[Federal Register Volume 78, Number 28 (Monday, February 11, 2013)]
[Notices]
[Pages 9763-9765]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-02951]



[[Page 9763]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68831; File No. SR-EDGX-2013-03]


Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change Relating to 
Amendments to the EDGX Exchange, Inc. Fee Schedule

February 5, 2013.
    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 January 30, 2013, 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 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\ and non-Members of the Exchange pursuant to EDGX Rule 
15.1(a) and (c). All of the changes described herein are applicable to 
EDGX Members and non-Members. The text of the proposed rule change is 
available on the Exchange's Internet 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\ As defined in Exchange Rule 1.5(n).
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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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    In SR-EDGX-2010-06,\4\ the Exchange proposed to adopt an annual fee 
per physical port utilized by Members and non-Members to connect to the 
Exchange's System \5\ for order entry and the receipt of Exchange data, 
among other reasons. A physical port is a port used by a Member or non-
Member to connect into the Exchange at the data centers where Exchange 
servers are located. Physical port connections can occur either through 
an external telecommunication circuit or a cross-connection. The 
Exchange noted at the time of filing that other market centers provided 
similar services.\6\
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    \4\ See Securities Exchange Act Release No. 62437 (July 1, 
2010), 75 FR 39599 (July 9, 2010) (SR-EDGX-2010-06).
    \5\ As defined in Exchange Rule 1.5(cc).
    \6\ See Securities Exchange Act Release No. 62437 (July 1, 
2010), 75 FR 39599, 39600 (July 9, 2010) (SR-EDGX-2010-06) (citing 
Securities Exchange Act Release No. 61545 (February 19, 2010), 75 FR 
8769 (February 25, 2010) (SR-BATS-2009-032) and Securities Exchange 
Act Release No. 62392 (June 28, 2010), 75 FR 38857 (July 6, 2010) 
(SR-NASDAQ-2010-077)).
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    In SR-EDGX-2010-21,\7\ the Exchange amended its fee schedule, 
effective January 1, 2011, to allow Members and non-Members the option 
of paying monthly fees for physical ports used to enter orders in the 
Exchange's System.
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    \7\ See Securities Exchange Act Release No. 63520 (December 10, 
2010), 75 FR 78794 (December 16, 2010) (SR-EDGX-2010-21).
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    The Exchange proposes to amend its fee schedule to eliminate the 
option for Members and non-Members to pay for physical ports on an 
annual basis. The Exchange's current monthly rates that it charges 
Members and non-Members for physical ports remains unchanged; 
therefore, the Exchange will assess a monthly fee of $500 per physical 
port that connects to the Exchange's System via 1 gigabyte Copper 
circuits; $750 per physical port that connects to the Exchange's System 
via 1 gigabyte Fiber circuits; and $1,000 per physical port that 
connects to the Exchange's System via 10 gigabyte Fiber circuits. In 
addition, the Exchange proposes to pro-rate for the month of January 
2013 only the annual fee paid by Members or non-Members who currently 
have annual billing as of January 1, 2013 and then convert those 
Members or non-Members to monthly billing starting in February 2013, 
subject to the execution of a new contract that the Exchange has 
distributed to all Members and non-Members to reflect this change.\8\ 
Furthermore, Direct Edge represents that its Members and non-Members 
who currently have annual contracts for physical ports have either 
consented to be converted to a month-to-month contract at the proposed 
rates, or elected to terminate their contract because they no longer 
require the service.
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    \8\ For example, Members or non-Members who are currently billed 
annually will pay $416 per physical port for 1GB copper circuits 
($5,000 annual fee/12 months) for the month of January 2013 only and 
then shift to a monthly billing arrangement and pay $500 per 
physical port from February 2013-December 2013 (monthly billing).
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    The Exchange proposes to implement these amendments to its fee 
schedule on February 1, 2013. Members and Non-Members were notified of 
the planned changes on November 8, 2012 and through subsequent direct 
communication.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\9\ in general, and 
furthers the objectives of Section 6(b)(4),\10\ in particular, as it 
provides for the equitable allocation of reasonable dues, fees and 
other charges among its Members and other persons using its facilities. 
The Exchange believes that the proposal represents an equitable 
allocation of reasonable dues, fees, and other charges as its billing 
for port fees is reasonably constrained by competitive alternatives. 
For example, the change to monthly billing is reasonable because it is 
consistent with the monthly options offered by other exchanges, such as 
the BATS Exchange, Inc. (``BATS'') and NASDAQ Stock Market LLC 
(``NASDAQ'').\11\ Furthermore, Members and other persons using the 
Exchange facilities also have the ability to obtain access to these 
services without the need for an independent physical port connection, 
such as through alternative means of financial extranets and service 
bureaus that act as a conduit for orders entered by Members and non-
Members. Members and non-Members also have the ability to choose lower 
cost connection service types and still obtain access to all EDGX 
services.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ The Exchange notes that BATS and NASDAQ only allow for 
payment of physical port fees on a monthly basis. See BATS Exchange, 
Inc., BATS BZX and BYX Exchange Fee Schedules, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf; NASDAQ Stock Market LLC, Price List--Trading & 
Connectivity, http://www.nasdaqtrader.com/trader.aspx?id=pricelisttrading2.
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    Furthermore, the fees associated with physical ports will continue 
to be

[[Page 9764]]

equitably allocated and non-discriminatory as they will continue to be 
uniform in application to all Members and non-Members. Members and non-
Members will continue to choose whether they want more than one 
physical port and choose the method of connectivity based on their 
specific needs.
    The proposed rule change is also an equitable allocation of 
reasonable dues, fees, and other charges because, for Members and non-
Members, the payment of physical connectivity fees on a monthly basis 
provides administrative benefits over payments made on an annual basis. 
For example, payment on a monthly basis allows Members and non-Members 
to opt-in or opt-out of physical connectivity on thirty (30) days' 
notice. Members and non-Members that choose to cancel their physical 
connectivity within the thirty (30) days' notice will have no recurring 
obligation.
    Finally, the proposed rule change is also an equitable allocation 
of reasonable dues, fees, and other charges as the Exchange believes 
that the increased fees obtained through the monthly port fees over the 
course of a year over annual port fees (an increase of $1,000 per year 
per port on all 1Gb copper circuits, $1,500 per year per port on all 
1Gb Fiber circuits, and $2,000 per year per port on all 10 Gb Fiber 
circuits) will enable it to cover its increased infrastructure costs 
associated with allowing Members and non-Members to establish physical 
ports to connect to the Exchange's systems and continue to maintain and 
improve its infrastructure, market technology, and services. The 
Exchange believes that the proposed rates are equitable and non-
discriminatory in that they apply uniformly to all Members and non-
Members. The Exchange believes the fees and monthly billing option 
remain competitive with those charged by other exchanges and therefore 
continue to be reasonable and equitably allocated to Members and non-
Members.

B. Self-Regulatory Organization's Statement on Burden on Competition

    This proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. Proposing to eliminate payment for physical connectivity on an 
annual basis does not introduce a burden on competition as exchanges 
such as BATS and NASDAQ currently only allow payment for physical 
connectivity on a monthly basis.\12\ In addition, the proposed rule 
change does not impose any burden on intramarket competition as payment 
on a monthly basis is available to all Members and non-Members. In 
addition, Members and non-Members also have the ability to obtain 
access to these services without the need for an independent physical 
port connection, such as through alternative means of financial 
extranets and service bureaus that act as a conduit for orders entered 
by Members and non-Members.
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    \12\ Id.
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    Fees for market access will be a component of the overall fees 
charged by the Exchange to execute and route orders through the 
Exchange. As the Commission has recognized, the market for execution 
and routing services is extremely competitive.\13\ Market participants 
that choose not to connect directly to the Exchange can readily access 
liquidity available on the Exchange by directing their order flow to 
other venues that, under Regulation NMS, must route to the Exchange if 
it has posted the best price. Accordingly, the Exchange must set its 
fees and billing options, including access service fees, at a level and 
in such a way that will not deter market participants from connecting 
to the Exchange; otherwise, potential users of the Exchange's services 
will simply direct order flow to the Exchange's multiple competitors.
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    \13\ See Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
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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)(A) of the Act \14\ and Rule 19b-4(f)(2) \15\ 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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    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 19b-4(f)(2)[sic].
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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-2013-03 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-2013-03. 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 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-2013-03 and should be 
submitted on or before March 4, 2013.


[[Page 9765]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-02951 Filed 2-8-13; 8:45 am]
BILLING CODE 8011-01-P