[Federal Register Volume 79, Number 43 (Wednesday, March 5, 2014)]
[Notices]
[Pages 12545-12547]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-04791]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71622; File No. SR-EDGX-2014-02]


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 27, 2014.
    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 18, 2014, 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) 
(``Fee Schedule'') to: (i) Amend Flag RC, which routes to the National 
Stock Exchange, Inc. (``NSX'') and adds liquidity; and (ii) make an 
administrative change to the definition of Total Consolidated Volume 
(``TCV''). 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\ The term ``Member'' is defined as ``any registered broker or 
dealer, or any person associated with a registered broker or dealer, 
that has been admitted to membership in the Exchange. A Member will 
have the status of a ``member'' of the Exchange as that term is 
defined in Section 3(a)(3) of the Act.'' See 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 proposes to amend its Fee Schedule to: (i) Amend Flag 
RC, which routes to the NSX and adds liquidity; and (ii) make an 
administrative change to the definition of TCV.
Flag RC
    In securities priced at or above $1.00, the Exchange currently 
provides a rebate of $0.0026 per share for Members' orders that yield 
Flag RC, which routes to the NSX and adds liquidity. The Exchange 
proposes to amend its Fee Schedule to replace this rebate with a fee of 
$0.0018 per share for Members' orders that yield Flag RC. The 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 that add liquidity to NSX 
when it does not qualify for a volume tiered reduced fee. The proposed 
change is in response to NSX's February 2014 fee change where the NSX 
replaced its rebate of $0.0026 per share with a fee of $0.0018 per 
share for orders that add liquidity on the NSX.\4\ When DE Route routes 
to and adds liquidity on the NSX, it will be charged a standard rate of 
$0.0018 per share.\5\ DE Route will pass through this rate on NSX to 
the Exchange and the Exchange, in turn, will pass through this rate to 
its Members.
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    \4\ See NSX, Information Circular 14-017, Amendments to the NSX 
Fee and Rebate Schedule Effective on February 18, 2014, http://www.nsx.com/resources/content/7/documents/InformationCircular14-017.pdf.
    \5\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered reduced fee on NSX, its rate for Flag 
RC will not change.
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TCV Definition
    On December 9, 2013, the Exchange amended its Fee Schedule to 
exclude odd lot transactions from the definition of TCV, which is used 
to determine whether a Member is eligible for certain pricing tiers, 
through January 31, 2014.\6\ Prior to December 9, 2013, an odd lot 
transaction, which is generally an execution of less than 100 
shares,\7\ was not reported to the consolidated tape. Therefore, the 
Exchange did not include odd lot transactions in its calculation of 
TCV.\8\ The proposal was designed to allow Members additional time to 
adjust to the potential impact of including odd lot transactions within 
consolidated volumes.
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    \6\ See Securities Exchange Act Release No. 71058 (December 12, 
2013), 78 FR 76682 (December 18, 2013) (SR-EDGX-2013-46).
    \7\ See Exchange Rule 11.6.
    \8\ See Securities Exchange Act Release No. 70794 (October 31, 
2013), 78 FR 66789 (November 6, 2013) (SR-CTA-2013-05) (Order 
Approving the Eighteenth Substantive Amendment to the Second 
Restatement of the CTA Plan). See also Securities Exchange Act 
Release No. 70793 (October 31, 2013), 78 FR 66788 (November 6, 2013) 
(File No. S7-24-89) (Order Approving Amendment No. 30 to the Joint 
Self-Regulatory Organization Plan Governing the Collection, 
Consolidation and Dissemination of Quotation and Transaction 
Information for Nasdaq-Listed Securities Traded on Exchanges on an 
Unlisted Trading Privileges Basis). See also Securities Exchange Act 
Release No. 70898 (November 19, 2013) (SR-NYSE-2013-75). See also 
announcements regarding December 9, 2013 implementation date, 
available at https://cta.nyxdata.com/cta/popup/news/2385 and http://www.nasdaqtrader.com/TraderNews.aspx?id=uva2013-11. If the inclusion 
of odd lot transactions in the consolidated tape is delayed to a 
date after December 9, 2013, the manner of inclusion or exclusion of 
odd lot transactions described in this proposal for purposes of 
billing on the Exchange would similarly take effect on such later 
date.
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    Beginning on February 1, 2014, the Exchange began to include odd 
lots in

[[Page 12546]]

the TCV calculation after a nearly two month transition period. 
Therefore, the Exchange proposes to update the definition of TCV in its 
Fee Schedule to remove, ``excluding odd lots through January 31, 2014'' 
and no longer reflect that odd lots are excluded from the calculation 
of TCV. As amended, the definition of TCV would read as follows: ``the 
volume reported by all exchanges and trade reporting facilities to the 
consolidated transaction reporting plans for Tapes A, B and C 
securities for the month in which the fees are calculated.''
Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule on February 18, 2014.
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 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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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
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Flag RC
    The Exchange believes that its proposal to replace the pass through 
rebate of $0.0026 per share for Members' orders that yield Flag RC with 
a fee of $0.0018 per share represents an equitable allocation of 
reasonable dues, fees, and other charges among 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 NSX through DE Route. Prior to NSX's February 2014 fee change, NSX 
provided its members a rebate of $0.0026 per share to add liquidity to 
the NSX and provided DE Route that same rebate, which DE Route passed 
through to the Exchange and the Exchange provided to its Members. In 
February 2014, NSX replaced the rebate of $0.0026 per share it provided 
its customers to add liquidity with a fee of $0.0018 per share.\11\ 
Therefore, the Exchange believes that the proposed change to Flag RC to 
replace the rebate of $0.0026 per share with a fee of $0.0018 per share 
is equitable and reasonable because it accounts for the pricing change 
on the NSX. In addition, the proposal allows the Exchange to charge its 
Members a pass-through rate for orders that are routed to the NSX and 
add liquidity. Furthermore, 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.
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    \11\ See NSX, Information Circular 14-017, Amendments to the NSX 
Fee and Rebate Schedule Effective on February 18, 2014, http://www.nsx.com/resources/content/7/documents/InformationCircular14-017.pdf.
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TCV Definition
    The Exchange believes its proposal to amend its definition of TCV 
is reasonable because it provides Members with greater clarity with 
regard to how the Exchange calculates TCV. The Exchange announced in 
its earlier filing amending the definition of TCV that it would begin 
to include odd lots in the TCV calculation on February 1, 2014, after 
the nearly two month transition period.\12\ The Exchange believes it is 
reasonable to now amend its definition of TCV to clarify that odd lots 
are no longer excluded. The proposed amendment is intended to make the 
Fee Schedule clearer and less confusing for investors and eliminate 
potential investor confusion, thereby removing impediments to and 
perfecting the mechanism of a free and open market and a national 
market system, and, in general, protecting investors and the public 
interest. The proposed rule change is also equitable and not unfairly 
discriminatory because it would apply to all Members uniformly.
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    \12\ See Securities Exchange Act Release No. 71058 (December 12, 
2013), 78 FR 76682 (December 18, 2013) (SR-EDGX-2013-46).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes its proposal amendments its Fee Schedule 
would 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. Additionally, Members may opt to 
disfavor EDGX's pricing if they believe that alternatives offer them 
better value. Accordingly, the Exchange does not believe that the 
proposed changes will impair the ability of Members or competing venues 
to maintain their competitive standing in the financial markets.
Flag RC
    The Exchange believes that its proposal to pass through a fee of 
$0.0018 per share for Members' orders that yield Flag RC would increase 
intermarket competition because it offers customers an alternative 
means to route to NSX for the same price as entering orders on NSX 
directly. The Exchange believes that its proposal would not burden 
intramarket competition because the proposed rate would apply uniformly 
to all Members.
TCV Definition
    The proposed rule change does not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. The proposal to exclude odd lot transactions from the TCV 
calculation was intended to allow Members additional time to adjust to 
the potential impact of including odd lot transactions within 
consolidated volumes. The Exchange believes that the proposed non-
substantive change to the definition of TCV would not affect 
intermarket nor intramarket competition because the change does not 
alter the criteria necessary to achieve the tiers nor the rates offered 
by the tiers. In addition, the Exchange believes that other exchanges 
have ceased excluding odd lot transactions from the consolidated volume 
calculations as of February 1, 2014.\13\
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    \13\ See Securities Exchange Act Release No. 70997 (December 5, 
2013), 78 FR 75432 (December 11, 2013) (SR-NYSE-2013-78) (amending 
its price list to exclude odd lot transactions from its consolidated 
average daily trading volume calculations thru January 31, 2014); 
see also, Securities Exchange Act Release No. 71140 (December 19, 
2013), 78 FR 78460 (December 26, 2013) (SR-BATS-2013-063) (amending 
its price schedule to exclude odd lot transactions from its 
consolidated average daily trading volume calculations thru January 
31, 2014).
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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

[[Page 12547]]

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 240.19b-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-2014-02 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-2014-02. 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-2014-02, and should be 
submitted on or before March 26, 2014.

    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. 2014-04791 Filed 3-4-14; 8:45 am]
BILLING CODE 8011-01-P