[Federal Register Volume 80, Number 31 (Tuesday, February 17, 2015)]
[Notices]
[Pages 8375-8378]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-03076]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74236; File No. SR-EDGX-2015-07]


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

February 10, 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 January 30, 2015, 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 19b-4(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 persons.
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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 EDGX Rule 15.1(a) 
and (c) (``Fee Schedule'') to: (i) Amend the definitions of ADV and TCV 
to remove a provision to exclude shares on each day from January 12, 
2015 up to and including January 16, 2015; (ii) update the description 
of fee code D to include routing using the RDOT routing strategy; (iii) 
delete fee codes M and U, which route to LavaFlow; and (iv) make a 
number of non-substantive and organizational amendments.
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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 www.batstrading.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

[[Page 8376]]

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: (i) Amend the definitions of ADV and TCV 
to remove a provision to exclude shares on each day from January 12, 
2015 up to and including January 16, 2015; (ii) update the description 
of fee code D to include routing using the RDOT routing strategy; (iii) 
delete fee codes M and U, which route to LavaFlow; and (iv) make a 
number of non-substantive and organizational amendments.
ADV and TCV Definitions
    Earlier this year, the Exchange and its affiliate, EDGX Exchange, 
Inc. (``EDGX'') 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 worked 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 of EDGX and EDGA onto the BATS 
technology platform occurred during 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 tiered pricing that it will 
provide to Members according to the Exchange's tiered pricing 
structure, which is based on the calculation of ADV \7\ and/or average 
daily TCV.\8\ The Exchange currently excludes from its calculation of 
ADV and TCV those shares traded on each day from January 12, 2015 up to 
and including January 16, 2015 in order to avoid penalizing Members 
that, because of the technology migration that occurred 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.\9\ As 
described above, such exclusion only applied to tier calculations in 
January, meaning that the language has no effect moving forward. As 
such, the Exchange proposes to remove the provisions from the 
definitions of ADV and TCV that exclude trading activity that occurred 
on each day from January 12, 2015 up to and including January 16, 2015 
as the exclusion period has passed and these provisions are no longer 
necessary.
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    \7\ As provided in the Fee Schedule, ``ADV'' is currently 
defined as ``average daily volume calculated as the number of shares 
added to, removed from, or routed by, the Exchange, or any 
combination or subset thereof, per day. ADV is calculated on a 
monthly basis.''
    \8\ As provided in the Fee Schedule, ``TCV'' is currently 
defined as ``total consolidated volume calculated as the volume 
reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply.''
    \9\ See Securities Exchange Act Release Nos. 74025 (January 9, 
2015), 80 FR 2154 (January 15, 2015) (SR-EDGA-2014-36); and 74021 
[sic] (January 9, 2015), 80 FR 2142 (January 15, 2015) (SR-EDGX-
2014-37).
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Fee Code D
    Currently, fee code D is appended to orders routed to the NYSE. 
Orders yielding fee code D are charged a fee of $0.0027 per share in 
securities priced at or above $1 and 0.30% of the dollar value of the 
trade in securities priced below $1. The Exchange proposes to amend the 
description of fee code D to include routing using the RDOT routing 
strategy, in addition to orders routed to the NYSE. RDOT is a routing 
option under which an order checks the System \10\ for available shares 
and then is sent to destinations on the System routing table,\11\ which 
may include non-exchange destinations. If shares remain unexecuted 
after routing, they are sent to the New York Stock Exchange, Inc. 
(``NYSE'') and can be re-routed by the NYSE. Any remainder will be 
posted to the NYSE, unless otherwise instructed by the User.\12\ 
Historically, fee code D is appended by the System to orders routed 
using the RDOT routing strategy that are executed on a destination on 
the System routing table prior to reaching the NYSE as well as to those 
RDOT orders that remove liquidity from the NYSE. Therefore, the 
Exchange proposes to update the description of fee code D to make clear 
that it also includes orders routed using the RDOT routing strategy. 
The Exchange notes that fee code F is and will remain appended to 
orders routed using the RDOT routing strategy that add liquidity to 
NYSE.
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    \10\ The term ``System'' is defined as ``the electronic 
communications and trading facility designated by the Board through 
which securities orders of Users are consolidated for ranking, 
execution and, when applicable, routing away.''
    \11\ The term ``System routing table'' refers to ``the 
proprietary process for determining the specific trading venues to 
which the System routes orders and the order in which it routes 
them.'' See Exchange Rule 11.11(g).
    \12\ See Exchange Rule 11.11(g)(5).
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Fee Codes M and U
    The Exchange proposes to amend its Fee Schedule to delete fee code 
M, which routes to LavaFlow and adds liquidity, as well as fee code U, 
which routes to LavaFlow. These changes are being proposed in response 
to LavaFlow's announcement that it will cease market operations and its 
last day of trading will be Friday, January 30, 2015. For orders 
yielding fee code M, the Exchange currently provides a rebate of 
$0.0024 per share in securities priced at or above $1.00 and no rebate 
in securities priced below $1.00. For orders yielding fee code U, the 
Exchange currently charges a fee of $0.0028 per share in securities 
priced at or above $1.00 and no fee in securities priced below $1.00. 
The rates for orders that yield fee codes M or U represent a pass 
through of the rate that BATS Trading, the Exchange's affiliated 
routing broker-dealer, is subject to for routing orders to LavaFlow. As 
of February 2, 2015, the Exchange, via BATS Trading, will no longer be 
able to route orders to LavaFlow because it ceased operations, and, 
therefore, proposes to delete fee codes M and U.
Non-Substantive and Organizational Changes to Fee Code and Associated 
Fees
    The Exchange also proposes to make two non-substantive and 
organizational changes to its Fee Schedule to provide greater clarity 
to Members on how the Exchange assesses fees and calculates rebates. 
The Exchange proposes to reorder the fee codes under the section 
entitled, Fee Codes and Associated Fees, as well as indicate the amount 
of the fees and rebates as five decimal points, rather than four 
decimal points, by adding a zero to the end of each fee and rebate, to 
reflect the order pricing format on the Exchange's Web site. The 
Exchange notes that none of these changes amend any fee or rebate, nor 
do they alter the manner in which it assesses fees or calculates 
rebates.

[[Page 8377]]

Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule on February 2, 2015.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\13\ in general, and 
furthers the objectives of Section 6(b)(4),\14\ 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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    \13\ 15 U.S.C. 78f.
    \14\ 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 remove a provision to exclude shares 
during the week the Exchange is migrated onto BATS technology is 
reasonable because, as explained above, it is no longer necessary as 
the exclusion period has passed. 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 initial 
proposal to exclude these trading days from the calculation of ADV and 
TCV was 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.
Fee Code D
    The Exchange believes that its proposal to update fee code D to 
also include order routed using the RDOT routing strategy represents an 
equitable allocation of reasonable dues, fees, and other charges among 
Members and other persons using its facilities. Historically, fee code 
D has been appended by the System to orders routed using the RDOT 
routing strategy that are executed on a destination on the System 
routing table prior to reaching the NYSE as well as to orders that that 
remove liquidity from NYSE. Therefore, the Exchange believes that 
updating fee code to specifically state that fee code D is appended to 
orders using the RDOT routing strategy would benefit Members by 
providing clear guidance in its Fee Schedule regarding which orders fee 
code D would be appended to. In addition, the Exchange believes that 
the proposed change to its Fee Schedule is equitably allocated among 
Exchange constituents and not unfairly discriminatory as the 
application of fee code D will apply equally to all Members who use the 
RDOT routing strategy.
Fee Codes M and U
    The Exchange believes that its proposal to delete fee codes M and U 
in its Fee Schedule represents an equitable allocation of reasonable 
dues, fees, and other charges among Members and other persons using its 
facilities. The proposed change is in response to LavaFlow's 
announcement that it will cease market operations and its last day of 
trading will Friday, January 30, 2015. As of February 2, 2015, the 
Exchange, via BATS Trading, will no longer be able to route orders to 
LavaFlow and, therefore, proposes to remove fee codes M and U. The 
Exchange believes that the proposed amendments are 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.
Non-Substantive and Organizational Changes to Fee Code and Associated 
Fees
    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 calculates rebates. The Exchange notes that none of 
the proposed non-substantive clarifying changes are designed to amend 
any fee, nor alter the manner in which it assesses fees or calculates 
rebates. These non-substantive and organizational 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 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 remove a provision to exclude shares from January 
12, 2015 up to and including January 16, 2015 from the ADV and TCV 
calculations would not affect intermarket nor intramarket competition 
because it is no longer necessary as the exclusion period has passed.
Fee Code D
    The Exchange believes that its proposal to update fee code D to 
also include order routed using the RDOT routing strategy would not 
affect intermarket nor intramarket competition because this change is 
not designed to amend any fee or rebate or alter the manner in which 
the Exchange assesses fees for orders yielding fee code D amend the 
orders to which fee code D applies. It is simply proposed to update the 
description of fee code D to make clear that it also includes orders 
routed using the RDOT routing strategy, in addition to orders routed to 
the NYSE.
Fee Codes M and U
    The Exchange believes that its proposal to delete fee codes M and U 
would not affect intermarket nor intramarket competition because this 
change is not designed to amend any fee or rebate or alter the manner 
in which the Exchange assesses fees or calculates rebates. It is simply 
proposed in response to LavaFlow's announcement that it will cease 
market operations and

[[Page 8378]]

its last day of trading will be Friday, January 30, 2015.
Non-Substantive and Organizational Changes to Fee Code and Associated 
Fees
    The Exchange believes that non-substantive and organizational 
changes to the Fee Schedule would not affect intermarket nor 
intramarket competition because none of these changes are designed to 
amend any fee or alter the manner in which the Exchange assesses fees 
or calculates rebates. These changes are intended to provide greater 
clarity to Members with regard to how the Exchange access fees and 
calculates rebate.

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-2015-07 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-2015-07. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (http://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-EDGX-2015-07, and should be 
submitted on or before March 10, 2015.

    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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Brent J. Fields,
Secretary.
[FR Doc. 2015-03076 Filed 2-13-15; 8:45 am]
BILLING CODE 8011-01-P