
[Federal Register Volume 79, Number 72 (Tuesday, April 15, 2014)]
[Notices]
[Pages 21310-21313]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-08420]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-71918; File No. SR-EDGX-2014-09]


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

April 9, 2014.
    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 April 1, 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 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) 
(``Fee Schedule'') to: (i) Increase the rebate for orders yielding Flag 
BY, which routes to the BATS-Y Exchange, Inc. (``BYX'') and removes 
liquidity using routing strategies ROUC, ROUE, or ROBY; \4\ (ii) 
increase the fee for orders yielding Flag RY, which route to BYX and 
adds liquidity; (iii) increase the fee for orders yielding Flag O, 
which routes to the listing exchanges opening cross; and (iv) amend 
Footnote 5 to increase the fee cap for orders yielding Flag O from 
$10,000 to $20,000 per month per Member. The text of the proposed rule 
change is available on the Exchange's Internet Web site at 
www.directedge.com, at the Exchange's principal office, and at the 
Public Reference Room of the Commission.
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    \3\ 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).
    \4\ The ROUC, ROUE, or ROBY routing strategies are set forth in 
Exchange Rule 11.9(b)(2).
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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.

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: (i) Increase 
the rebate for orders yielding Flag BY, which routes to BYX and removes 
liquidity using routing strategies ROUC, ROUE, or ROBY; (ii) increase 
the fee for orders yielding Flag RY, which route to BYX and adds 
liquidity; (iii) increase the fee for orders yielding Flag O, which 
routes to the listing exchanges opening cross; and (iv) amend Footnote 
5 to increase the fee cap for orders yielding Flag O from $10,000 to 
$20,000 per month per Member.
Flag BY
    In securities priced at or above $1.00, the Exchange currently 
provides a rebate of $0.0001 per share for Members'

[[Page 21311]]

orders that yield Flag BY, which routes orders to BYX and removes 
liquidity using routing strategies ROUC, ROUE, or ROBY. The Exchange 
proposes to amend its Fee Schedule to increase the rebate for orders 
that yield Flag BY to $0.0016 per share in securities priced at or 
above $1.00.\5\ The proposed change represents a pass through of the 
rate Direct Edge ECN LLC (d/b/a DE Route) (``DE Route''), the 
Exchange's affiliated routing broker-dealer, is provided for routing 
orders to BYX that remove liquidity. The proposed change is in response 
to BYX's April 2014 fee change where BYX increased its rebate from 
$0.0001 per share to $0.0016 per share for orders in securities priced 
at or above $1.00.\6\ When DE Route routes to and removes liquidity 
from BYX, it will now receive a standard rebate of $0.0016 per share. 
DE Route will pass through the rebate provided by BYX to the Exchange 
and the Exchange, in turn, will pass through this rate to its Members.
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    \5\ The Exchange does not propose to amend its fee for orders 
that yield Flag BY in securities priced below $1.00.
    \6\ See the BYX Fee Schedule available at http://www.batstrading.com/resources/regulation/rule_book/BYX_Fee_Schedule.pdf.
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Flag RY
    In securities priced at or above $1.00, the Exchange currently 
charges a fee of $0.0003 per share for Members' orders that yield Flag 
RY, which route to BYX and adds liquidity. The Exchange proposes to 
amend its Fee Schedule to increase the fee for orders that yield Flag 
BY to $0.0018 per share in securities priced at or above $1.00.\7\ The 
proposed change represents a pass through of the rate DE Route, the 
Exchange's affiliated routing broker-dealer, is charged for routing 
orders to BYX that add liquidity. The proposed change is in response to 
BYX's April 2014 fee change where BYX increased its standard fee to 
$0.0018 per share from $0.0003 per share for orders in securities 
priced at or above $1.00.\8\ When DE Route routes to and adds liquidity 
on BYX, it will now be charged a standard rate of $0.0018 per share.\9\ 
DE Route will pass through the rate it is charged on BYX to the 
Exchange and the Exchange, in turn, will pass through this rate to its 
Members.
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    \7\ The Exchange does not propose to amend its fee for orders 
that yield Flag RY in securities priced below $1.00.
    \8\ See the BYX Fee Schedule available at http://www.batstrading.com/resources/regulation/rule_book/BYX_Fee_Schedule.pdf.
    \9\ The Exchange notes that to the extent DE Route does or does 
not achieve any volume tiered reduced fee on BYX, its rate for Flag 
RY will not change.
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Flag O
    In securities priced at or above $1.00, the Exchange currently 
charges a fee of $0.0005 per share for Members' orders that yield Flag 
O, which routes to the listing exchange's opening process.\10\ The 
Exchange proposes to amend its Fee Schedule to increase the fee for 
orders that yield Flag O to $0.0010 per share in securities priced at 
or above $1.00.\11\ The proposed change represents an equitable 
allocation of routing fees that DE Route, the Exchange's affiliated 
routing broker-dealer, is charged for orders routed to the listing 
exchange's opening process when it does not qualify for a volume tiered 
reduced fee. The proposed change is in response to the New York Stock 
Exchange, Inc.'s (``NYSE'') April 2014 fee change where the NYSE 
increased its fee to $0.0010 per share from $0.0005 per share for 
orders in securities priced at or above $1.00.\12\ When DE Route routes 
an order to the NYSE's opening cross, it will now be charged a standard 
rate of $0.0010 per share. DE Route will pass through the rate it is 
charged on the NYSE to the Exchange and the Exchange, in turn, will 
pass through this rate to its Members.
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    \10\ Under Flag O, the Exchange routes to the following listing 
exchanges: The New York Stock Exchange, Inc.; The Nasdaq Stock 
Market LLC (``Nasdaq''); NYSE MKLT LLC; NYSE Arca Inc. (``NYSE 
Arca''), and BATS Exchange, Inc.
    \11\ The Exchange does not propose to amend its fee for orders 
that yield Flag O in securities priced below $1.00.
    \12\ See NYSE Trader Update dated March 27, 2014 available at 
http://www.nyse.com/pdfs/NYSE%20Client%20Notice%20Fees%2004%202014.pdf. Nasdaq currently 
charges $0.0010 per share to participate in its opening cross. See 
Nasdaq Price List available at http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2. NYSE Arca currently charges 
$0.0005 per share to participate in its opening cross. See NYSE 
Arca's Equity Trading Fees available at http://usequities.nyx.com/sites/usequities.nyx.com/files/nyse_arca_marketplace_fees_for_3-1-14.pdf.
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Footnote 5
    The Exchange also proposes to amend Footnote 5 to increase the fee 
cap for orders yielding Flag O from $10,000 to $20,000 per month per 
Member. When the Exchange routes to a listing exchange's opening cross 
(Flag O), the Exchange passes through the tier savings that DE Route 
achieves on an away exchange to its Members. This tier savings takes 
the form of a cap of Members' fees at $10,000 per month for using Flag 
O. The proposed increase in the fee cap under Footnote 5 is in response 
to April 2014 fee cap changes by Nasdaq and NYSE for orders that 
participate in their opening cross processes. First, under the NYSE's 
April 2014 fee change, it is increasing its fee cap for orders that 
participate in its opening cross from $15,000 to $20,000 per month.\13\ 
Second, under Nasdaq's April 2014 fee cap increase, it is requiring 
that members add, at a minimum, one million shares of liquidity to 
Nasdaq, on average per day, during the month to be eligible for its 
existing fee cap of $20,000 for orders that participate in the opening 
cross.\14\ When DE Route routes to the NYSE or Nasdaq's opening cross, 
it will now be subject to the increased fee cap and new tier 
requirement. The proposed increase to the fee cap under Footnote 5 
would enable the Exchange to equitably allocate its costs among all 
Members utilizing Flag O. Therefore, the Exchange proposes to amend 
Footnote 5 to increase the fee cap for orders yielding Flag O from 
$10,000 to $20,000 per month per Member in response to the Nasdaq and 
the NYSE's April 2014 increased fee caps and related requirements.
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    \13\ See NYSE Trader Update dated March 27, 2014 available at 
http://www.nyse.com/pdfs/NYSE%20Client%20Notice%20Fees%2004%202014.pdf.
    \14\ See Nasdaq Equity Trader Alert 2014-28 available 
at http://www.nasdaqtrader.com/TraderNews.aspx?id=ETA2014-28.
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Implementation Date
    The Exchange proposes to implement these amendments to its Fee 
Schedule on April 1, 2014.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\15\ in general, and 
furthers the objectives of Section 6(b)(4),\16\ 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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    \15\ 15 U.S.C. 78f.
    \16\ 15 U.S.C. 78f(b)(4).
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Flag BY
    The Exchange believes that its proposal to increase the rebate for 
orders that yield Flag BY represents an equitable allocation of 
reasonable dues, fees, and other charges among Members and other 
persons using its facilities. Prior to the BYX's April 2014 fee change, 
BYX provided DE Route a rebate of $0.0001 per share to remove liquidity 
in securities priced at or above $1.00, which DE Route passed through 
to the Exchange and the Exchange charged its Members. When DE Route 
routes to BYX, it will now be provided a rebate of $0.0016 per share. 
The Exchange does not levy additional fees or offer additional rebates 
for orders that it routes to BYX through DE Route.

[[Page 21312]]

Therefore, the Exchange believes that the proposed change to Flag BY is 
equitable and reasonable because it accounts for the pricing changes on 
BYX, which enables the Exchange to charge its Members the applicable 
pass-through rate. Lastly, the Exchange notes that routing through DE 
Route is voluntary and believes that the proposed change is non-
discriminatory because it applies uniformly to all Members.
Flag RY
    The Exchange believes that its proposal to increase the fees for 
orders yielding Flag RY represents an equitable allocation of 
reasonable dues, fees, and other charges among Members and other 
persons using its facilities. Prior to BYX's April 2014 fee change, BYX 
charged DE Route a fee of $0.0003 per share to add liquidity in 
securities priced at or above $1.00, which DE Route passed through to 
the Exchange and the Exchange charged its Members. When DE Route routes 
to BYX, it will now be charged a standard rate of $0.0018 per share. 
The Exchange does not levy additional fees or offer additional rebates 
for orders that it routes to BYX through DE Route. Therefore, the 
Exchange believes that the proposed change to Flag RY is equitable and 
reasonable because it accounts for the pricing changes on BYX, which 
enables the Exchange to charge its Members the applicable pass-through 
rate. Lastly, the Exchange notes that routing through DE Route is 
voluntary and believes that the proposed change is non-discriminatory 
because it applies uniformly to all Members.
Flag O
    The Exchange believes that its proposal to increase the fees for 
orders yielding Flag O represents an equitable allocation of reasonable 
dues, fees, and other charges among Members and other persons using its 
facilities. Prior to NYSE's April 2014 fee change, NYSE charged DE 
Route a fee of $0.0005 per share for orders routed to the NYSE's 
opening cross, which DE Route passed through to the Exchange and the 
Exchange charged its Members. When DE Route routes to the NYSE opening 
cross, it will now be charged a rate of $0.0010 per share.\17\ The 
Exchange does not levy additional fees or offer additional rebates for 
orders that it routes to the NYSE opening cross through DE Route. 
Therefore, the Exchange believes that the proposed change to Flag O is 
equitable and reasonable because it accounts for the pricing changes on 
the NYSE, which enables the Exchange to equitably allocate its costs 
among all Members utilizing Flag O. Lastly, the Exchange notes that 
routing through DE Route is voluntary and believes that the proposed 
change is non-discriminatory because it applies uniformly to all 
Members.
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    \17\ The Exchange notes that Nasdaq currently charges DE Route 
$0.0010 per share to participate in its opening cross. See Nasdaq 
Price List available at http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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Footnote 5
    The Exchange believes that its proposal to amend Footnote 5 to 
increase the fee cap for orders yielding Flag O from $10,000 to $20,000 
per month per Member represents an equitable allocation of reasonable 
dues, fees, and other charges among Members and other persons using its 
facilities. The proposed increase in the fee cap under Footnote 5 is in 
response to April 2014 fee cap updates by Nasdaq and NYSE for orders 
that participate in their opening cross processes. Prior to Nasdaq's 
April 2014 fee cap increase, Nasdaq capped DE Routes monthly fees for 
participating in its opening cross at $20,000, regardless of the volume 
it added to Nasdaq. When DE Route routes to the Nasdaq opening cross, 
it will now be required to add, at a minimum, one million shares of 
liquidity to Nasdaq, on average per day, during the month, to be 
eligible for its $20,000 monthly fee cap.\18\ In addition, prior to 
NYSE's April 2014 fee change, the NYSE capped DE Routes monthly fees 
for participating in its opening cross at $15,000. When DE Route routes 
to the NYSE opening cross, it will now be subject to the NYSE's higher 
fee cap of $20,000.\19\ The proposed increase to the fee cap under 
Footnote 5 would enable the Exchange to equitably allocate its costs 
among all Members who utilize Flag O. Therefore, the Exchange believes 
that the proposed change to Footnote 5 is equitable and reasonable 
because it accounts for the increased NYSE fee cap and Nasdaq 
eligibility requirements, which enables the Exchange to apply to its 
Members similar fee caps. Lastly, the Exchange notes that routing 
through DE Route is voluntary and believes that the proposed change is 
non-discriminatory because it applies uniformly to all Members.
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    \18\ See Nasdaq Equity Trader Alert 2014-28 available 
at http://www.nasdaqtrader.com/TraderNews.aspx?id=ETA2014-28.
    \19\ See NYSE Trader Update dated March 27, 2014 available at 
http://www.nyse.com/pdfs/NYSE%20Client%20Notice%20Fees%2004%202014.pdf.
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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 EDGX'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.
    In particular, the Exchange believes that its proposal to pass 
through the amended fees for orders that yield Flags BY and RY would 
increase intermarket competition because it offers customers an 
alternative means to route to BYX for the same price that they would be 
charged if they entered orders on those trading centers directly. The 
Exchange believes that its proposal would not burden intramarket 
competition because the proposed rate would apply uniformly to all 
Members.
    The Exchange also believes that its proposal to pass through the 
amended fees for orders that yield Flag O and its related fee cap under 
Footnote 5 would increase intermarket competition because it offers 
customers an alternative means to route to a listing exchange's opening 
cross for the similar prices that they would be charged if they entered 
orders on those trading centers directly. The Exchange believes that 
its proposal would not burden intramarket competition because the 
proposed rate would apply uniformly to all 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)

[[Page 21313]]

of the Act \20\ and Rule 19b-4(f)(2) \21\ 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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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-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 email to rule-comments@sec.gov. Please include 
File Number SR-EDGX-2014-09 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-2014-09. 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-2014-09 and should be 
submitted on or before May 6, 2014.
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    \22\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-08420 Filed 4-14-14; 8:45 am]
BILLING CODE 8011-01-P


