through the RMPT routing 
strategy is equitable in that Mid-Point Peg Orders behave in a similar 
fashion to non-displayed orders, which are currently priced at $0.0010 
per share. Mid-Point Peg Orders like non-displayed orders are non-
displayed orders that remain hidden on the Exchange's book at various 
price points. The rate is also comparable to fees for non-displayed 
liquidity on other exchanges. For example, Nasdaq OMX BX charges 
$0.0018 to add non-displayed liquidity,\14\ while BATS BYX charges 
$0.001 to add non-displayed (hidden) liquidity to its order book.\15\ 
In addition, EDGA believes that it is reasonable and equitable to 
charge the same rates for non-displayed orders, and it is non-
discriminatory because the charge will apply uniformly to all Members.
---------------------------------------------------------------------------

    \14\ See Nasdaq OMX BX fee schedule at: http://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing.
    \15\ See BATS BYX fee schedule at: http://www.batstrading.com/FeeSchedule.
---------------------------------------------------------------------------

    The Exchange believes the proposed fee of $0.0020 associated with 
Flag PX is reasonable and equitable as it represents a flat rate 
charged by different exchanges and is consistent

[[Page 15409]]

with how other exchanges pass through charges plus or minus a 
differential for orders routed to a different exchange. The rate 
represents a flat routing rate for EDGA members. The flat-rate provides 
simplicity for Members 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 
$0.0025 per share) and for Flag 7 executions ($0.0027 per 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 \16\ for which Nasdaq charges 
$0.0030 per share. The Exchange believes that the proposed fee is non-
discriminatory in that it applies uniformly to all Members.
---------------------------------------------------------------------------

    \16\ 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 
and NASDAQ Pricing List at: http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
---------------------------------------------------------------------------

    In addition, the Exchange believes that the proposed pass-through 
of rates for Flags RZ, 9, 10, RB, RC, RM, RS, RW, and RY represent an 
equitable allocation or reasonable dues, fees and other charges since 
it reflects the pass-through of the rates associated with transactions 
done on other exchanges, as described above. In addition, EDGA believes 
that it is reasonable and equitable to pass-through certain rates to 
its Members. The Exchange also believes that the proposed pass-through 
of rates is non-discriminatory because they apply 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 and non-discriminatory 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 \17\ and Rule 19b-4(f)(2) \18\ 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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 19b-4(f)(2).
---------------------------------------------------------------------------

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-EDGA-2012-07 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-2012-07. 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-EDGA-2012-07 and should be 
submitted on or before April 5, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-6237 Filed 3-14-12; 8:45 am]
BILLING CODE 8011-01-P