[Federal Register Volume 76, Number 28 (Thursday, February 10, 2011)]
[Notices]
[Pages 7620-7622]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-2950]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63837; File No. SR-EDGX-2011-03]
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
February 3, 2011.
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 February 1, 2011, 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, II,
and III 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). 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.
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\3\ A Member is any registered broker or dealer, or any person
associated with a registered broker or dealer, that has been
admitted to membership in the Exchange.
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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.
[[Page 7621]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
In SR-EDGX-2010-10,\4\ the Exchange filed for immediate
effectiveness a rule filing to charge for legacy ISE \5\ Financial
Information Exchange (``FIX'') sessions (``Sessions'') used to connect
to EDGX and thereby, amended its fee schedule accordingly.\6\ These
Sessions 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 enabled the Exchange to continue to bill Members for
these Sessions until they are terminated.
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\4\ See Securities Exchange Act Release No. 62640 (August 4,
2010), 75 FR 48734 (August 11, 2010) (SR-EDGX-2010-10).
\5\ 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).
\6\ As stated in SR-ISE-2007-79, the ISE used the 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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The Exchange notes that all Members have transitioned their order
entry to other ports and no firms currently send orders over ISE FIX
sessions as of February 1, 2011. Therefore, effective February 1, 2011,
the Exchange will be discontinuing the ISE FIX sessions as all Members
of EDGX that previously used ISE FIX sessions have transitioned to
their Direct EDGX Sessions.
In SR-EDGX-2011-01, the Exchange added the ROOC routing option in
Rule 11.9(b)(3)(p) for orders that the entering firm wishes to
designate for participation in the opening or closing process of a
primary listing market (NYSE, Nasdaq, NYSE Amex, or NYSE Arca) if
received before the opening/closing time of such market. If shares
remain unexecuted after attempting to execute in the opening or closing
process, they are either posted to the book, executed, or routed like a
ROUT routing option, as described in Rule 11.9(b)(3)(h). In this
filing, the Exchange proposes to add the corresponding flags for the
use of the ROOC strategy to its fee schedule and assign corresponding
fees. If the entering firm wishes the order to participate in the
listing market close via the ROOC strategy, it will be assigned a flag
of ``CL'' and a fee of $0.0010 per share, except for NYSE Arca. This
fee represents a blended rate of all four primary listing market fees
for participation in the market close. For ease of administration, the
Exchange uses this blended rate as it represents an average fee from
the primary listing markets. However, a flag of ``O'' will be yielded
and the associated fee for the ``O'' flag, $0.0005 per share, will be
assessed, if the order is routed to the NYSE Arca closing process. This
is clarified in proposed footnote 9 to the fee schedule and represents
a pass through of the NYSE Arca fee. If the entering firm wishes to
designate that the order participate in the opening process of NYSE
Amex and it adds liquidity, it will be assigned a flag of ``8'' and a
rebate of $0.0015 per share. This rebate represents a pass through of
the NYSE Amex rebate. If the entering firm wishes to designate that the
order participate in the opening process of NYSE Arca and it adds
liquidity, it will be assigned a flag of ``9'' and a rebate of $0.0021
per share. This rebate represents a pass through of the NYSE Arca
rebate. The Exchange proposes to add these flags effective February 1,
2011 but not implement them until the ROOC strategy is effective, which
is on or about February 14, 2011.
Currently, the ``K'' flag is yielded when an order is routed to
BATS BZX Exchange using the ROBA order type. The Exchange proposes that
this flag be yielded and its associated fee of $0.0025 per share be
assessed when an order is routed to Nasdaq PSX using the ROUC order
type, as defined in Rule 11.9(b)(3)(a).\7\ This fee of $0.0025 per
share represents a pass through of the Nasdaq PSX rate.
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\7\ Rule 11.9(b)(3)(a) defines the ROUC order type as a routing
option under which an order checks the System for available shares,
and then is sent sequentially to destinations on the System routing
table, Nasdaq OMX BX, and NYSE. If shares remain unexecuted after
routing, they are posted on the Exchange's book.
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Currently, stocks priced below $1.00 are charged 0.20% of the
dollar value of the transaction when routed to Nasdaq and removing
liquidity in securities on all Tapes, as noted in footnote 3 of the fee
schedule and as indicated on corresponding flag J. The Exchange
proposes to increase this fee to 0.30% of the dollar value of the
transaction to reflect an increase in rate provided by Nasdaq,
effective January 3, 2011.
EDGX Exchange proposes to implement these amendments to the
Exchange fee schedule on February 1, 2011.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\8\ in general, and
furthers the objectives of Section 6(b)(4),\9\ 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.
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\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the fees associated with the new flags
described above represent an equitable allocation of reasonable dues,
fees, and other charges. The fee associated with the ``CL'' flag
($0.0010) (except for NYSE Arca) represents a blended rate of all four
primary listing market fees for participation in the market close.
However, a flag of ``O'' will be yielded and the associated fee for the
``O'' flag, $0.0005 per share, will be assessed, if the order is routed
to the NYSE Arca closing process. This represents a pass through of the
NYSE Arca fee. If the entering firm wishes to designate that the order
participate in the opening process of NYSE Amex and it adds liquidity,
it will be assigned a flag of ``8'' and a rebate of $0.0015 per share.
This rebate represents a pass through of the NYSE Amex rebate. If the
entering firm wishes to designate that the order participate in the
opening process of NYSE Arca and it adds liquidity, it will be assigned
a flag of ``9'' and a rebate of $0.0021 per share. This rebate also
represents a pass through of the NYSE Arca rebate. The fee associated
with the K flag ($0.0025 per share) also represents a pass through of
the Nasdaq PSX rate. In addition, as discussed above, stocks priced
below $1.00 are now proposed to be charged 0.30% of the dollar value of
the transaction when routed to Nasdaq and removing liquidity in
securities on all Tapes, as noted in proposed footnote 3 of the fee
schedule. This increase in fee (from 0.20% of the dollar value of the
transaction) reflects a pass through of the Nasdaq's increased rate,
effective January 3, 2011.
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
[[Page 7622]]
the proposed rates are equitable 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.
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 \10\ and Rule 19b-4(f)(2) \11\ 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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\10\ 15 U.S.C. 78s(b)(3)(A).
\11\ 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:
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-2011-03 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-2011-03. 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,\12\ 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-2011-03 and should be submitted on or before March 3, 2011.
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\12\ 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.\13\
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\13\ 17 CFR 200.30-3(a)(12).
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Cathy H. Ahn,
Deputy Secretary.
[FR Doc. 2011-2950 Filed 2-9-11; 8:45 am]
BILLING CODE 8011-01-P