[Federal Register Volume 80, Number 10 (Thursday, January 15, 2015)]
[Notices]
[Pages 2142-2145]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-00526]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74024; File No. SR-EDGX-2014-37]


Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to Related 
to Fees for Use of EDGX Exchange, Inc.

January 9, 2015.
    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 December 30, 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 Exchange. The 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested person.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend its fees and rebates 
applicable to Members \5\ of the Exchange pursuant to

[[Page 2143]]

EDGX Rule 15.1(a) and (c) (``Fee Schedule'') to amend: (i) The 
definitions of Average Daily Trading Volume (``ADV'') and Total 
Consolidated Volume (``TCV'') to exclude shares on each day from 
January 12, 2015 up to and including January 16, 2015; (ii) increase 
the annual Membership fee from $2,000 to $2,500; (iii) eliminate the 
Trading Rights Fee and Market Participant Identifier (``MPID'') Fee; 
and (iv) make a number of non-substantive amendments and 
clarifications.
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    \5\ 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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    The text of the proposed rule change is available at the Exchange's 
Web site at http://www.directedge.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

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 Exchange 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 Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant parts 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 amend: (i) The 
definitions of ADV and TCV to exclude shares on each day from January 
12, 2015 up to and including January 16, 2015; (ii) increase the annual 
Membership fee from $2,000 to $2,500; (iii) eliminate the Trading 
Rights Fee and MPID Fee; and (iv) make a number of non-substantive 
amendments and clarifications.
ADV and TCV Definitions
    Earlier this year, the Exchange and its affiliate, EDGA Exchange, 
Inc. (``EDGA'') received approval to effect a merger (the ``Merger'') 
of the Exchange's parent company, Direct Edge Holdings LLC, with BATS 
Global Markets, Inc., the parent of BATS (together with BATS, EDGA and 
EDGX, the ``BGM Affiliated Exchanges'').\6\ In the context of the 
Merger, the BGM Affiliated Exchanges are working to migrate EDGX and 
EDGA onto the BATS technology platform, and align certain system 
functionality, retaining only intended differences between the BGM 
Affiliated Exchanges. The migration is currently scheduled for the week 
of January 12, 2015.
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    \6\ See Securities Exchange Act Release No. 71449 (January 30, 
2014), 79 FR 6961 (February 5, 2014) (SR-EDGX-2013-43; SR-EDGA-2013-
34).
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    Currently, the Exchange determines the liquidity adding rebate that 
it will provide to Members based on the Exchange's tiered pricing 
structure based on the calculation of ADV,\7\ and/or average daily 
TCV.\8\ The Exchange currently excludes from is calculation of ADV and 
TCV days where its system experiences a disruption that lasts for more 
than 60 minutes during Regular Trading Hours,\9\ days with a scheduled 
early market close, and the last Friday in June (the ``Russell 
Reconstitution Day''). The Exchange proposes to modify the definitions 
of ADV and TCV to also exclude shares on each day from January 12, 2015 
up to and including January 16, 2015. The Exchange notes that it is not 
proposing to modify any of the existing rebates or the percentage 
thresholds at which a Member may qualify for certain rebates pursuant 
to the tiered pricing structure.
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    \7\ As provided in the Fee Schedule, ``ADV'' is currently 
defined as ``the average daily volume of shares that a Member 
executed on the Exchange for the month in which the fees are 
calculated. ADV is calculated on a monthly basis, excluding shares 
on any day that the Exchange's system experiences a disruption that 
lasts for more than 60 minutes during Regular Trading Hours 
(``Exchange System Disruption''), days with a scheduled early market 
close, and on the last Friday in June (the ``Russell Reconstitution 
Day'').''
    \8\ As provided in the Fee Schedule, ``TCV'' is currently 
defined as ``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, excluding volume on any day that the Exchange 
experiences an Exchange System Disruption'', days with a scheduled 
early market close, or the Russell Reconstitution Day.''
    \9\ ``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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    The Exchange believes that this modification is reasonable because 
it avoids penalizing Members that might otherwise qualify for certain 
tiered pricing but that, because of the technology migration scheduled 
to occur during the week of January 12, 2015, did not participate on 
the Exchange during that week to the extent that they might have 
otherwise participated. Therefore, the Exchange is proposing to modify 
its Fee Schedule to exclude trading activity occurring on each day from 
January 12, 2015 up to and including January 16, 2015. The proposal to 
exclude these trading days from the calculation of ADV and TCV is 
designed to provide Members additional time to monitor the migration of 
the Exchange onto BATS technology.
Membership Fees
    The Exchange's current Membership Fees include an annual Membership 
Fee, a Trading Rights Fee, and an MPID Fee. The annual Membership Fee 
is currently $2,000 per Member and is assessed in January of each year. 
For any month in which a firm is approved for membership with the 
Exchange after the January renewal period, the Firm Membership Fee will 
continue to be pro-rated beginning on the date on which membership is 
approved. The pro-rated fee is calculated based on the remaining 
trading days in that year, and assessed in the month following 
membership approval. The fee will continue to be non-refundable in the 
event that the firm ceases to be a Member following the date on which 
fees are assessed. However, if a Member is pending a voluntary 
termination of rights as a Member pursuant to Exchange Rule 2.8 prior 
to the date any Membership Fee for a given year will be assessed, and 
the Member does not utilize the facilities of Exchange during such 
time, then the Member is not obligated to pay the annual Membership 
Fee.
    Currently, the Exchange charges Members a monthly Trading Rights 
Fee of $300 for the ability to trade on the Exchange, regardless of the 
volume of shares traded. The Exchange also currently charges no fee for 
a Member's first five MPIDs approved for use on the Exchange and $250 
per month to Members who have more than 5 MPIDs approved for use on the 
Exchange.
    The Exchange proposes to increase the annual Membership Fee from 
$2,000 to $2,500 and eliminate the Trading Rights Fee and MPID Fee. 
Therefore, as of January 2, 2015, Members will only be subject to the 
increased annual Membership Fee as part of their Membership Fee 
obligations.
Non-Substantive Clarifying Changes
    The Exchange also proposes to make a number of clarifying, non-
substantive changes to its Fee Schedule to provide greater clarity to 
Members on how the Exchange assesses fees and calculates rebates. The 
Exchange notes that none of these changes amend any fee or rebate, nor 
alter the manner in which it assesses fees or calculates rebates. 
First, the Exchange proposes to remove a reference to the EdgeBook 
Cloud Pricing

[[Page 2144]]

as it was recently replaced by EDGX Historical Depth Data.\10\ Second, 
the Exchange proposes to correct a typographical error under pricing 
for ConnectEdge. Lastly, the Exchange propose to remove a reference to 
the effective date for Licensing and Continuing Education pricing as 
those fees effective [sic] have been effective since September 2013.
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    \10\ See Securities Exchange Act Release Nos. 73759 (December 5, 
2014), 79 FR 73677 (December 11, 2014); and 73758 (December 5, 
2014), 79 FR 73679 (December 11, 2014) (SR-EDGX-2014-30; SR-EDGA-
2014-30).
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Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule on January 2, 2015.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\11\ in general, and 
furthers the objectives of Section 6(b)(4),\12\ 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. 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.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4).
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ADV and TCV Definitions
    The Exchange believes that its proposed amendments to the 
definitions of ADV and TCV to exclude shares during the week the 
Exchange is migrated onto BATS technology is reasonable because, as 
explained above, it will avoid penalizing Members that might otherwise 
qualify for certain tiered pricing but that, because of the technology 
migration, did not participate on the Exchange to the extent that they 
might have otherwise participated. The Exchange is not proposing to 
amend the thresholds a Member must achieve to become eligible for, or 
the dollar value associated with, the tiered rebates or fees. The 
proposal to exclude these trading days from the calculation of ADV and 
TCV is reasonable in that it is designed to provide Members additional 
time to monitor the migration of the Exchange onto BATS technology. In 
addition, the Exchange believes that the proposed changes to its Fee 
Schedule are equitably allocated among Exchange constituents and not 
unfairly discriminatory as the methodology for calculating ADV and TCV 
will apply equally to all Members.
Membership Fees
    The Exchange believes that increasing the annual Membership Fee and 
removing the Trading Rights Fee and MPID Fee provides an equitable 
allocation of reasonable dues, fees and other charges among its Members 
and other persons using its facilities. The Exchange also believes 
these changes will not permit unfair discrimination because the 
proposed fee changes will apply to all Members equally. Any firm that 
is granted membership to the Exchange will be charged the same fee, 
subject only to it being pro-rated based on the date upon which they 
become a Member, as described above. The Exchange also believes that 
increasing the annual Membership Fee from $2,000 [sic] $2,500 is an 
equitable allocation of reasonable dues, fees, and other charges 
because the cost of Exchange membership will continue to be lower than 
the cost of membership on other exchanges.\13\ The Exchange notes that 
it has not increased the annual Membership Fee since its inception in 
September 2011. The Exchange believes eliminating the Trading Rights 
Fee and MPID Fee is reasonable because it would help simplify and 
streamline the Exchange's membership fees and ease Members' overall 
membership fee related obligations.
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    \13\ See, e.g., NASDAQ Rule 7001(a) (assessing a $3,000 annual 
membership fee); New York Stock Exchange Price List 2011, at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf 
(assessing a $40,000 annual trading license fee for the first two 
licenses held by a member organization).
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    In addition, the increase in the annual Membership Fee, coupled 
with the elimination of the Trading Rights and MPID fees, amounts to a 
fee reduction in a Member's annual fee costs. Currently, Members are 
charged an annual Membership Fee of $2,000 and an additional Trading 
Rights Fee of $300 per month, resulting in a total charge of $5,600 for 
a full calendar year. That Member may be charged an additional $250 per 
month where it has more than 5 MPIDs approved for trading on the 
Exchange. As proposed, Members would only be subject to the proposed 
annual Membership Fee of $2,500. These reduced overall fees may attract 
additional firms to become Members on the Exchange, thereby, 
potentially increasing liquidity on the Exchange. Such increased 
liquidity benefits all investors by deepening the Exchange's liquidity 
pool and offers additional flexibility for all investors to enjoy cost 
savings and improving investor protection. Furthermore, such increased 
volume would increase potential revenue to the Exchange and would allow 
the Exchange to spread its administrative and infrastructure costs over 
a greater number of shares, potentially leading to lower per share 
costs. Therefore, the Exchange believes that the proposed rule change 
provides for an equitable allocation of reasonable dues, fees and other 
charges among its members and other persons using its facilities.
Non-Substantive Clarifying Changes
    The Exchange believes that the non-substantive clarifying changes 
to its Fee Schedule are reasonable because they are designed to provide 
greater transparency to Members with regard to how the Exchange 
assesses fees and provides rebates. The Exchange notes that none of the 
proposed non-substantive clarifying changes are designed to amend any 
fee or rebate, nor alter the manner in which it assesses fees or 
calculates rebates. The Exchange believes that Members would benefit 
from clear guidance in its Fee Schedule that describes the manner in 
which the Exchange would assess fees and calculate rebates. These non-
substantive, technical changes to the Fee Schedule as 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.

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

    The Exchange believes its proposed amendments to 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 the proposed change represents a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. Additionally, Members may opt to 
disfavor the Exchange's pricing if they

[[Page 2145]]

believe that alternatives offer them better value. Accordingly, the 
Exchange does not believe that the proposed change will impair the 
ability of Members or competing venues to maintain their competitive 
standing in the financial markets.
ADV and TCV Definitions
    The proposal to exclude shares from January 12, 2015 up to and 
including January 16, 2015 from the ADV and TCV calculations is 
intended to allow Members additional time to monitor the migration of 
the Exchange onto BATS technology. Accordingly, the Exchange does not 
believe that the proposed change will impair the ability of Members or 
competing venues to maintain their competitive standing in the 
financial markets. The proposed change will help to promote intramarket 
competition by avoiding a penalty Members that might otherwise qualify 
for certain tiered pricing but that, because of the technology 
migration, did not participate on the Exchange to the extent that they 
might have otherwise participated. The proposed rule change will not 
have an impact on intermarket [sic] competition as it will apply to all 
Members equally.
Membership Fees
    The Exchange believes that increasing the annual Membership Fee and 
removing the Trading Rights Fee and MPID Fee would not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange's membership fees 
continue to be lower than the cost of membership on other 
exchanges,\14\ and therefore, may stimulate intramarket [sic] 
competition by attracting additional firms to become Members on the 
Exchange. In addition, membership fees are subject to competition from 
other exchanges. Accordingly, if the changes proposed herein are 
unattractive to market participants, it is likely the Exchange will see 
a decline in membership and/or trading activity as a result. The 
proposed fee change will not impact intermarket [sic] competition 
because it will apply to all Members equally.
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    \14\ See, e.g., NASDAQ Rule 7001(a) (assessing an $3,000 annual 
membership fee); New York Stock Exchange Price List 2011, at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf 
(assessing a $40,000 annual trading license fee for the first two 
licenses held by a member organization).
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Non-Substantive Clarifying Changes
    The Exchange believes that non-substantive, clarifying changes to 
the Fee Schedule would not affect intermarket nor intramarket 
competition because none of these changes are designed to amend any fee 
or rebate or alter the manner in which the Exchange assesses fees or 
calculates rebates. These changes are intended to provide greater 
transparency to Members with regard to how the Exchange access fees and 
provides rebates.

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 paragraph (f) of Rule 19b-4 
thereunder.\16\ At any time within 60 days of the filing of the 
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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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f).
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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-2014-37 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-EDGX-2014-37. 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-2014-37, and should be 
submitted on or before February 5, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
Brent J. Fields,
Secretary.
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    \17\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2015-00526 Filed 1-14-15; 8:45 am]
BILLING CODE 8011-01-P