[Federal Register Volume 80, Number 134 (Tuesday, July 14, 2015)]
[Notices]
[Pages 41109-41111]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-17168]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75390; File No. SR-EDGA-2015-26]
Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Related to
Fees for Use of EDGA Exchange, Inc.
July 8, 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 June 26, 2015, EDGA Exchange, Inc. (the ``Exchange'' or
``EDGA'') 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
[[Page 41110]]
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 the fee schedule applicable
to Members \5\ and non-members of the Exchange pursuant to EDGA Rules
15.1(a) and (c). Changes to the fee schedule pursuant to this proposal
are effective upon filing.
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\5\ The term ``Member'' is defined as ``any registered broker or
dealer that has been admitted to membership in the Exchange.'' 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.
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
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fee Schedule to modify its fees
for physical connectivity. A physical port is utilized by a Member or
non-Member to connect to the Exchange at the data centers where the
Exchange's servers are located. The Exchange currently maintains a
presence in two third-party data centers: (i) The primary data center
where the Exchange's business is primarily conducted on a daily basis,
and (ii) a secondary data center, which is predominantly maintained for
business continuity purposes. The Exchange currently assesses the
following physical connectivity fees for Members and non-Members on a
monthly basis: $500 per physical port that connects to the System \6\
via 1 gigabyte copper circuit; $1,000 per physical port that connects
to the System via 1 gigabyte fiber circuit; and $2,000 per physical
port that connects to the System via 10 gigabyte fiber circuit.
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\6\ 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.'' See Exchange Rule
1.5(cc).
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The Exchange now proposes to amend its physical connectivity fees
to align the Exchange's fees with its affiliates.\7\ First, the
Exchange proposes to amend its Fee Schedule to no longer distinguish
between fiber and copper circuits. Therefore, it proposes to delete the
charge of $500 per month per physical port that connects to the System
via 1 gigabyte copper circuit and to assess a monthly fee of $2,000 per
physical port that connects to the System via 1 gigabyte circuit
regardless of the type of connection. Second, the Exchange proposes to
increase the fee per physical port that connects to the System via 10
gigabyte circuit from $2,000 per month to $4,000 per month. The
Exchange also proposes to replace the reference to ``fiber'' with
``physical port'' within the description of the 1 gigabyte and 10
gigabyte physical connectivity fees as it proposes to no longer
distinguish between fiber and copper circuits within its Fee Schedule.
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\7\ The Exchange's affiliates are EDGX Exchange, Inc.
(``EDGX''), BATS Y-Exchange, Inc. (``BYX'') and BATS Exchange, Inc.
(``BZX'', together with the Exchange, EDGX and BYX, the ``BATS
Exchanges''). The Exchange notes that each of its affiliates will
also file proposed rule changes with Commission to adopt similar
physical connectivity fees to be effective July 1, 2015.
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Lastly, to further align its physical connectivity fees with its
affiliates, the Exchange proposes to pass through in full any hardware
costs or connectivity fees incurred that are directly related to
completing a cross-connect where the expense to the Exchange billed by
a third party exceeds $1,000.\8\ The Exchange proposes to pass through
the expense as an alternative to the flat installation fees charged by
the Exchange's primary competitors. The Exchange does not anticipate
that passing through these expenses will affect many of the Exchange's
constituents, because the majority of cross-connect completions cost
less than $1,000. For this reason, the Exchange proposes to pass-
through the charges associated with cross-connect completions that cost
more than $1,000 rather than to charge an installation fee for all
completions regardless of their cost.
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\8\ See BZX fee schedule available at http://batstrading.com/support/fee_schedule/bzx/ and the BYX fee schedule available at
http://batstrading.com/support/fee_schedule/byx/.
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Implementation Date
The Exchange proposes to implement this amendment to its Fee
Schedule on July 1, 2015.
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. 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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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposal represents an equitable
allocation of reasonable dues, fees, and other charges as its fees for
physical connectivity are reasonably constrained by competitive
alternatives. If a particular exchange charges excessive fees for
connectivity, affected Members and non-Members may opt to terminate
their connectivity arrangements with that exchange, and adopt a
possible range of alternative strategies, including routing to the
applicable exchange through another participant or market center or
taking that exchange's data indirectly. Accordingly, if the Exchange
charges excessive fees, it would stand to lose not only connectivity
revenues but also revenues associated with the execution of orders
routed to it, and, to the extent applicable, market data revenues. The
Exchange believes that this competitive dynamic imposes powerful
restraints on the ability of any
[[Page 41111]]
exchange to charge unreasonable fees for connectivity.
Furthermore, the proposed rule change is also an equitable
allocation of reasonable dues, fees, and other charges as the Exchange
believes that the increased fees obtained will enable it to cover its
increased infrastructure costs associated with establishing physical
ports to connect to the Exchange's Systems. The additional revenue from
the increased fees will also enable the Exchange to continue to
maintain and improve its market technology and services. The Exchange
believes that the proposed fees for 1 gigabyte circuit of $2,000 per
month and for 10 gigabyte circuit of $4,000 per month are reasonable in
that they are less than analogous fees charged by the Nasdaq Stock
Market LLC (``Nasdaq''), which are $2,500 per month for 1 gigabyte
connectivity and range from $10,000--$15,000 per month for 10 gigabyte
circuits.\11\ In addition, the Exchange proposed physical connectivity
fees are designed to align the Exchange's fees with its affiliates.\12\
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\11\ See Nasdaq Rule 7034(b).
\12\ See supra note 7.
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The Exchange also believes that passing through the cross-connect
related expenses in excess of $1,000 as an alternative to the flat
installation fees is equitable and reasonable. The proposed pass
through would be in lieu of the flat installation fees charged by the
Exchange's primary competitors. The Exchange does not anticipate that
passing through these expenses will affect many of the Exchange's
constituents, because the majority of cross-connect completions cost
less than $1,000.
Finally, the Exchange believes that the proposed rates are
equitable and non-discriminatory in that they apply uniformly to all
Members and non-Members. Members and non-Members will continue to
choose whether they want more than one physical port and choose the
method of connectivity based on their specific needs. All Exchange
Members that voluntarily select various service options will be charged
the same amount for the same services. As is true of all physical
connectivity, all Members and non-Members have the option to select any
connectivity option, and there is no differentiation with regard to the
fees charged for the service.
(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. As discussed above, the
Exchange believes that fees for connectivity are constrained by the
robust competition for order flow among exchanges and non-exchange
markets. Further, excessive fees for connectivity, including port fee
access, would serve to impair an exchange's ability to compete for
order flow rather than burdening competition. The proposal to increase
the fees for physical connectivity would bring the fees charged by the
Exchange closer to similar fees charged for physical connectivity by
other exchanges.\13\ In addition, the proposal to pass through cross-
connect installation related expenses serves as an alternative to the
flat installation fees charged by the Exchange's primary competitors.
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\13\ See supra note 11.
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Lastly, the proposed rule change does not impose any burden on
intramarket competition as the fees are uniform for all Members and
non-Members. The Exchange notes that Members and non-Members also have
the ability to obtain access to these services without the need for an
independent physical port connection, such as through alternative means
of financial extranets and service bureaus that act as a conduit for
orders entered by Members and non-Members.
(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 paragraph (f) of Rule 19b-4
thereunder.\15\ 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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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 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-EDGA-2015-26 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-EDGA-2015-26. 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 will also 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-EDGA-2015-26 and should be
submitted on or before August 4, 2015.
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\16\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
Brent J. Fields,
Secretary.
[FR Doc. 2015-17168 Filed 7-13-15; 8:45 am]
BILLING CODE 8011-01-P