[Federal Register Volume 79, Number 89 (Thursday, May 8, 2014)]
[Notices]
[Pages 26493-26495]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2014-10542]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72089; File No. SR-EDGA-2014-12]


Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend 
EDGA Rule 11.5 Regarding the Route Peg Order

May 2, 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 April 29, 2014, EDGA Exchange, Inc. (``EDGX'' or ``Exchange'') 
filed with the Securities and Exchange Commission (``Commission'') the 
proposed rule change as described in Items I and II below, which Items 
have been prepared by the Exchange. The Commission is publishing this 
notice to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C.78s(b)(1).
    \2\ 17 CFR 240.19b-4.down
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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 the Route Peg Order under Rule 
11.5(c)(14) to permit: (i) Executions against routable orders that are 
equal to or less than the aggregate size of the Route Peg Order 
interest available at that price; and (ii) Users \3\ to add a minimum 
execution quantity instruction. All of the changes described herein are 
applicable to EDGA Members.
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    \3\ The term ``User'' is defined as ``any Member or Sponsored 
Participant who is authorized to obtain access to the System 
pursuant to Rule 11.3.'' See Exchange Rule 1.5(ee).
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    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.

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 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Route Peg Order under Rule 
11.5(c)(14) to permit: (i) Executions against routable orders that are 
equal to or less than the aggregate size of the Route Peg Order 
interest available at that price, which would replace the current 
requirement that routable orders be equal to or less than the size of 
an individual Route Peg Order; and (ii) Users to add a minimum 
execution quantity instruction.
    A Route Peg Order is a non-displayed limit order that posts to the 
EDGA Book, and thereafter is eligible for execution at the national 
best bid (``NBB'') for buy orders and national best offer (``NBO'') for 
sell orders against routable orders that are equal to or less than the 
size of the Route Peg Order.\4\ Route Peg Orders are passive, resting 
orders on the EDGA Book \5\ and do not take liquidity. Route Peg Orders 
may be entered, cancelled, and cancelled/replaced prior to and during 
Regular Trading Hours.\6\ Route Peg Orders are eligible for execution 
in a given security during Regular Trading Hours, except that, even 
after the commencement of Regular Trading Hours, Route Peg Orders are 
not eligible for execution (1) in the opening cross, and (2) until such 
time that regular session orders in that security can be posted to the 
EDGA Book. A Route Peg Order does not execute at a price that is 
inferior to a Protected Quotation, and is not be permitted to execute 
if the

[[Page 26494]]

NBBO is locked or crossed. Any and all remaining, unexecuted Route Peg 
Orders are cancelled at the conclusion of Regular Trading Hours.
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    \4\ See Securities Exchange Act Release No. 67726 (August 24, 
2012), 77 FR 52771 (August 30, 2012) (Order Approving the Route Peg 
Order).
    \5\ The ``EDGA Book'' is defined as ``the System's electronic 
file of orders.'' See Exchange Rule 1.5(d).
    \6\ ``Regular Trading Hours'' is defined as ``the time between 
9:30 a.m. and 4:00 p.m. Eastern Time.'' See Exchange Rule 1.5(y).
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Aggregate Size
    As noted above, Route Peg Orders will currently only trade with 
routable orders that are equal to or smaller in quantity than the order 
quantity of an individual Route Peg Order. The Exchange proposes to 
amend the operation of the Route Peg Order to permit it to execute 
against routable orders that are equal to or less than the aggregate 
size of the Route Peg Order interest available at that price. The 
Exchange believes this change would incentivize Users seeking large 
size executions to route orders to the Exchange by increasing 
opportunities for executions against Route Peg Orders. This proposed 
change to the Route Peg Order is similar to the operation of the Nasdaq 
Stock Market LLC's (``Nasdaq'') Supplemental Order and NYSE Arca, 
Inc.'s (``NYSE Arca'') Tracking Order, which both only execute if the 
size of the incoming order is less than or equal to the aggregate size 
of Supplemental Order or Tracking Order interest available at that 
price.\7\
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    \7\ See Nasdaq Rules 4751(f)(14), 4751(g) and 4757(a)(1)(D); see 
also NYSE Arca Rule 7.31(f).
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Minimum Execution Quantity
    The Exchange also proposes to amend the Route Peg Order under Rule 
11.5 to add optional functionality to allow Users to designate a 
minimum execution quantity. As proposed, a minimum execution quantity 
on a Route Peg order will no longer apply where the number of shares 
remaining after a partial execution are less than the minimum execution 
quantity. This proposed change is similar to the operation of NYSE 
Arca, Inc.'s Tracking Order, which permits Tracking Orders to include a 
minimum size requirement.\8\ The Exchange believes that providing Users 
with the option to designate a minimum quantity for Route Peg Orders 
will promote the entry of liquidity at the Exchange because Users 
entering such orders will be assured of obtaining a larger sized 
execution. The Exchange believes that the proposed rule change could 
attract Users that are seeking larger executions to enter Route Peg 
Orders because by designating a minimum quantity, the submitting User 
would be assured that they are not traded against by smaller-sized 
interest.
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    \8\ On NYSE Arca, if the Tracking Order with a minimum size 
requirement is executed but not exhausted and the remaining portion 
of the Tracking Order is less than the minimum size requirement, 
NYSE Arca would cancel the Tracking Order. See NYSE Arca Rule 
7.31(f). See also Securities Exchange Act Release No. 71366 (January 
22, 2014), 79 FR 4515 (January 28, 2014) (SR-NYSEArca-2014-01) 
(Notice of Filing and Immediate Effectiveness of Proposed Rule 
Change Amending NYSE Arca Equities Rule 7.31 to Add a Minimum 
Execution Size Designation for Tracking Orders).
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Implementation Date
    The Exchange will announce the effective date of the proposed rule 
change in a Trading Notice to be published no later than 30 days 
following publication of the proposed rule change by the Commission.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with Section 
6(b) of the Act \9\ in general, and furthers the objectives of Section 
6(b)(5) of the Act \10\ in particular, in that it is designed to 
promote just and equitable principles of trade, to foster cooperation 
and coordination with persons engaged in facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system and, in general, to 
protect investors and the public interest.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
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Aggregate Size
    The Exchange believes that the proposal to permit executions 
against routable orders that are equal to or less than the aggregate 
size of the Route Peg Order interest available at that price would 
remove impediments to and perfect the mechanism of a free and open 
market and protect investors and the public interest because it would 
incentivize Users seeking large size executions to route orders to the 
Exchange by increasing opportunities for executions against Route Peg 
Orders in a manner similar to existing functionality available on 
Nasdaq and NYSE Arca.\11\ The proposed rule change also encourages 
market participants to post liquidity at the NBBO on the Exchange 
through the use of Route Peg Orders, thereby promoting just and 
equitable principles of trade and removing impediments to and 
perfecting the mechanism of a free and open market and national market 
system. Moreover, the proposed rule changes would protect investors and 
the public interest by increasing the probability of an execution on 
the Exchange at the NBBO in the event that the order would otherwise be 
shipped to an external destination and potentially miss an execution at 
the NBBO while in transit. Lastly, the Exchange does not believe that 
this will permit unfair discrimination among customers, brokers, or 
dealers because it will be available to all Users.
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    \11\ See supra note 8 and accompanying text.
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Minimum Execution Quantity
    The Exchange also believes its proposal to amend the Route Peg 
Order under Rule 11.5 to add optional functionality to allow Users to 
designate a minimum execution quantity removes impediments to and 
perfects the mechanism of a free and open market and protects investors 
and the public interest because it would provide an incentive for 
Members seeking larger-sized executions both to post liquidity at the 
Exchange using this feature and to route larger-sized orders to the 
Exchange because of the potential for an execution against such 
liquidity. The Exchange further believes that adding an optional 
minimum quantity would remove impediments to and perfect the mechanism 
of a free and open market system because the proposed functionality is 
similar to functionality available at the NYSE Arca.\12\ The Exchange 
believes it is appropriate to provide an option for Users seeking to 
provide such liquidity to not only designate a minimum execution 
quantity, but for a minimum execution quantity on a Route Peg order to 
no longer apply where the number of shares remaining after a partial 
execution are less than the minimum execution quantity. Doing so would 
permit Users to continue to have their Route Peg Orders eligible for 
execution in such circumstances. In such case, Users will have the 
option to cancel their Route Peg Order if they wish.
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    \12\ See supra note 9 [sic] and accompanying text.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. To the contrary, the Exchange 
believes that the proposal will promote competition by enhancing the 
value of the Exchange's Route Peg Order by mirroring the function of 
similar order types offered by Nasdaq and NYSE Arca.\13\
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    \13\ See supra notes 8 [sic] and 9 [sic] and accompanying text.
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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 neither solicited nor received written comments on 
the proposed rule change.

[[Page 26495]]

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \14\ and Rule 19b-4(f)(6) thereunder.\15\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative prior to 
30 days from the date on which it was filed, or such shorter time as 
the Commission may designate, if consistent with the protection of 
investors and the public interest, the proposed rule change has become 
effective pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-
4(f)(6)(iii) thereunder.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \15\ 17 CFR 240.19b-4(f)(6).
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    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. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \16\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \16\ 15 U.S.C. 78s(b)(2)(B).
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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-EDGA-2014-12 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-EDGA-2014-12. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of such filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make publicly available. All 
submissions should refer to File Number SR-EDGA-2014-12 and should be 
submitted on or before May 29, 2014.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-10542 Filed 5-7-14; 8:45 am]
BILLING CODE 8011-01-P