
[Federal Register Volume 79, Number 109 (Friday, June 6, 2014)]
[Notices]
[Pages 32798-32799]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-13108]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-72292; File No. SR-EDGX-2014-13]


Self-Regulatory Organizations; EDGX Exchange, Inc.; Order 
Approving Proposed Rule Change To Amend Footnote 4 of the Exchange's 
Fee Schedule To Permit Members To Designate Their Retail Orders To Be 
Identified as Retail on the EDGX Book Feed

June 2, 2014.

I. Introduction

    On April 17, 2014, EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission 
(``Commission'') pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to permit EDGX Members \3\ to identify their 
retail orders as ``retail'' on the EDGX Book Feed (the ``Proposal''). 
The Proposal was published for comment in the Federal Register on April 
30, 2014.\4\ The Commission received no comments on the Proposal. This 
order approves the Proposal.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ A 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 EDGX Rule 1.5(n).
    \4\ See Securities Exchange Act Release No. 72016 (April 24, 
2014), 79 FR 24463 (``Notice'').
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II. Description of the Proposal

    Currently, EDGX Members may submit their Orders as Non-Attributable 
Orders \5\ or Attributable Orders.\6\ If a Member choses to submit an 
order as Attributable, the Exchange includes the Member's market 
participant identifier (``MPID'') with that Member's published 
quotations on the EDGX Book Feed.
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    \5\ A Non-Attributable Order is defined as ``[a]n order that is 
designated for display (price and size) on an anonymous basis by the 
Exchange. See EDGX Rule 11.5(c)(19).
    \6\ An Attributable Order is defined as, ``[a]n order that is 
designated for display (price and size) including the Member's 
market participant identifier (`MPID').'' See EDGX Rule 11.5(c)(18).
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    In the Proposal, the Exchange proposes to amend Footnote 4 of its 
Fee Schedule to permit Members to designate that their Attributable 
Retail Orders be identified as ``Retail'' \7\ on the EDGX Book Feed, 
rather than by their MPID.\8\ Under the Proposal, a Member may elect 
that their Retail Orders be identified as Retail on an order-by-order 
basis or instruct the Exchange to identify all of the Member's Retail 
Orders as Retail on a port-by-port basis where that port is also 
designated as a Retail Order Port.\9\ The Exchange will

[[Page 32799]]

announce the effective date of the Proposal in a Trading Notice to be 
published no later than 30 days following approval of the Proposal by 
the Commission.\10\
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    \7\ Footnote 4 of the Exchange's Fee Schedule defines a ``Retail 
Order'' as (i) an agency order or riskless principal order that 
meets the criteria of FINRA Rule 5320.03 that originates from a 
natural person; (ii) is submitted to EDGX by a Member, provided that 
no change is made to the terms of the order; and (iii) the order 
does not originate from a trading algorithm or any other 
computerized methodology. Footnote 4 of the Exchange's Fee Schedule 
also provides that Members may designate orders as Retail Orders on 
an order-by-order basis or a port level basis by designating 
particular FIX ports as Retail Order Ports. Members must submit a 
signed written attestation, in a form prescribed by the Exchange, 
that they have implemented policies and procedures that are 
reasonably designed to ensure that substantially all orders 
designated by the Member as a ``Retail Order'' comply with the above 
requirements. See Footnote 4 of the Exchange's Fee Schedule 
available at http://www.directedge.com/Trading/EDGXFeeSchedule.aspx.
    \8\ If a Member instructs the Exchange to identify all its 
orders on a Retail Order Port as Retail, the Member will not be able 
to designate any Retail Order from that port instead as an 
Attributable Order or as a Non-Attributable Order. See Notice, 79 FR 
at 24464.
    \9\ A Member's decision on whether to identify their Retail 
Order as Retail under the proposed rule change will not impact that 
Member's eligibility to qualify for a rebate under the Retail Order 
Tier included in Footnote 4 of the Exchange's Fee Schedule. See 
Notice, 79 FR at 24464.
    \10\ See Notice, 79 FR at 24464.
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III. Discussion

    After careful review, the Commission finds that the Proposal is 
consistent with the requirements of the Act and the rules and 
regulations thereunder applicable to a national securities exchange 
and, in particular, with Section 6(b) of the Act.\11\ In particular, 
the Commission finds that the proposed rule change is consistent with 
Section 6(b)(5) of the Act,\12\ which requires, among other things, 
that the rules of a national securities exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest; and not be designed to 
permit unfair discrimination between customers, issuers, brokers or 
dealers.
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    \11\ 15 U.S.C. 78f(b). In approving this proposed rule change, 
the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
    \12\ 15 U.S.C. 78f(b)(5).
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    The Commission believes that the Proposal is consistent with the 
Act because it is reasonably designed to promote market transparency 
and to encourage increased liquidity. Specifically, the Commission 
notes that, according to the Exchange, members who may otherwise choose 
to designate their order as Non-Attributable, and thereby not include 
their MPID with their published quote on the EDGX Book Feed, would 
choose to designate their orders as Retail. Identifying additional 
orders as Retail Orders may encourage Members who wish to execute 
against Retail Orders to send additional Orders to the Exchange,\13\ 
thereby potentially increasing the level of competition around retail 
executions, resulting in better prices for retail investors.
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    \13\ The Exchange notes that it conducted a study of its 
execution data from January 1, 2014 to March 31, 2014, which 
indicated that Members who represent Retail Orders and utilize 
Attributable Orders to include their MPID with their published quote 
on the EDGX Book Feed received an 18% higher execution rate than 
Members who represent Retail Orders that elected not to include 
their MPID on the EDGX Book Feed via the use of a Non-Attributable 
Order. See Notice, 79 FR at 24464.
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IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\14\ that the proposed rule change (SR-EDGX-2014-13), is hereby 
approved.
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    \14\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-13108 Filed 6-5-14; 8:45 am]
BILLING CODE 8011-01-P


