[Federal Register Volume 75, Number 154 (Wednesday, August 11, 2010)]
[Notices]
[Pages 48734-48736]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2010-19760]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-62640; File No. SR-EDGX-2010-10]
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
August 4, 2010.
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 July 30, 2010, the EDGX Exchange, Inc. (the ``Exchange'' or the
``EDGX'') 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 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) to
(i) establish a rebate; (ii) charge for legacy International Securities
Exchange (``ISE'') FIX session fees; and (iii) make other technical
amendments to the fee schedule.
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\3\ A Member is any registered broker or dealer that has been
admitted to membership in the Exchange.
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All of the changes described herein are applicable to EDGX Members.
The text of the proposed rule change is available on the Exchange's
Internet Web site at http://www.directedge.com.
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
(i) ISE FIX Session Fees
The Exchange proposes to charge for legacy ISE \4\ Financial
Information Exchange (``FIX'') sessions (``Sessions'') used to connect
to EDGX and thereby,
[[Page 48735]]
amend its fee schedule accordingly.\5\ These are logical ports used to
enter orders into the Exchange's trading system and to receive order
messages from the Exchange. The Sessions are currently being used to
send orders to EDGX by certain legacy Members of the ISE who became
Members of EDGX. The amendment to the fee schedule enables the Exchange
to continue to bill Members for these Sessions until they are
terminated. Members will be charged $250/month for the first two
Sessions and $50/month for each Session thereafter. The Exchange
believes that the fees obtained will enable it to cover certain costs.
First, the fees would enable the Exchange to charge for existing
infrastructure costs for a legacy system that the Exchange is planning
to discontinue using. Secondly, the fees would cover those costs
associated with allowing Members to continue to use this legacy
infrastructure until they have successfully transitioned to EDGX
Sessions (which are currently provided at no charge). Finally,
switching over to the EDGX Sessions involves no additional costs nor
software changes by Members.
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\4\ A wholly-owned subsidiary of Direct Edge Holdings, LLC
(prior to July 16, 2010) previously operated the ISE Stock Exchange
as a facility of ISE. These Session fees are identical to the fees
filed previously filed by and billed for by the ISE. See Securities
Exchange Act Release No. 56379 (September 10, 2007), 72 FR 52591
(September 14, 2007) (SR-ISE-2007-79).
\5\ As stated in SR-ISE-2007-79, the ISE used the Financial
Information Exchange (FIX) protocol, which Members program to in
order to develop applications that send trading commands and/or
queries to and receive broadcasts and/or transactions from the
trading system. The protocol processes quotes, receives orders from
Members, tracks activity in the underlying markets, when applicable,
executes trades in the matching engine, and broadcasts trade details
to participating Members.
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(ii) Other Technical Amendments
The Exchange proposes to make several technical amendments to its
fee schedule. The Exchange proposes to move the text in footnote 1 that
states that ``upon a Member's request, EDGX will aggregate share volume
calculations for wholly owned affiliates on a prospective basis'' to
new footnote ``a.'' Then, the Exchange proposes adding a reference to
footnote ``a'' next to all numbered footnotes (except footnotes 2 and 4
since these say ``intentionally omitted.'') This amendment clarifies
that the ability of Members to request aggregation and the Exchange to
aggregate share volume calculations for wholly owned affiliates on a
prospective basis applies across all fee and volume threshold
calculations and not just to the language found in footnote 1.
The Exchange proposes to delete the reference to footnote 4 found
on Flags E and 5 since footnote 4 is ``intentionally omitted'' and
leaving the reference intact leads to confusion by Members.
(iii) Proposed Rebate
Currently, Members can qualify for a rebate of $0.0032 per share
for all liquidity posted on EDGX if they add or route at least
5,000,000 shares of average daily volume prior to 9:30 AM or after 4:00
PM (includes all flags except 6) AND add a minimum of 50,000,000 shares
of average daily volume on EDGX in total, including during both market
hours and pre and post-trading hours.
The Exchange proposes to add an additional rebate to footnote 1 of
its fee schedule which will provide Members a $0.0031 rebate per share
for liquidity added on EDGX if the Member on a daily basis, measured
monthly posts 0.75% of the Total Consolidated Volume (``TCV'') in
average daily volume. TCV is defined as volume reported by all
exchanges and trade reporting facilities to the consolidated
transaction reporting plans for Tapes A, B and C securities. The
Exchange believes that this pricing is appropriate since this rebate ($
0.0031 per share), which is $0.0001 lower than the $0.0032 per share
rebate mentioned above, is also easier to meet. For example, 0.75% of
the average TCV for June 2010 (9.3 billion) was approximately 70
million shares, but this volume need not be posted (like that required
for the $0.0032 rebate per share) only during pre and post-trading
hours, a more limited time period. Therefore, this threshold is not as
restrictive as the criteria to qualify for the $0.0032 rebate. In
addition, the rebate also results in part from lower administrative
costs associated with higher volume.
EDGX Exchange proposes to implement these amendments to the
Exchange fee schedule on August 1, 2010.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\6\ in general, and
furthers the objectives of Section 6(b)(4),\7\ 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 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 fees obtained from
legacy ISE Sessions will enable it to cover its infrastructure costs
associated with allowing Members to continue to use this legacy
infrastructure until they have successfully transitioned to EDGX
Sessions. Finally, the Exchange believes that the proposed rates are
equitable in that they apply uniformly to all Members and provide
higher rebates for higher volume thresholds, resulting from lower
administrative costs. 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 those members that opt to
direct orders to the Exchange rather than competing venues.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(4).
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B. Self-Regulatory Organization's Statement on Burden on Competition
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.
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) of the Act \8\ and Rule 19b-4(f)(2) \9\ 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 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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\8\ 15 U.S.C. 78s(b)(3)(A).
\9\ 17 CFR 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:
[[Page 48736]]
Electronic Comments
Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an e-mail to [email protected]. Please include
File Number SR-EDGX-2010-10 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-2010-10. This file
number should be included on the subject line if e-mail 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,\10\ 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 a.m. and 3 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-2010-10 and should be submitted on or before September 1, 2010.
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\10\ The text of the proposed rule change is available on
Exchange's Web site at http://www.directedge.com, on the
Commission's Web site at http://www.sec.gov, at EDGX, and at the
Commission's Public Reference Room.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
[FR Doc. 2010-19760 Filed 8-10-10; 8:45 am]
BILLING CODE 8010-01-P