[Federal Register Volume 78, Number 31 (Thursday, February 14, 2013)]
[Notices]
[Pages 10676-10678]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-03426]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68878; File No. SR-EDGX-2013-07]


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 8, 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 31, 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\ of the Exchange pursuant to EDGX Rule 15.1(a) and (c). All 
of the changes described herein are applicable to EDGX 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
    The Exchange currently assesses a charge of $0.0003 per share for 
Members' orders that yield Flag RY. The Exchange proposes to increase 
the rate it charges for Flag RY from $0.0003 per share to $0.0005 per 
share for Members' orders that route to the BATS Y-Exchange, Inc. 
(``BATS BYX'') and add liquidity. This proposed change represents a 
pass through of the rate that Direct Edge ECN LLC (d/b/a DE Route) 
(``DE Route''), the Exchange's affiliated routing broker dealer, is 
charged for routing orders to BATS BYX that do not qualify for 
additional volume tiered discounts, as described in BATS BYX's fee 
filing with the Securities and Exchange Commission.\4\
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    \4\ See Securities Exchange Act Release No. 68665 (January 16, 
2013), 78 FR 4946 (January 23, 2013) (SR-BYX-2013-001).
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    The Exchange proposes to add Flag RT to its fee schedule for 
Members' orders that route to away trading centers using the ROUT 
routing strategy \5\ and remove liquidity from the away exchange. The 
Exchange proposes to assess a fee of $0.0030 per share for orders 
yielding Flag RT.
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    \5\ As defined in Exchange Rule 11.9(b)(3)(c)(ii).
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    The Exchange proposes to add Flag RX to its fee schedule for 
Members' orders that route to away trading centers using the ROUX 
routing strategy \6\ and remove liquidity from the away exchange. The 
Exchange proposes to assess a fee of $0.0030 per share for orders 
yielding Flag RX.
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    \6\ As defined in Exchange Rule 11.9(b)(3)(c)(iii).
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    The Exchange proposes to implement these amendments to its fee 
schedule on February 1, 2013.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\7\ in general, and 
furthers the objectives of Section 6(b)(4),\8\ 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.
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    \7\ 15 U.S.C. 78f.
    \8\ 15 U.S.C. 78f(b)(4).
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    The Exchange's proposed fee increase for Flag RY represents a pass-
through rate where BATS BYX charges DE Route $0.0005 per share for 
Members' orders that route to BATS BYX through DE Route and add 
liquidity, and then DE Route charges the Exchange $0.0005 per share, 
and then the Exchange charges its

[[Page 10677]]

Members $0.0005 per share. The Exchange's proposal represents an 
equitable allocation of reasonable dues, fees, and other charges among 
Members of the Exchange and other persons using its facilities because 
the Exchange does not levy additional fees or offer additional rebates 
for orders that it routes to BATS BYX through DE Route. Prior to BATS 
BYX's January 2013 fee filing, BATS BYX charged DE Route a fee of 
$0.0003 per share for orders yielding Flag RY, which DE Route passed 
through to the Exchange and the Exchange passed through to its Members. 
In BATS BYX's January 2013 fee filing, BATS BYX increased the rate it 
charges its customers, such as DE Route, from $0.0003 per share to a 
charge of $0.0005 per share for orders that are routed to BATS BYX and 
add liquidity. Therefore, the Exchange believes that the proposed 
change in Flag RY from a fee of $0.0003 per share to a fee of $0.0005 
per share is equitable and reasonable because it accounts for the 
pricing changes on BATS BYX. In addition, the proposal allows the 
Exchange to continue to charge its Members a pass-through rate for 
orders that are routed to BATS BYX and add liquidity using DE Route. 
The Exchange notes that routing through DE Route is voluntary. Lastly, 
the Exchange also believes that the proposed amendment is non-
discriminatory because it applies uniformly to all Members.
    The Exchange believes that its proposal to assess a charge of 
$0.0030 per share for orders that yield Flag RT represents an equitable 
allocation of reasonable dues, fees and other charges among its Members 
and other persons using its facilities. By electing the ROUT routing 
strategy, Members' orders check the System for available shares and 
then are sent to destinations on the System routing table,\9\ and any 
unexecuted shares are posted to EDGX, unless otherwise instructed. The 
Exchange believes that the proposed rate of $0.0030 per share for 
orders that yield Flag RT is equitable because it is comparable to the 
Exchange's default rate of $0.0029 per share that it charges Members 
for routing to away trading destinations and removing liquidity from 
the away exchange and also accounts for the increased costs associated 
with the ROUT routing strategy routing to all displayed markets 
including more costly destinations such as NYSE Arca, Inc. (``NYSE 
Arca'') and The NASDAQ Stock Market LLC (``NASDAQ''). In addition, the 
Exchange believes that the proposed rate of $0.0030 per share for 
orders that yield Flag RT is reasonable because it is comparable to the 
fees charged by other exchanges for similar routing strategies. Namely, 
BATS Exchange, Inc. (``BATS BZX'') charges its customers a rate of 
$0.0029 per share for orders using its Parallel D or Parallel 2D 
routing strategies; \10\ and NASDAQ charges its customers a rate of 
$0.0030 per share for orders using its SCAN and STGY routing 
strategies.\11\ Lastly, the Exchange also believes that the proposed 
amendment is non-discriminatory because it applies uniformly to all 
Members.
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    \9\ As defined in Exchange Rule 11.9(b)(3).
    \10\ See BATS BZX Fee Schedule, http://cdn.batstrading.com/resources/regulation/rule_book/BZX_Fee_Schedule.pdf. See also 
BATS BZX Rules 11.13(a)(3)(B) and (C) (describing Parallel D and 
Parallel 2D as routing options under which an order checks the 
BATS's system for available shares and then is sent to destinations 
on the BATS's system routing table and the BATS's system may route 
to multiple destinations at a single price level simultaneously 
through Parallel D or Parallel 2D routing). Rules of BATS Exchange, 
Inc., http://cdn.batstrading.com/resources/regulation/rule_book/BATS_Exchange_Rulebook.pdf.
    \11\ See NASDAQ, Price List--Trading & Connectivity, http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2#route. See 
also NASDAQ, Routing Strategies and Order Types Guide, http://www.nasdaqtrader.com/content/ProductsServices/Trading/Workstation/rash_strategy.pdf (describing SCAN and STGY routing strategies).
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    The Exchange believes that its proposal to assess a charge of 
$0.0030 per share for orders that yield Flag RX represents an equitable 
allocation of reasonable dues, fees and other charges among its Members 
and other persons using its facilities. By electing the ROUX routing 
strategy, Members' orders check the System for available shares and 
then are sent to destinations on the System routing table, and any 
unexecuted shares are posted to EDGX, unless otherwise instructed. The 
Exchange believes that the proposed rate of $0.0030 per share for 
orders that yield Flag RX is equitable because it is comparable to the 
Exchange's default rate of $0.0029 per share that it charges Members 
for routing to away trading destinations and removing liquidity from 
the away exchange and also accounts for the increased costs associated 
with the ROUX routing strategy routing to all displayed markets 
including more costly destinations such as NYSE Arca and NASDAQ. In 
addition, the Exchange believes that the proposed rate of $0.0030 per 
share for orders that yield Flag RX is reasonable because it is 
comparable to the fees charged by other exchanges for similar routing 
strategies. Namely, BATS BZX charges its customers a rate of $0.0029 
per share for orders using its Parallel D or Parallel 2D routing 
strategies; and NASDAQ charges its customers a rate of $0.0030 per 
share for orders using its SKIP and SKNY routing strategies.\12\ 
Lastly, the Exchange also believes that the proposed amendment is non-
discriminatory because it applies uniformly to all Members.
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    \12\ See NASDAQ, Routing Strategies and Order Types Guide, 
http://www.nasdaqtrader.com/content/ProductsServices/Trading/Workstation/rash_strategy.pdf (describing SKIP and SKNY routing 
strategies).
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    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

    These proposed rule changes do not impose any burdens on 
competition that are not necessary or appropriate in furtherance of the 
purposes of the Act. The Exchange does not believes that any of the 
changes represent a significant departure from previous pricing offered 
by the Exchange or pricing offered by the Exchange's competitors.
    Regarding Flag RY, the Exchange believes its proposal to assess a 
charge of $0.0005 per share increases competition among trading centers 
because it offers customers an alternative means to route to BATS BYX 
and add liquidity for the same price as entering orders on BATS BYX 
directly. The Exchange believes that its proposal will have no burden 
on intramarket competition because the rate applies uniformly to all 
Members.
    Regarding Flag RT, the Exchange believes that its proposal to 
assess a fee of $0.0030 per share for Members' orders that route using 
the ROUT routing strategy and remove liquidity from the away exchange 
will increase competition because it is comparable to the rates charged 
by BATS BZX and NASDAQ for similar routing strategies. The Exchange 
believes that its proposal will have no burden on intramarket 
competition because the rate applies uniformly to all Members. The 
Exchange believes that its proposal will

[[Page 10678]]

increase competition for routing services because the market for order 
execution is competitive and the Exchange's proposal provides customers 
with another alternative to route their orders. The Exchange notes that 
routing through DE Route is voluntary.
    Regarding Flag RX, the Exchange believes that its proposal to 
assess a fee of $0.0030 per share for Members' orders that route using 
the ROUX routing strategy and remove liquidity from the away exchange 
will increase competition because it is comparable to the rates charged 
by BATS BZX and NASDAQ for similar routing strategies. The Exchange 
believes that its proposal will have no burden on intramarket 
competition because the rate applies uniformly to all Members. The 
Exchange believes that its proposal will increase competition for 
routing services because the market for order execution is competitive 
and the Exchange's proposal provides customers with another alternative 
to route their orders. The Exchange notes that routing through DE Route 
is voluntary.

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 \13\ and Rule 19b-4(f)(2) \14\ 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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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 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-2013-07 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-EDGX-2013-07. 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 
10:00 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-2013-07 and should be 
submitted on or before March 7, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
Kevin M. O'Neill,
Deputy Secretary.
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    \15\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-03426 Filed 2-13-13; 8:45 am]
BILLING CODE 8011-01-P