[Federal Register Volume 78, Number 48 (Tuesday, March 12, 2013)]
[Notices]
[Pages 15783-15790]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2013-05583]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69042; File No. SR-EDGX-2013-10]


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

March 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 February 28, 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

[[Page 15784]]

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 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.
---------------------------------------------------------------------------

    \3\ As defined in Exchange Rule 1.5(n).
---------------------------------------------------------------------------

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
Securities Priced Below $1.00
    The Exchange's default \4\ rates for securities priced below $1.00 
that add, remove or route liquidity are listed on the Exchange's fee 
schedule. Under ``Liquidity Flags and Associated Fees,'' the Exchange 
proposes to modify the title of the existing column from ``Fee/
(Rebate)'' to ``Fee/(Rebate) Securities at or above $1.00.'' The 
Exchanges also proposes to insert a column titled ``Fee/(Rebate) 
Securities below $1.00'' to list the rate that corresponds to each 
liquidity flag for securities priced below $1.00 in order to increase 
the transparency of the Exchange's fee schedule, as described in 
greater detail below. In addition, the Exchange proposes to delete the 
text under ``Liquidity Flags and Associated Fees'' that states ``unless 
otherwise noted, the following rebates and fees apply to orders in 
securities priced $1 and over'' because this text is no longer accurate 
given the Exchange's proposed changes.
---------------------------------------------------------------------------

    \4\ Where ``default'' refers to the standard rate that the 
Exchange charges its Members for orders that add, remove, or route 
liquidity from the Exchange absent Members qualifying for additional 
volume tiered pricing. The Exchange maintains default rates for 
securities at or above $1.00 and securities priced below $1.00 for 
orders that add, remove, and route liquidity. The Exchange notes 
that a Member may qualify for a higher rebate if the Member 
satisfies the volume tier requirements outlined in Footnotes 1, 2, 
6, 11 and 13 of the fee schedule for securities priced at or above 
$1.00. The Exchange notes that the volume from securities priced 
below $1.00 contributes toward volume tiered requirements for 
securities priced at or above $1.00 as outlined in Footnotes 1, 2, 
6, 11 and 13 of the fee schedule. Unless otherwise stated in the fee 
schedule, the Exchange does not offer volume tiered pricing for 
securities priced below $1.00.
---------------------------------------------------------------------------

    The Exchange's fee schedule states that it offers Members the 
default rebate of $0.00003 per share for orders that add liquidity in 
securities priced below $1.00. The Exchange proposes to amend its fee 
schedule to list the rebate of $0.00003 in the column ``Fee/(Rebate) 
Securities below $1.00'' for Flags B, V, Y, 3, 4, HA, MM, RP, and ZA. 
The Exchange notes that this proposal does not modify the current rates 
it charges its Members for orders that yield Flags B, V, Y, 3, 4, HA, 
MM, RP, and ZA for securities priced below $1.00 that add liquidity to 
the Exchange.
    The Exchange's fee schedule states that it charges Members the 
default rate of 0.30% of the dollar value of the transaction for orders 
that remove liquidity in securities priced below $1.00.\5\ The Exchange 
proposes to amend its fee schedule to list the rate of 0.30% of the 
dollar value of the transaction in the column ``Fee/(Rebate) Securities 
below $1.00'' for Flags N, W, 6, BB, MT, PI, PR, and ZR. The Exchange 
notes that this proposal does not modify the current rates it charges 
its Members for orders that yield Flags N, W, 6, BB, MT, PI, PR, and ZR 
for securities priced below $1.00 that remove liquidity from the 
Exchange.
---------------------------------------------------------------------------

    \5\ This fee is consistent with the limitations of Regulation 
NMS, SEC Rule 610(c), for securities priced below $1.00.
---------------------------------------------------------------------------

    The Exchange's fee schedule states that it charges Members the 
default rate of 0.30% of the dollar value of the transaction for orders 
that route to away trading destinations in securities priced below 
$1.00. The Exchange proposes to amend its fee schedule to list the rate 
of 0.30% of the dollar value of the transaction in the column ``Fee/
(Rebate) Securities below $1.00'' for Flags D, G, I, J, K, L, O, Q, R, 
S, T, U, X, Z, 2, 7, CL, RQ, RR, RT, RX, and SW. The Exchange notes 
that this proposal does not modify the current rates it charges its 
Members for orders that yield Flags D, G, I, J, K, L, O, Q, R, S, T, U, 
X, Z, 2, 7, CL, RQ, RR, RT, RX, and SW for securities priced below 
$1.00 that route to away trading destinations and remove liquidity. In 
addition, the Exchange proposes to amend the title of the routing 
liquidity category to ``Routing and Removing Liquidity'' in order to 
increase the transparency of the Exchange's fee schedule. Regarding the 
flags' descriptions contained on the fee schedule, the Exchange 
proposes to delete references to removing liquidity for Flags D, G, J, 
L, U, 2, RR, RT and RX because the Exchange's references to ``route'' 
imply that the flags route and remove liquidity. In addition, the 
Exchange proposes to make conforming changes to the description of Flag 
U in order to make the descriptions for all flags that route and remove 
liquidity consistent.
    The Exchange's fee schedule does not clearly disclose its pricing 
for Members' orders that route to some away trading destinations \6\ 
and add liquidity in securities priced below $1.00. The Exchange 
currently assesses no charge to Members for orders that route to these 
away trading destinations and add liquidity because these away trading 
destinations pass through no charge to Direct Edge ECN LLC (d/b/a DE 
Route) (``DE Route''), the Exchange's affiliated routing broker dealer, 
for adding liquidity in securities priced below $1.00. The Exchange 
proposes to amend its fee schedule to assess no charge for Flags A, F, 
M, 8, 9, 10, RA, RB, RS, RW, RY, and RZ. The Exchange notes that its 
proposal conforms to an existing practice and does not modify the rates 
that the Exchange has been charging its Members for orders that yield 
Flags A, F, M, 8, 9, 10, RA, RB, RS, RW, RY, and RZ for securities 
priced below $1.00 that route to away trading destinations and add 
liquidity. In addition, the Exchange proposes to make conforming 
changes to Flag M's description in order to make the descriptions for 
all flags that route to these away trading destinations and add 
liquidity consistent and to revise Flag 8 to replace the entity 
formerly known as NYSE Amex with NYSE MKT LLC.
---------------------------------------------------------------------------

    \6\ The Exchange currently assess no charge for Members' orders 
that route to the following away trading destinations and add 
liquidity: NYSE Arca, Inc. (``NYSE Arca''), New York Stock Exchange 
LLC (``NYSE''), The NASDAQ Stock Market LLC (``NASDAQ''), LavaFlow 
ECN, NASDAQ OMX BX, Inc.'s (``NASDAQ BX''), CBOE Stock Exchange, 
Inc. (``CBSX''), BATS Y-Exchange, Inc. (``BATS BYX''), BATS 
Exchange, Inc. (``BATS BZX''), EDGA Exchange, Inc. (``EDGA''), 
NASDAQ OMX PSX, Inc. (``NASDAQ PSX''), and NYSE MKT LLC (formerly 
NYSE Amex).
---------------------------------------------------------------------------

    The Exchange's fee schedule displays a rebate of $0.00003 per share 
as the default rate for Members, orders that add liquidity and a charge 
of 0.30% of the dollar value of the transaction as the

[[Page 15785]]

default rate for Members, orders that remove liquidity for securities 
priced below $1.00. However, in practice, the Exchange assesses no 
charge for Members' orders that that yield Flag OO in securities priced 
below $1.00, which represents Members' orders that are matched at the 
``Direct Edge Opening'' and either add or remove liquidity. The 
Exchange proposes to amend its fee schedule to assess no charge for 
Flag OO. The Exchange notes that its proposal conforms to an existing 
practice and does not modify the rate that the Exchange has been 
charging its Members for orders that yield Flag OO for securities 
priced below $1.00 that are matched at the Direct Edge Opening.
    The Exchange's fee schedule does not clearly disclose its pricing 
for Members' orders that yield Flag RC in securities priced below 
$1.00. The Exchange currently assesses no charge for Members' orders 
that yield Flag RC, which route to the National Stock Exchange, Inc. 
(the ``NSX'') and add liquidity. The Exchange proposes to amend its fee 
schedule to assess no charge for Flag RC. The Exchange notes that its 
proposal conforms to an existing practice and does not modify the rate 
that the Exchange has been charging its Members for orders that yield 
Flag RC for securities priced below $1.00 that route to the NSX and add 
liquidity.
    As provided in Footnote 3 of the fee schedule, the Exchange 
currently assesses a charge of 0.10% of the dollar value of the 
transaction for Members' orders that yield Flag C, which route to 
NASDAQ BX and remove liquidity in securities priced below $1.00. The 
Exchange proposes to amend its fee schedule to list a charge of 0.10% 
of the dollar value of the transaction in the column ``Fee/(Rebate) 
Securities below $1.00'' for Flag C. The Exchange notes that this 
proposal does not modify the current rate it charges its Members for 
orders that yield Flag C for securities priced below $1.00 that route 
to NASDAQ BX and add liquidity. In addition, the Exchange proposes to 
delete ``removes liquidity'' in Flag C's description because the 
Exchange's reference to ``routed'' implies that Flag C routes and 
removes liquidity. The Exchange proposes to delete the text of Footnote 
3 and its associated annotations on the default rate for routing and 
removing liquidity at the top of the fee schedule in addition to Flags 
C, D, J, L, and 2 on the Exchange's fee schedule because the Exchange 
proposes to list these rates in the column ``Fee/(Rebate) Securities 
below $1.00'' on the Exchange's fee schedule. The Exchange proposes to 
insert ``intentionally omitted'' in Footnote 3 in place of the deleted 
text.
    The Exchange notes that Footnote 10 on the fee schedule incorrectly 
lists a flat rate of $0.0010 per share for Members' orders that yield 
Flag BY in securities priced below $1.00. However, in practice, the 
Exchange charges Members 0.10% of the dollar value of the transaction 
for Members' orders that yield Flag BY, which routes to BATS BYX and 
removes liquidity using routing strategies ROUC, ROUE or ROBY.\7\ This 
rate represents a pass through of the rate that BATS BYX charges DE 
Route. Accordingly, the Exchange proposes to amend its fee schedule to 
assess a charge of 0.10% of the dollar value of the transaction for 
Flag BY. The Exchange notes that its proposal conforms to an existing 
practice and does not modify the rate that the Exchange has been 
charging its Members for orders that yield Flag BY for securities 
priced below $1.00 that route to BATS BYX and remove liquidity using 
routing strategies ROUC, ROUE or ROBY. In addition, the Exchange 
proposes to delete the text of Footnote 10 and its associated 
annotation on Flag BY on the fee schedule because the Exchange proposes 
to list this rate in the column ``Fee/(Rebate) Securities below 
$1.00.'' The Exchange proposes to insert ``intentionally omitted'' in 
Footnote 10 in place of the deleted text. In addition, the Exchange 
proposes to delete ``removes liquidity'' in Flag BY's description 
because the Exchange's reference to ``routed'' implies that Flag BY 
routes and removes liquidity.
---------------------------------------------------------------------------

    \7\ As defined in Exchange Rule 11.9(b)(3).
---------------------------------------------------------------------------

    Customer internalization generally occurs when one Member presents 
two orders to the Exchange from the same Member Participant Identifier 
(``MPID'') separately, rather than in a paired manner, and the two 
orders inadvertently match with one another.\8\ As provided in Footnote 
11 of the fee schedule, the Exchange currently assesses a charge of 
0.15% of the dollar value of the transaction per side for Members' 
orders in securities priced below $1.00 that yield Flags 5, EA and ER, 
which are the flags associated with customer internalization. The 
Exchange proposes to amend its fee schedule to list the rate of 0.15% 
of the dollar value of the transaction per side in the column ``Fee/
(Rebate) Securities below $1.00'' for Flags 5, EA and ER. The Exchange 
notes that this proposal does not modify the current rates charged for 
Members' orders that yield Flags 5, EA and ER for securities priced 
below $1.00 that are associated with customer internalization. The 
Exchange also notes that the internalization fee is no more favorable 
than the prevailing maker/taker spread of 0.30% of the dollar value of 
the transaction.\9\ In addition, the Exchange proposes to delete the 
text of Footnote 11 on the Exchange's fee schedule that states, ``for 
stocks priced below $1, the internalization rate is 0.15% of the dollar 
value of the transaction per share per side'' because the Exchange 
proposes to list these rates in the column ``Fee/(Rebate) Securities 
below $1.00'' on the Exchange's fee schedule because this text is no 
longer necessary given the Exchange's proposed changes.
---------------------------------------------------------------------------

    \8\ Members are advised to consult Exchange Rule 12.2 regarding 
fictitious trading.
    \9\ See Securities Exchange Release No. 64452 (May 10, 2011), 76 
FR 28110, 28111 (May 13, 2011) (SR-EDGX-2011-13), where the Exchange 
represented that it ``will work promptly to ensure that the 
internalization fee is no more favorable than each prevailing maker/
taker spread.''
---------------------------------------------------------------------------

Rate Changes for Flag AA
    The Exchange currently assesses no charge for Members' orders that 
yield Flag AA for securities priced at or above $1.00 at this time. The 
Exchange proposes to increase the rate it charges for Flag AA in 
securities priced at or above $1.00 from no charge to $0.0012 per share 
per side for Members' orders that inadvertently match with themselves 
at the Midpoint Match \10\ in the same MPID. Therefore, the Exchange's 
proposed internalization fee will be no more favorable than the current 
spread of $0.0012 per share per side for Members' orders that add 
liquidity at the Midpoint Match and yield Flag MM and Members' orders 
that remove liquidity at the Midpoint Match and yield Flag MT. The 
Exchange notes that this proposed internalization fee will discourage 
Members from engaging in potential wash sales.
---------------------------------------------------------------------------

    \10\ As defined in Exchange Rule 11.5(c)(7).
---------------------------------------------------------------------------

    In conjunction with the Exchange's proposal to amend the rate for 
Members' orders that yield Flag AA in securities priced at or above 
$1.00 as described above, the Exchange proposes to amend the rate it 
charges Members for orders that yield Flag AA in securities priced 
below $1.00. The Exchange currently assesses no charge for Members' 
orders that inadvertently match with themselves at the Midpoint Match 
in the same MPID. The Exchange proposes to charge Members 0.15% of the 
dollar value of the transaction per side for securities priced below 
$1.00 so the internalization fee is no more favorable than the spread 
per side for Members' orders in securities priced below $1.00 that add 
liquidity at the Midpoint Match

[[Page 15786]]

and yield Flag MM, and Members' orders that remove liquidity at the 
Midpoint Match and yield Flag MT.\11\ The Exchange notes that this 
proposed internalization fee will discourage Members from engaging in 
potential wash sales.
---------------------------------------------------------------------------

    \11\ The rate of 0.15% of the dollar value of the transaction 
per side is derived from calculating the spread between adding and 
removing liquidity in securities priced below $1.00 for Flags MM and 
MT. The Exchange assumes a security is priced at $0.99 and dividing 
that result by two (2) to account for each side of the transaction: 
(0.30% x 1 share x $0.99)-(rebate of $0.00003 per share) = $0.00294/
2 =$.00147 per share/$0.99 x 100 = approx. 0.15% of the dollar value 
of the transaction.
---------------------------------------------------------------------------

    The Exchange proposes to implement these amendments to its fee 
schedule on March 1, 2013.
2. Statutory Basis
    The Exchange believes that the proposed rule change is 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).
---------------------------------------------------------------------------

Securities Priced Below $1.00
    The Exchange believes that its proposal to revise its fee schedule 
to list the default rate that corresponds to each liquidity flag for 
securities priced below $1.00 that add liquidity on the Exchange's fee 
schedule represents an equitable allocation of reasonable dues, fees 
and other charges among its Members and other persons using its 
facilities. Specifically, for Members' orders that add liquidity, the 
Exchange proposes to list the default rebate of $0.00003 per share next 
to Flags B, V, Y, 3, 4, HA, MM, RP, and ZA. The Exchange's proposal to 
revise the corresponding text on the fee schedule, as described above, 
will increase the level of transparency of the Exchange's fee schedule 
and improve the Exchange's ability to effectively convey the rates for 
securities priced below $1.00 to Members. In addition, the Exchange 
believes it is equitable and reasonable to offer Members a default 
rebate of $0.00003 per share for orders that add liquidity in 
securities priced below $1.00 because it will incentivize Members to 
add liquidity to the Exchange by offering them a rebate and offering 
rebates to Members that add liquidity is consistent with the Exchange's 
maker/taker model. The Exchange notes that its proposal does not modify 
the current rates it charges its Members for orders that yield Flags B, 
V, Y, 3, 4, HA, MM, RP, and ZA for securities priced below $1.00 that 
add liquidity from the Exchange. Lastly, the Exchange also believes 
that these proposed amendments are non-discriminatory because they 
apply uniformly to all Members.
    The Exchange believes that its proposal to revise its fee schedule 
to list the default rate that corresponds to each liquidity flag for 
securities priced below $1.00 that remove liquidity on the Exchange's 
fee schedule represents an equitable allocation of reasonable dues, 
fees and other charges among its Members and other persons using its 
facilities. Specifically, for Members' orders that remove liquidity, 
the Exchange proposes to list the default removal rate of 0.30% of the 
dollar value of the transaction next to Flags N, W, 6, BB, MT, PI, PR, 
and ZR. The Exchange's proposal to revise the corresponding text on the 
fee schedule, as described above, will increase the level of 
transparency of the Exchange's fee schedule and improve the Exchange's 
ability to effectively convey the rates for securities priced below 
$1.00 to Members. In addition, the Exchange believes it is equitable 
and reasonable to charge Members a default removal rate of 0.30% of the 
dollar value of the transaction because these fees allow the Exchange 
to offset its administrative, clearing, and other operating costs 
incurred in executing such trades. The Exchange notes that its proposal 
does not modify the current rates it charges its Members for orders 
that yield Flags N, W, 6, BB, MT, PI, PR, and ZR for securities priced 
below $1.00 that remove liquidity from the Exchange. Lastly, the 
Exchange also believes that these proposed amendments are non-
discriminatory because they apply uniformly to all Members.
    The Exchange believes that its proposal to revise its fee schedule 
to list the default rate that corresponds to each liquidity flag for 
securities priced below $1.00 that route and remove liquidity on the 
Exchange's fee schedule represents an equitable allocation of 
reasonable dues, fees and other charges among its Members and other 
persons using its facilities. Specifically, for Members' orders that 
route and remove liquidity, the Exchange proposes to list the default 
rate of 0.30% of the dollar value of the transaction next to Flags D, 
G, I, J, K, L, O, Q, R, S, T, U, X, Z, 2, 7, CL, RQ, RR, RT, RX, and 
SW. The Exchange's proposal to revise the corresponding text on the fee 
schedule, as described above, will increase the level of transparency 
of the Exchange's fee schedule and improve the Exchange's ability to 
effectively convey the rates for securities priced below $1.00 to 
Members. In addition, the Exchange believes it is equitable and 
reasonable to charge Members a default routing and removal rate of 
0.30% of the dollar value of the transaction because these fees allow 
the Exchange to offset its administrative, clearing, and other 
operating costs incurred in executing such trades. The Exchange also 
notes that routing through DE Route is voluntary. The Exchange notes 
that its proposal does not modify the current rates it charges its 
Members for orders that yield Flags D, G, I, J, K, L, O, Q, R, S, T, U, 
X, Z, 2, 7, CL, RQ, RR, RT, RX, and SW for securities priced below 
$1.00 that route to away trading destinations and remove liquidity. 
Lastly, the Exchange also believes that these proposed amendments are 
non-discriminatory because they apply uniformly to all Members.
    The Exchange believes that its proposal to pass through no charge 
for securities priced below $1.00 that route to some away trading 
destinations and add liquidity represents an equitable allocation of 
reasonable dues, fees and other charges among its Members and other 
persons using its facilities because the Exchange does not levy 
additional fees or offer additional rebates for orders that it routes 
to these away trading destinations through DE Route. The Exchange's fee 
schedule does not clearly disclose its pricing for Members' orders that 
route to these away trading destinations and add liquidity in 
securities priced below $1.00. Currently, the away trading destinations 
assess no charge to DE Route for orders that route to those 
destinations and add liquidity, and DE Route passes through no charge 
to the Exchange and the Exchange passes through no charge to its 
Members.\14\ Therefore, since DE Route is

[[Page 15787]]

not charged a fee by the away trading destination for routing orders 
that add liquidity to its trading center in securities priced below 
$1.00, the Exchange believes it is equitable and reasonable to not 
charge its Members for orders that yield Flags A, F, M, 8, 9, 10, RA, 
RB, RS, RW, RY, and RZ. The Exchange's proposal allows the Exchange to 
continue to charge its Members a pass-through rate for orders that are 
routed to some away trading destinations and add liquidity through DE 
Route. The Exchange notes that its proposal conforms to an existing 
practice and does not modify the rates that the Exchange has been 
charging its Members for orders that yield Flags A, F, M, 8, 9, 10, RA, 
RB, RS, RW, RY, and RZ for securities priced below $1.00 that route to 
these away trading destinations and add liquidity. The Exchange notes 
that routing through DE Route is voluntary. The Exchange's proposal to 
revise the corresponding text on the fee schedule, as described above, 
will increase the level of transparency of the Exchange's fee schedule 
and improve the Exchange's ability to effectively convey the rates for 
securities priced below $1.00 to Members. Lastly, the Exchange also 
believes that these proposed amendments are non-discriminatory because 
they apply uniformly to all Members.
---------------------------------------------------------------------------

    \14\ NYSE Arca, NYSE, NYSE MKT LLC, BATS BZX, BATS BYX, CBSX, 
NASDAQ, NASDAQ BX, NASDAQ PSX, LavaFlow ECN, and EDGA assess 
customers no charge for orders that add liquidity on their 
respective exchanges in securities priced below $1.00. See NYSE 
Arca, NYSE Arca Trading Fees, http://usequities.nyx.com/markets/nyse-arca-equities/trading-fees; NYSE, NYSE Trading Fees, http://usequities.nyx.com/markets/nyse-equities/trading-fees; NYSE MKT LLC, 
NYSE MKT Trading Fees, http://usequities.nyx.com/markets/nyse-mkt-equities/trading-fees; BATS, BATS BZX and BYX Exchange Fee 
Schedules, http://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf; Chicago Board Options 
Exchange, CBOE Stock Exchange Fees Schedule, http://www.cboe.com/publish/cbsxfeeschedule/cbsxfeeschedule.pdf; NASDAQ, Price List--
Trading and Connectivity, http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2; NASDAQ OMX BX, Inc., NASDAQ OMX BX 
Price List--Trading and Connectivity, http://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing; NASDAQ OMX PSX, Inc., NASDAQ OMX PSX 
Price List--Trading and Connectivity, http://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing; LavaFlow ECN, LavaFlow Pricing, https://www.lavatrading.com/solutions/pricing.php; and EDGA Exchange, Inc., 
EDGA Exchange Fee Schedule, http://www.directedge.com/Membership/FeeSchedule/EDGAFeeSchedule.aspx.
---------------------------------------------------------------------------

    The Exchange believes that its proposal to assess no charge for 
securities priced below $1.00 that yield Flag OO represents an 
equitable allocation of reasonable dues, fees and other charges among 
its Members and other persons using its facilities. Members will yield 
Flag OO when their orders are matched at the Direct Edge Opening on 
EDGX, whether the Member's order adds or removes liquidity. The 
Exchange's fee schedule displays a rebate of $0.00003 per share as the 
default rate for Members' orders that add liquidity and a charge of 
0.30% of the dollar value of the transaction as the default rate for 
Members' orders that remove liquidity for securities priced below 
$1.00. However, in practice, the Exchange assesses no charge for 
Members' orders that that yield Flag OO in securities priced below 
$1.00, which represents Members' orders that are matched at the 
``Direct Edge Opening'' and either add or remove liquidity. Because the 
Exchange is not a primary listing market, Flag OO generates low volume; 
therefore, the Exchange believes its proposal to assess no charge is 
equitable and reasonable given that the Exchange incurs only nominal 
administrative, clearing, and other operating costs in executing 
trades. The Exchange notes that its proposal conforms an existing 
practice and does not modify the rate that the Exchange has been 
charging its Members for orders that yield Flag OO for securities 
priced below $1.00 that are matched at the Direct Edge Opening. The 
Exchange's proposal to revise the corresponding text on the fee 
schedule, as described above, will increase the level of transparency 
of the Exchange's fee schedule and improve the Exchange's ability to 
effectively convey the rates for securities priced below $1.00 to 
Members. 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 no charge for 
securities priced below $1.00 that yield Flag RC represents an 
equitable allocation of reasonable dues, fees and other charges among 
its Members and other persons using its facilities. Members will yield 
Flag RC when their orders route to the NSX and add liquidity. The 
Exchange's fee schedule does not clearly disclose its pricing for 
Members' orders that yield Flag RC in securities priced below $1.00. 
The Exchange notes that the NSX offers a rebate to DE Route for 
Members' orders that yield Flag RC. The Exchange also notes that Flag 
RC generates low volume and nominal revenue to the Exchange. Therefore, 
the Exchange believes its proposal to assess no charge is equitable and 
reasonable because the rebate paid by NSX to DE Route and DE Route to 
the Exchange does not offset the administrative, clearing, and other 
operating costs associated with passing through the NSX rebate to 
Members. The Exchange notes that routing through DE Route is voluntary. 
The Exchange also notes that its proposal conforms to an existing 
practice and does not modify the rate that the Exchange has been 
charging its Members for orders that yield Flag RC for securities 
priced below $1.00. The Exchange's proposal to revise the corresponding 
text on the fee schedule, as described above, will increase the level 
of transparency of the Exchange's fee schedule and improve the 
Exchange's ability to effectively convey the rates for securities 
priced below $1.00 to Members. 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 revise its fee schedule 
to list the rate of 0.10% of the dollar value of the transaction for 
Members' orders that yield Flag C for securities priced below $1.00 
represents an equitable allocation of reasonable dues, fees and other 
charges among its Members and other persons using its facilities 
because it is a pass-through rate and the Exchange does not levy 
additional fees or offer additional rebates for orders that it routes 
to NASDAQ BX through DE Route. Therefore, since DE Route is charged a 
fee by NASDAQ BX for routing orders that remove liquidity to its 
trading center in securities priced below $1.00, the Exchange believes 
it is equitable and reasonable to charge its Members for orders that 
yield Flag C. The Exchange's proposal allows the Exchange to continue 
to charge its Members a pass-through rate for orders that are routed to 
NASDAQ BX and remove liquidity through DE Route. The Exchange notes 
that routing through DE Route is voluntary. The Exchange notes that its 
proposal does not modify the current rate it charges its Members for 
orders that yield Flag C for securities priced below $1.00. The 
Exchange's proposal to revise the corresponding text on the fee 
schedule, as described above and deleting the text of Footnote 3 and 
its associated annotations on Flags C, D, J, L, and 2, will increase 
the level of transparency of the Exchange's fee schedule and improve 
the Exchange's ability to effectively convey the rates for securities 
priced below $1.00 to Members. Lastly, the Exchange also believes that 
this proposed amendment is non-discriminatory because it applies 
uniformly to all Members.
    The Exchange believes that its proposal to pass through 0.10% of 
the dollar value of the transaction for Members' orders that yield Flag 
BY for securities priced below $1.00 represents an equitable allocation 
of reasonable dues, fees and other charges among its Members 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. The Exchange notes that Footnote 10 on 
the fee schedule incorrectly lists a flat rate of $0.0010 per share for 
Members' orders that yield Flag BY in securities priced below $1.00. In 
practice, the Exchange charges Members 0.10% of the dollar value of the 
transaction for Members' orders that yield Flag BY. Since DE

[[Page 15788]]

Route is charged a fee by BATS BYX for routing orders that remove 
liquidity using routing strategies ROUC, ROUE or ROBY to its trading 
center in securities priced below $1.00, the Exchange believes it is 
equitable and reasonable to charge its Members for orders that yield 
Flag BY. The Exchange's proposal allows the Exchange to continue to 
charge its Members a pass-through rate for orders that are routed to 
BATS BYX and remove liquidity through DE Route. The Exchange notes that 
its proposal conforms to an existing practice and does not modify the 
rate that the Exchange has been charging its Members for orders that 
yield Flag BY for securities priced below $1.00. The Exchange notes 
that routing through DE Route is voluntary. The Exchange's proposal to 
revise the corresponding text on the fee schedule, as described above 
and deleting the text of Footnote 10 and its associated annotation on 
Flag BY, will increase the level of transparency of the Exchange's fee 
schedule and improve the Exchange's ability to effectively convey the 
rates for securities priced below $1.00 to Members. Lastly, the 
Exchange also believes that this proposed amendment is non-
discriminatory because it applies uniformly to all Members.
    The Exchange believes that its proposal revise its fee schedule to 
list a charge of 0.15% of the dollar value of the transaction per side 
for Members' orders in securities priced below $1.00 that yield Flags 
5, EA and ER, which are associated with customer internalization, 
represents an equitable allocation of reasonable dues, fees and other 
charges. The Exchange's rate of 0.15% of the dollar value of the 
transaction per side for customer internalization is equitable because 
the rate is consistent with the Exchange's proposed maker/taker spread 
for securities priced below $1.00. Therefore, in each case, the 
internalization fee of 0.15% of the dollar value of the transaction per 
side is no more favorable to the Member than the proposed maker/taker 
spread. Since the spread for customer internalization equals the 
Exchange's maker/taker spread, the Exchange's proposal continues to 
discourage Members from engaging in potential wash sales. The Exchange 
notes that its proposal does not modify the current rates it charges 
its Members for orders that yield Flags 5, EA or ER for securities 
priced below $1.00. The Exchange's proposal to revise the corresponding 
text on the fee schedule, as described above and deleting the 
applicable text of Footnote 11, will increase the level of transparency 
of the Exchange's fee schedule and improve the Exchange's ability to 
effectively convey the rates for securities priced below $1.00 to 
Members. Lastly, the Exchange believes that these proposed rates are 
non-discriminatory in that they apply uniformly to all Members.
    As described in Section 3, the Exchange proposes to make conforming 
and non-substantive revisions to the fee schedule in general and the 
description of certain flags in particular in order to increase the 
level of transparency of the Exchange's fee schedule, promote 
consistent descriptions and applications, and improve the Exchange's 
ability to effectively convey the rates for securities priced below 
$1.00 to Members.
Rate Changes for Flag AA
    The Exchange believes that its proposal to increase the rate it 
charges Members for customer internalization from no charge per share 
per side to $0.0012 per share per side for Members' orders that yield 
Flag AA in securities priced at or above $1.00 is an equitable 
allocation of reasonable dues, fees and other charges. The Exchange's 
proposed rate of $0.0012 per side per share for Members' orders that 
inadvertently match with themselves at the Midpoint Match in the same 
MPID is equitable because the rate is consistent with the Exchange's 
proposed maker/taker spread of $0.0012 per share, where the rate to add 
liquidity at the Midpoint Match and yield Flag MM is $0.0012 per share 
and the rate to remove liquidity at the Midpoint Match and yield Flag 
MT is $0.0012 per share. Therefore, in each case, the proposed 
internalization fee of $0.0012 per side per share, equaling a total 
cost of $0.0024 per share for Flag AA, is no more favorable to the 
Member than the proposed maker/taker spread for Midpoint Match. Since 
the spread for customer internalization and the Exchange's maker/taker 
spread for Midpoint Match will equal $0.0012 per share, the Exchange's 
proposal discourages Members from engaging in potential wash sales. 
Lastly, the Exchange believes that the proposed rate is non-
discriminatory in that it applies uniformly to all Members.
    The Exchange believes that its proposal to charge Members 0.15% of 
the dollar value of the transaction per side for customer 
internalization for orders that yield Flag AA in securities priced 
below $1.00 is an equitable allocation of reasonable dues, fees and 
other charges. The Exchange's proposed rate of 0.15% of the dollar 
value of the transaction per side for Members' orders that 
inadvertently match with themselves at the Midpoint Match in the same 
MPID is equitable because the rate is consistent with the Exchange's 
proposed maker/taker spread for Midpoint Match. Therefore, in each 
case, the proposed internalization fee of 0.15% of the dollar value of 
the transaction per side, equaling a total cost of 0.30% of the dollar 
value of the transaction, where the rebate to add to Midpoint Match 
(Flag MM) is $0.00003 per share and the fee to remove from Midpoint 
Match (Flag MT) is 0.30% of the dollar value of the transaction, is no 
more favorable to the Member than the proposed maker/taker spread for 
Midpoint Match. Since the spread for customer internalization will 
equal the Exchange's maker/taker spread for Midpoint Match, the 
Exchange's proposal discourages Members from engaging in potential wash 
sales. Lastly, the Exchange believes that the proposed rate is non-
discriminatory in that it applies uniformly 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

    These proposed rule changes do not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. The Exchange does not believe that any of these changes 
represent a significant departure from previous pricing offered by the 
Exchange or pricing offered by the Exchange's competitors. As described 
in Section 3, the Exchange proposes to make conforming and non-
substantive revisions to the fee schedule in general and the 
description of certain flags in particular in order to increase the 
level of transparency of the Exchange's fee schedule, promote 
consistent descriptions and applications, and improve the Exchange's 
ability to effectively convey the rates for securities priced below 
$1.00 to Members.

[[Page 15789]]

Securities Priced Below $1.00
    Regarding Flags B, V, Y, 3, 4, HA, MM, RP, and ZA, the Exchange 
believes that its proposal to amend its fee schedule to list the 
default rebate of $0.00003 in the column ``Fee/(Rebate) Securities 
below $1.00'' will not burden intramarket competition or intermarket 
competition given that the Exchange's proposal does not modify its 
current rates for orders that add liquidity and they apply uniformly to 
all Members that place orders in securities priced below $1.00.
    Regarding Flags N, W, 6, BB, MT, PI, PR, and ZR, the Exchange 
believes that its proposal to amend its fee schedule to list the 
default rate of 0.30% of the dollar value of the transaction in the 
column ``Fee/(Rebate) Securities below $1.00'' will not burden 
intramarket competition or intermarket competition given that the 
Exchange's proposal does not modify its current rates for orders that 
remove liquidity and they apply uniformly to all Members that place 
orders in securities priced below $1.00.
    Regarding Flags D, G, I, J, K, L, O, Q, R, S, T, U, X, Z, 2, 7, CL, 
RQ, RR, RT, RX, and SW, the Exchange believes that its proposal to 
amend its fee schedule to list the default rate of 0.30% of the dollar 
value of the transaction in the column ``Fee/(Rebate) Securities below 
$1.00'' will not burden intramarket competition or intermarket 
competition given that the Exchange's proposal does not modify its 
current rates for orders that route and remove liquidity and they apply 
uniformly to all Members that place orders in securities priced below 
$1.00.
    Regarding Flags A, F, M, 8, 9, 10, RA, RB, RS, RW, RY, and RZ, the 
Exchange's fee schedule does not clearly disclose its pricing for 
Members' orders that route to these away trading destinations and add 
liquidity in securities priced below $1.00. The Exchange believes that 
its proposal to pass through no charge for securities priced below 
$1.00 that route to some away trading destinations and add liquidity 
will increase competition because it is comparable to the rates charged 
by the away trading destinations for adding liquidity. The Exchange 
believes its proposal will not burden intramarket competition or 
intermarket competition given that the Exchange's proposal conforms to 
an existing practice and does not modify the rates for orders that 
route and add liquidity and they apply uniformly to all Members that 
place orders in securities priced below $1.00. 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.
    Regarding Flag OO, the Exchange's fee schedule displays a rebate of 
$0.00003 per share as the default rate for Members orders that add 
liquidity and a charge of 0.30% of the dollar value of the transaction 
as the default rate for Members orders that remove liquidity for 
securities priced below $1.00. However, in practice, the Exchange 
assesses no charge for Members' orders that that yield Flag OO in 
securities priced below $1.00, which represents Members' orders that 
are matched at the ``Direct Edge Opening'' and either add or remove 
liquidity. The Exchange believes that its proposal to assess no charge 
will not burden intramarket competition or intermarket competition 
given that the Exchange's proposal conforms to an existing practice and 
does not modify the rate for Flag OO and it applies uniformly to all 
Members that place orders in securities priced below $1.00.
    Regarding Flag RC, the Exchange's fee schedule does not clearly 
disclose its pricing for Members' orders yield Flag RC in securities 
priced below $1.00. The Exchange believes that its proposal to assess 
no charge will not burden intramarket competition or intermarket 
competition given that the Exchange's proposal conforms to an existing 
practice and does not modify the rate for Flag RC and it applies 
uniformly to all Members that place orders in securities priced below 
$1.00.
    Regarding Flag C, the Exchange believes that its proposal to amend 
its fee schedule to list a charge of 0.10% of the dollar value of the 
transaction will not burden intramarket competition or intermarket 
competition given that the Exchange's proposal does not modify its 
current rate for Flag C and it applies uniformly to all Members that 
place orders in securities priced below $1.00. By charging a pass-
through rate for securities priced below $1.00 that route to NASDAQ BX 
and remove liquidity, the Exchange will increase competition because it 
is comparable to the rates charged by NASDAQ BX for removing liquidity. 
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.
    Regarding Flag BY, the Exchange notes that Footnote 10 on the fee 
schedule incorrectly lists a flat rate of $0.0010 per share for 
Members' orders that yield Flag BY in securities priced below $1.00. 
However, in practice, the Exchange charges Members 0.10% of the dollar 
value of the transaction for Members' orders that yield Flag BY. The 
Exchange believes that its proposal to pass through a charge of 0.10% 
of the dollar value of the transaction for securities priced below 
$1.00 that route to BATS BYX and remove liquidity will increase 
competition because it is comparable to the rates charged by BATS BYX 
for removing liquidity. The Exchange believes its proposal will not 
burden intramarket competition or intermarket competition given that 
the Exchange's proposal conforms to an existing practice and does not 
modify the rate for Flag BY and it applies uniformly to all Members 
that place orders in securities priced below $1.00. 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.
    Regarding Flags 5, EA and ER, the Exchange believes that its 
proposal to amend its fee schedule to list the rate of 0.15% of the 
dollar value of the transaction per side in the column ``Fee/(Rebate) 
Securities below $1.00'' for customer internalization will not burden 
intermarket or intramarket competition as the proposed rate is no more 
favorable than the Exchange's prevailing maker/taker spread. In 
addition, the Exchange believes that its proposal will not burden 
intramarket competition or intermarket competition given that the 
Exchange's proposal does not modify its current rates for Flags 5, EA 
and ER and they apply uniformly to all Members that place orders in 
securities priced below $1.00.
Rate Changes for Flag AA
    Regarding Flag AA in securities priced at or above $1.00, the 
Exchange believes that its proposal to assess a charge of $0.0012 per 
share per side for Members' orders that inadvertently match with 
themselves at the Midpoint Match in the same MPID will not burden 
intermarket or intramarket competition as the proposed rate is no more 
favorable than the Exchange's prevailing maker/taker spread at the 
Midpoint Match. In addition, the Exchange believes that its proposal 
will not burden intramarket competition or intermarket competition 
because it applies uniformly to all Members.
    Regarding Flag AA in securities priced below $1.00, the Exchange

[[Page 15790]]

believes that its proposal to assess a charge of 0.15% of the dollar 
value of the transaction per side will not burden intermarket or 
intramarket competition as the proposed rate is no more favorable than 
the Exchange's prevailing maker/taker spread at the Midpoint Match. In 
addition, the Exchange believes that its proposal will not burden 
intramarket competition or intermarket competition because it applies 
uniformly to all Members that place orders in securities priced below 
$1.00.

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 \15\ and Rule 19b-4(f)(2) \16\ 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.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 19b-4(f)(2)[sic].
---------------------------------------------------------------------------

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-2013-10 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-2013-10. 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-2013-10 and should be 
submitted on or before April 2, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Kevin M. O'Neill,
Deputy Secretary.
---------------------------------------------------------------------------

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

[FR Doc. 2013-05583 Filed 3-11-13; 8:45 am]
BILLING CODE 8011-01-P