[Federal Register Volume 77, Number 85 (Wednesday, May 2, 2012)]
[Notices]
[Pages 26064-26066]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2012-10541]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-66864; File No. SR-EDGX-2012-14]


Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Fees Associated With Receipt of the EDGX Book Feed

April 26, 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 April 19, 2012, 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 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 the 
Substance of the Proposed Rule Change

    The Exchange proposes to amend its fee schedule applicable to 
Members \3\ and non-Members of the Exchange to assess market data fees 
for internal and external distribution of the EDGX book feed (``EDGX 
Book Feed''). 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In SR-EDGX-2011-18,\4\ the Exchange made available the EDGX Book 
Feed, a data feed that contains all orders for securities trading on 
the Exchange, including all displayed orders for listed securities 
trading on EDGX, order executions, order cancellations, order 
modifications, order identification numbers and administrative 
messages. The EDGX Book Feed offers real-time data, thereby allowing 
Member firms to more accurately price their orders based on EDGX's view 
of the depth of book information. It also provides Members an ability 
to track their own orders from order entry to execution. It is 
available in both unicast and multicast format. Upon the Exchange's 
initial offering of the EDGX Book Feed, such service was provided at no 
cost. In SR-EDGX-2011-18, the Exchange stated that ``[s]hould EDGX 
determine to charge fees

[[Page 26065]]

associated with the EDGX Book Feed, EDGX will submit a proposed rule 
change to the Commission in order to implement those fees.'' \5\ This 
proposal is designed to implement fees for the receipt of the EDGX Book 
Feed.
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    \4\ Securities Exchange Act Release No. 64791 (July 1, 2011), 76 
FR 39944 (July 7, 2011) (SR-EDGX-2011-18).
    \5\ Id.
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    The proposed rule change to the EDGX fee schedule codifies such a 
fee associated with the receipt of the EDGX Book Feed. The Exchange, 
like other market centers and other data providers, intends to assess 
fees for entities that receive real-time market data directly or 
indirectly and act as either internal or external distributors, as 
discussed below. A ``Distributor'' of Exchange data is any entity that 
receives an EDGX Book Feed directly from the Exchange or indirectly 
through another entity and then distributes such data either internally 
(within that entity) (``Internal Distributor'') or externally (outside 
that entity) (``External Distributor''). All Distributors shall execute 
a Market Data Vendor Agreement with Direct Edge, Inc., acting on behalf 
of the EDGX Exchange. The amount of the monthly fees would depend on 
whether the distributor is an ``Internal Distributor'' or ``External 
Distributor.'' Internal Distributors are proposed to be charged $500 
per month and External Distributors are proposed to be charged $2,500 
per month. The fee paid by an External Distributor includes the 
Internal Distributor Fee and thus allows an External Distributor to 
provide data both internally (i.e., to users within their own 
organization) and externally (to users outside their own organization).
    Additionally, Distributors will only pay one distributor fee, 
regardless of the number of locations or users to which the feed is 
received or distributed. In addition, neither Distributors nor their 
end-users will be charged per-user device fees when used to receive the 
EDGX Book Feed nor will they be charged per-user display fees when used 
to present the EDGX Book Feed.
    The Exchange proposes to implement this rule change on May 1, 2012.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act \6\ in general and furthers 
the objectives of Section 6(b)(4) \7\ 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. 
The Exchange makes all services and products subject to these fees 
available on a non-discriminatory basis to similarly situated 
recipients because the service is optional and fees charged for the 
EDGX Book Feed will be the same for both Members and non-Members. The 
fees are not unreasonably discriminatory and are equitably allocated. 
The fees for Members and non-Members are uniform except with respect to 
reasonable distinctions with respect to internal and external 
distribution.\8\ The Exchange proposes charging External Distributors 
more than Internal Distributors because of higher administrative costs 
associated with monitoring External Distributors ongoing reporting, as 
provided in the Direct Edge Data Vendor Agreement and market data 
requirements referenced therein. The Exchange believes that the fees 
established for the EDGX Book Feed are reasonable and fair in light of 
alternatives offered by other market centers.\9\ For example, PSX 
charges its data recipients of its book feed, PSX TotalView, a $1,000 
monthly fee to receive its data feed directly from the Exchange. If the 
data recipient then distributes the data, it pays an ``internal'' or 
``external'' distributor fee depending on the method of distribution. 
These fees are on top of the $1,000 monthly fee and amount to an 
additional $500/month for internal distributors and $1250/month for 
external distributors. This would amount to total costs of $1,500 
monthly for internal distributors and $2,250 monthly for external 
distributors that receive their feed directly from PSX. BX charges its 
data recipients and internal/external distributors the same fees for 
its book feed, BX TotalView. Finally, NASDAQ charges $1,000/month for 
internal distributors of NASDAQ listed-security depth entitlements and 
$500/month for internal distributors of non NASDAQ-listed security 
depth entitlements; for external distributors, NASDAQ charges $2,500/
month for NASDAQ-listed security depth entitlements and $1,250/month 
for external distributors of non NASDAQ-listed security depth 
entitlements. These are on top of NASDAQ's direct access fees of 
$2,000/month for NASDAQ listed-security depth entitlements and $1,000/
month for non NASDAQ-listed security depth entitlements.\10\
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4).
    \8\ The Exchange notes that distinctions based on external 
versus internal distribution have been previously filed with the 
Commission by NASDAQ Exchange (``NASDAQ''), NASDAQ OMX BX (``BX''), 
and NASDAQ OMX PSX (``PSX''). See Nasdaq Rule 7019(b). See also 
Securities Exchange Act Release No. 62876 (September 9, 2010), 75 FR 
56624 (September 16, 2010) (SR-PHLX-2010-120). See also Securities 
Exchange Act Release No. 62907 (September 14, 2010), 75 FR 57314 
(September 20, 2010) (SR-NASDAQ-2010-110). See also Securities 
Exchange Act Release No. 63442 (December 6, 2010), 75 FR 77029 
(December10, 2010) (SR-BX-2010-081).
    \9\ Id.
    \10\ See Nasdaq Rule 7019(b).
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    Revenue generated from such fees 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, structured in a manner comparable to and 
consistent with other market centers who provide similar market data 
products.\11\
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    \11\ Id.
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    The Exchange also believes that the proposed fees are consistent 
with Section 6(b)(5) of the Act,\12\ as it is designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to and facilitating transactions in 
securities, 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. EDGX believes that this 
proposal is in keeping with those principles by promoting increased 
transparency through the codification of uniform fees for the EDGX Book 
Feed for all users and by clarifying the availability of the EDGX Book 
Feed to various market participants. In addition, EDGX has made a 
voluntary decision to make this Book Feed available. EDGX is not 
required by the Act in the first instance to make the data available. 
EDGX has chosen to make the Book Feed available to improve market 
quality, attract order flow, and increase transparency. It will 
continue to make such data available until such time as it changes its 
rule.
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    \12\ 15 U.S.C. 78f(b)(5).
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    The Exchange also believes that the proposal is consistent with the 
goals of Regulation NMS,\13\ namely facilitating efficiency and 
competition. Efficiency is promoted when Members who do not need the 
EDGX Book Feed data are not required to receive (and pay for) such 
data. The Exchange also believes that efficiency is promoted when 
Members may choose to receive (and pay for) additional market data 
based on their own internal analysis of the need for

[[Page 26066]]

such data. Competition is promoted as the Exchange cannot set 
unreasonable fees without losing business to its competitors.\14\
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    \13\ See Securities Exchange Act Release No. 51808 (June 9, 
2006), 70 FR 37496 (June 29, 2005).
    \14\ See infra discussion in section II.B. ``Self-Regulatory 
Organization's Statement on Burden on Competition.''
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended.
    There is significant competition for the provision of market data 
to market participants, as well as competition for the orders that 
generate that data. In introducing the proposed fees for this service, 
the Exchange would be providing one similar to alternatives offered by 
other market centers.\15\ The existence of such alternatives ensures 
that the Exchange cannot set unreasonable fees, or fees that are 
unreasonably discriminatory, without losing business to these 
alternatives. Thus, the EDGX Book Feed will promote competition if it 
succeeds in providing market participants with viable and cost-
effective alternatives which drive the market to continually improve 
products and services to cater to customers' data needs.
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    \15\ See Nasdaq Rule 7019(b). See also Securities Exchange Act 
Release No. 62876 (September 9, 2010), 75 FR 56624 (September 16, 
2010) (SR-PHLX-2010-120). See also Securities Exchange Act Release 
No. 62907 (September 14, 2010), 75 FR 57314 (September 20, 2010) 
(SR-NASDAQ-2010-110). See also Securities Exchange Act Release No. 
63442 (December 6, 2010), 75 FR 77029 (December 10, 2010) (SR-BX-
2010-081).
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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 \16\ and Rule 19b-4(f)(2) \17\ 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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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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 email to [email protected]. Please include 
File Number SR-EDGX-2012-14 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-2012-14. 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 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-2012-14, and should be submitted on or before May 23, 2012.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-10541 Filed 5-1-12; 8:45 am]
BILLING CODE 8011-01-P