Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of EDGX Exchange, Inc., 73916-73919 [2014-29108]
Download as PDF
73916
Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Notices
of publication of notice in the Federal
Register.
As discussed above, OCC filed
Amendment No. 1 to describe the
proposed change to Article IV, Section
1 of OCC’s By-Laws to reflect OCC’s
Board of Directors’ decision that the
President should not be a Management
Director. Specifically, OCC is amending
Article IV, Section 1 of its By-Laws to
refer only to the Executive Chairman,
and not the President, as a Management
Director. Amendment No. 1 provides
the Commission with clarifying
information about how OCC is
implementing and providing
transparency about the Transition Plan.
By allowing OCC to implement the
proposed changes, as amended, on an
accelerated basis, OCC will be able to
implement the Transition Plan sooner,
which should allow OCC to manage and
govern OCC more efficiently and
effectively.
Accordingly, the Commission finds
good cause to approve the proposed rule
change, as modified by Amendment No.
1, on an accelerated basis.
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:
mstockstill on DSK4VPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
OCC–2014–18 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–OCC–2014–18. 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 (https://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
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16:57 Dec 11, 2014
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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 OCC. 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–OCC–
2014–18 and should be submitted on or
before January 2, 2015.
V. Conclusion
On the basis of the foregoing, the
Commission finds that the proposal is
consistent with the requirements of the
Act and in particular with the
requirements of Section 17A of the Act 8
and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,9 that the
proposed rule change (SR–OCC–2014–
18), as modified by Amendment No. 1,
be, and it hereby is, approved on an
accelerated basis.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.10
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–29110 Filed 12–11–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73782; File No. SR–EDGX–
2014–32]
Self-Regulatory Organizations; EDGX
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Related to Fees for Use
of EDGX Exchange, Inc.
December 8, 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 November
8 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).
9 15 U.S.C. 78s(b)(2).
10 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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26, 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 Exchange. The Exchange has
designated the proposed rule change as
one establishing or changing a member
due, fee, or other charge imposed by the
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.
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 of the Exchange pursuant to
EDGX Rules 15.1(a) and (c) (‘‘Fee
Schedule’’). Changes to the Fee
Schedule pursuant to this proposal are
effective upon filing.
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.directedge.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 the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fee Schedule to amend: (i) The criteria
3 15
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
5 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 17
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Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Notices
for the Retail Order Tier under Footnote
4; and (ii) the first two bullets regarding
added and removal flags under the
General Notes section to include Flags
EA, ER, and 5, which include in [sic]
internalized volume.
Retail Order Tier
The Exchange currently provides a
rebate of $0.0032 per share for Retail
Orders 6 that yield Flag ZA and add
liquidity. The Exchange currently offers
a Retail Order Tier under Footnote 4
whereby Members are provided a rebate
of $0.0034 per share if they: (i) Add an
Average Daily Volume 7 (‘‘ADV’’) of
Retail Orders yielding Flag ZA that is
0.10% or more of the Total Consolidated
Volume 8 (‘‘TCV’’) on a daily basis,
measured monthly; and (ii) have an
‘‘added liquidity’’ to ‘‘added to removed
liquidity’’ ratio of at least 85%. The
Exchange proposes to ease the criteria to
satisfy this tier by: (i) Lowering the
requirement that a Member have an
average daily volume of Retail Orders of
0.10% or more of the TCV on a daily
basis, measured monthly, to 0.07% or
more of the TCV on a daily basis,
measured monthly; and (ii) deleting the
requirement that a Member have an
‘‘added liquidity’’ to ‘‘added to removed
liquidity’’ ratio of at least 85%. The
Exchange believes easing the criteria to
satisfy the Retail Order Tier will attract
more Retail Orders to the Exchange.
mstockstill on DSK4VPTVN1PROD with NOTICES
Added and Removal Flags
The General Notes section of the Fee
Schedule includes two bullets that
contain the list of applicable ‘‘added
flags’’ and ‘‘removal flags’’ that may be
considered when calculating whether a
Member satisfied a certain pricing tier.
The Exchange appends Flags EA, ER,
6 Exchange Rule 11.21(a) defines a ‘‘Retail Order,’’
in part, as an: (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.
7 ADV is defined in the Exchange’s Fee Schedule
‘‘as the average daily volume of shares that a
Member executed on, or routed by, the Exchange for
the month in which the fees are calculated. ADV
is calculated on a monthly basis, excluding shares
on any day that the Exchange’s system experiences
a disruption that lasts for more than 60 minutes
during Regular Trading Hours (‘Exchange System
Disruption’), on any day with a scheduled early
market close and on the last Friday in June (the
‘Russell Reconstitution Day’).’’
8 TCV is defined in the Exchange’s Fee Schedule
‘‘as the volume reported by all exchanges and trade
reporting facilities to the consolidated transaction
reporting plans for Tapes A, B and C securities for
the month in which the fees are calculated,
excluding volume on any day that the Exchange
experiences an Exchange System Disruption, on any
day with a scheduled early market close or the
Russell Reconstitution Day.’’
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and 5 to orders that inadvertently match
against each other and share the same
MPID (Member shares both sides of the
trade). The Exchange proposes to amend
the first bullet regarding added flags to
include Flag EA, which covers
internalized trades that add liquidity.
The Exchange also proposes to amend
the second bullet regarding removal
flags to include Flag ER, which covers
internalized trades that remove
liquidity. Lastly, the Exchange proposes
to amend both the first and second
bullets to include Flag 5, which covers
internalized trades that add or remove
liquidity during the pre and post market
sessions. The Exchange also proposes to
add Footnote 10 to state that a Member’s
monthly volume attributed to Flag 5
will be divided evenly between the
added flags and removal flags when
determining whether that Member
satisfied a certain tier. The Exchange
proposes to divide a Member’s Flag 5
volume as such because the Exchange’s
systems cannot currently delineate
orders yielding Flag 5 that added from
those that removed liquidity for
purposes of determining whether a
Member satisfies a certain tier.
Implementation Date
The Exchange proposes to implement
these amendments to its Fee Schedule
on December 1, 2014.
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.
9 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
10 15
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Retail Order Tier
The Exchange believes that easing the
criteria required to achieve the Retail
Order Tier is reasonable, equitable and
not unfairly discriminatory because it
would continue to encourage Members
to send additional Retail Orders that
add liquidity to the Exchange for
execution in order to qualify for an
incrementally higher rebate for such
executions that add liquidity. The
potential for increased volume from
Retail Orders would increase potential
revenue to the Exchange, and allow the
Exchange to spread its administrative
and infrastructure costs over a greater
number of shares, leading to lower per
share costs. These lower per share costs
in turn would allow the Exchange to
pass on the savings to Members in the
form of lower fees. The increased
liquidity benefits all investors by
deepening EDGX’s liquidity pool,
offering additional flexibility for all
investors to enjoy cost savings,
supporting the quality of price
discovery, promoting market
transparency and improving investor
protection. The Exchange notes that a
significant percentage of the orders of
individual investors are executed overthe-counter.11 The Exchange believes
that it is thus appropriate to continue to
create a financial incentive to bring
more retail order flow to a public
market, such as the Exchange, over offexchange venues. The Exchange
believes that investor protection and
transparency is promoted by rewarding
displayed liquidity on exchanges over
off-exchange executions. In this regard,
the Exchange believes that maintaining
or increasing the proportion of Retail
Orders in exchange-listed securities that
are executed on a registered national
securities exchange (rather than relying
on certain available off-exchange
execution methods) would contribute to
investors’ confidence in the fairness of
their transactions and would benefit all
investors by deepening the Exchange’s
liquidity pool, supporting the quality of
price discovery, promoting market
11 See Concept Release on Equity Market
Structure, Securities Exchange Act Release No.
61358 (January 14, 2010), 75 FR 3594 (January 21,
2010) (noting that dark pools and internalizing
broker-dealers executed approximately 25.4% of
share volume in September 2009). See also Mary L.
Schapiro, Strengthening Our Equity Market
Structure (Speech at the Economic Club of New
York, Sept. 7, 2010) (available on the Commission’s
Web site). In her speech, Chairman Schapiro noted
that nearly 30 percent of volume in U.S.-listed
equities was executed in venues that do not display
their liquidity or make it generally available to the
public and the percentage was increasing nearly
every month.
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mstockstill on DSK4VPTVN1PROD with NOTICES
transparency and improving investor
protection.
The Exchange believes that reducing
the percentage of TCV required to
achieve the Retail Order Tier from
0.10% to 0.07% for Members’ Retail
Orders that add liquidity (Flag ZA) is
reasonable, equitable and not unfairly
discriminatory because this percentage
continues to be within a range that the
Exchange believes would incentivize
Members to submit Retail Orders to the
Exchange in order to qualify for the
applicable rebate of $0.0034 per share.
The Exchange notes that certain other
existing pricing tiers within its Fee
Schedule make rebates available to
Members that are also based on the
Member’s level of activity as a
percentage of TCV. These existing
percentage thresholds, depending on
other related factors and the level of the
corresponding rebates, are both higher
and lower [sic] than the 0.07% proposed
herein.12
The Exchange also notes that the
revisions to the Retail Order Tier,
including removing the requirement
that Members have an ‘‘added liquidity’’
to ‘‘added to removed liquidity’’ ratio of
at least 85%, are reasonable in that
NYSE Arca, Inc. (‘‘NYSE Arca’’) offers a
comparable Retail Order Tier (with an
analogous Retail Order definition) that
provides a rebate of $0.0033 per share
for its Retail Orders that provide
liquidity on NYSE Arca in Tapes A, B
and C securities for ETP Holders that
execute an ADV of Retail Orders that is
0.20% or more of the TCV with no
additional criteria.13 In addition, The
NASDAQ Stock Market LLC (‘‘Nasdaq’’)
recently proposed to offer its members
a rebate of $0.0034 per share for
Designated Retail Orders, as defined by
Nasdaq, where the member adds
Customer and/or Professional liquidity
in Penny Pilot Options and/or NonPenny Pilot Options of 1.40% or more
of national customer volume in
multiply-listed equity and ETF options
classes in a month as pursuant to
Chapter XV, Section 2 of the Nasdaq
Options Market rules.14 Moreover, like
12 See for example, the Market Depth Tier 1
Rebate ($0.00325 per share rebate), Mega Step-Up
Tier Rebate ($0.0032 per share), Ultra Tier rebate
($0.0031 per share rebate), and Investor Tier rebate
($0.0032 per share rebate) that are all tied to a
percentage of TCV.
13 See Securities Exchange Act Release No. 69134
(March 14, 2013), 78 FR 17247 (March 20, 2013)
(SR–NYSEArca–2013–24). See also, NYSE Arca
Equities, Inc., Schedule of Fees and Charges for
Exchange Services, https://usequities.nyx.com/
sites/usequities.nyx.com/files/nyse_arca_
marketplace_fees_3_1_13.pdf.
14 See Securities Exchange Act Release No. 73648
(November 19, 2014) (SR–Nasdaq–2014–108). See
also Nasdaq Price List available at https://nasdaq
trader.com/Trader.aspx?id=PriceListTrading2.
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existing pricing on the Exchange and
the NYSE that are tied to Member’s
volume levels as a percentage of TCV,
the proposed Retail Order Tier
continues to be equitable and not
unfairly discriminatory because it is
available to all Members on an equal
and non-discriminatory basis.
Added and Removal Flags
The Exchange believes that its
proposal to amend two bullets under the
General Notes section of the Fee
Schedule that contain the list of
applicable ‘‘added flags’’ and ‘‘removal
flags’’ are [sic] represents an equitable
allocation of reasonable dues, fees, and
other charges among Members and other
persons using its facilities. The
Exchange appends Flag EA, ER, and 5
to buy and sell orders that inadvertently
match against each other and share the
same MPID (Member shares both sides
of the trade). The Exchange also believes
proposed Footnote 10 stating that a
Member’s monthly volume attributed to
Flag 5 will be divided evenly between
the added flags and removal flags when
determining whether that Member
satisfied a certain tier represents an
equitable allocation of reasonable dues,
fees, and other charges. The Exchange
proposes to divide a Member’s Flag 5
volume as such because Flag 5 includes
both added and removed liquidity
because the Exchange’s systems cannot
currently delineate orders yielding Flag
5 that added from those that removed
liquidity purposes of determining
whether a Member satisfies a certain
tier. The Exchange believes that
Members orders that yield Flags EA, ER,
or 5 should be included in the
calculation of the ADV threshold as
added or removal flags for purposes of
determining whether a tier’s criteria has
been met. Including such Flags would
be a reasonable means to encourage
Members to direct their orders to the
Exchange because they would have
certainty that certain orders will not be
excluded from their ADV calculations
because it inadvertently matched
against an order sharing the same MPID.
Lastly, the Exchange also believes that
the proposed amendment is nondiscriminatory because it applies
uniformly to all Members.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
These proposed rule changes do 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 any
of these changes represent a significant
departure from previous pricing offered
by the Exchange or pricing offered by
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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 changes will
impair the ability of Members or
competing venues to maintain their
competitive standing in the financial
markets.
Retail Order Tier
Regarding the Retail Order Tier, the
Exchange believes that its proposal to
amend the criteria to achieve the tier
will increase intermarket competition
for Retail Orders because the proposed
Retail Order Tier is comparable in price
and criteria to NYSE Arca and Nasdaq’s
retail order tier.15 In addition, the
proposed rule change is in direct
response to Nasdaq recently
implementing a rebate for retail orders
of $0.0034 per share where the member
adds Customer and/or Professional
liquidity in Penny Pilot Options and/or
Non-Penny Pilot Options of 1.40% or
more of national customer volume in
multiply-listed equity and ETF options
classes in a month as pursuant to
Chapter XV, Section 2 of the Nasdaq
Options Market rules.16 The Exchange
believes that its proposal would neither
increase nor decrease intramarket
competition because the Retail Order
Tier would continue to apply uniformly
to all Members and the ability of some
Members to meet the Retail Order Tier
would only benefit other Members by
contributing to increased retail liquidity
on the Exchange.
Added and Removal Flags
The Exchange believes that adding
orders yielding Flags EA, ER, and 5 to
the ‘‘added flags’’ and ‘‘removal flags’’
would increase intermarket competition
because it would encourage Members to
direct their orders to the Exchange
because they would have certainty that
their orders will not be excluded from
their ADV calculations because it
inadvertently matched against an order
sharing the same MPID. The Exchange
believes that its proposal would neither
increase nor decrease intramarket
competition because the added and
removal flags would continue to apply
uniformly to all Members and the ability
of some Members to meet the tiers
15 See NYSE Arca, NYSE Arca Equities Trading
Fees—Retail Order Tier, available at https://
usequities.nyx.com/markets/nyse-arca-equities/
trading-fees (last visited June 27, 2013). See also
Nasdaq, Price List—Rebate to Add Displayed
Designated Retail Liquidity, available at https://
www.nasdaqtrader.com/Trader.aspx?id=PriceList
Trading2 (last visited June 27, 2013).
16 See supra note 14.
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Federal Register / Vol. 79, No. 239 / Friday, December 12, 2014 / Notices
would only benefit other Members by
contributing to increased liquidity and
improve market quality at the Exchange.
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 17 and paragraph (f) of Rule
19b–4 thereunder.18 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.
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:
mstockstill on DSK4VPTVN1PROD with NOTICES
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
EDGX–2014–32 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–2014–32. 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 (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
17 15
18 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
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16:57 Dec 11, 2014
Jkt 235001
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–
2014–32, and should be submitted on or
before January 2, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–29108 Filed 12–11–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73776; File No. SR–CME–
2014–29]
Self-Regulatory Organizations;
Chicago Mercantile Exchange Inc.;
Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Make Clarifying Changes to
CME Rule 814 and CME Rule 901
December 8, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder 2
notice is hereby given that, on
November 26, 2014, Chicago Mercantile
Exchange Inc. (‘‘CME’’) 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
primarily by CME. CME filed the
proposal pursuant to Section 19(b)(3)(A)
of the Act,3 and Rule 19b–4(f)(4)(ii) 4
thereunder, so that the proposal was
effective upon filing with the
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(4)(ii).
1 15
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73919
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
CME is filing a proposed rule change
that is limited to its business as a
derivatives clearing organization. More
specifically, the proposed rule change
would make amendments to CME Rule
814 and CME Rule 901 to specify the
time at which a settlement bank
becomes responsible to the clearing
house to perform variation margin
settlement and the point during the
clearing cycle at which a clearing
member’s obligations to the clearing
house cease. The proposed revisions
would not modify clearing house
operations but merely clarify to the
marketplace the clearing cycle currently
in place.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
CME 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. CME has prepared
summaries, set forth in sections A, B,
and C below, of the most significant
aspects of these statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
CME is registered as a derivatives
clearing organization with the
Commodity Futures Trading
Commission (‘‘CFTC’’) and operates a
substantial business clearing futures and
swaps contracts subject to the
jurisdiction of the CFTC. CME is
proposing to make amendments to CME
Rule 814 and CME Rule 901 to specify
the time at which a settlement bank
becomes responsible to the clearing
house to perform variation margin
settlement and the point during the
clearing cycle at which a clearing
member’s obligations to the clearing
house cease. The proposed revisions
would not modify clearing house
operations but merely clarify to the
marketplace the clearing cycle currently
in place. CME notes that it has also
made a corresponding filing with the
CFTC, in Submission No. 14–280,
regarding the proposed changes.
E:\FR\FM\12DEN1.SGM
12DEN1
Agencies
[Federal Register Volume 79, Number 239 (Friday, December 12, 2014)]
[Notices]
[Pages 73916-73919]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-29108]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73782; File No. SR-EDGX-2014-32]
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Related to
Fees for Use of EDGX Exchange, Inc.
December 8, 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 November 26, 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 Exchange. The
Exchange has designated the proposed rule change as one establishing or
changing a member due, fee, or other charge imposed by the 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\ of the Exchange pursuant to EDGX Rules 15.1(a) and (c)
(``Fee Schedule''). 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, 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).
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The text of the proposed rule change is available at the Exchange's
Web site at https://www.directedge.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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fee Schedule to amend: (i) The
criteria
[[Page 73917]]
for the Retail Order Tier under Footnote 4; and (ii) the first two
bullets regarding added and removal flags under the General Notes
section to include Flags EA, ER, and 5, which include in [sic]
internalized volume.
Retail Order Tier
The Exchange currently provides a rebate of $0.0032 per share for
Retail Orders \6\ that yield Flag ZA and add liquidity. The Exchange
currently offers a Retail Order Tier under Footnote 4 whereby Members
are provided a rebate of $0.0034 per share if they: (i) Add an Average
Daily Volume \7\ (``ADV'') of Retail Orders yielding Flag ZA that is
0.10% or more of the Total Consolidated Volume \8\ (``TCV'') on a daily
basis, measured monthly; and (ii) have an ``added liquidity'' to
``added to removed liquidity'' ratio of at least 85%. The Exchange
proposes to ease the criteria to satisfy this tier by: (i) Lowering the
requirement that a Member have an average daily volume of Retail Orders
of 0.10% or more of the TCV on a daily basis, measured monthly, to
0.07% or more of the TCV on a daily basis, measured monthly; and (ii)
deleting the requirement that a Member have an ``added liquidity'' to
``added to removed liquidity'' ratio of at least 85%. The Exchange
believes easing the criteria to satisfy the Retail Order Tier will
attract more Retail Orders to the Exchange.
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\6\ Exchange Rule 11.21(a) defines a ``Retail Order,'' in part,
as an: (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.
\7\ ADV is defined in the Exchange's Fee Schedule ``as the
average daily volume of shares that a Member executed on, or routed
by, the Exchange for the month in which the fees are calculated. ADV
is calculated on a monthly basis, excluding shares on any day that
the Exchange's system experiences a disruption that lasts for more
than 60 minutes during Regular Trading Hours (`Exchange System
Disruption'), on any day with a scheduled early market close and on
the last Friday in June (the `Russell Reconstitution Day').''
\8\ TCV is defined in the Exchange's Fee Schedule ``as the
volume reported by all exchanges and trade reporting facilities to
the consolidated transaction reporting plans for Tapes A, B and C
securities for the month in which the fees are calculated, excluding
volume on any day that the Exchange experiences an Exchange System
Disruption, on any day with a scheduled early market close or the
Russell Reconstitution Day.''
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Added and Removal Flags
The General Notes section of the Fee Schedule includes two bullets
that contain the list of applicable ``added flags'' and ``removal
flags'' that may be considered when calculating whether a Member
satisfied a certain pricing tier. The Exchange appends Flags EA, ER,
and 5 to orders that inadvertently match against each other and share
the same MPID (Member shares both sides of the trade). The Exchange
proposes to amend the first bullet regarding added flags to include
Flag EA, which covers internalized trades that add liquidity. The
Exchange also proposes to amend the second bullet regarding removal
flags to include Flag ER, which covers internalized trades that remove
liquidity. Lastly, the Exchange proposes to amend both the first and
second bullets to include Flag 5, which covers internalized trades that
add or remove liquidity during the pre and post market sessions. The
Exchange also proposes to add Footnote 10 to state that a Member's
monthly volume attributed to Flag 5 will be divided evenly between the
added flags and removal flags when determining whether that Member
satisfied a certain tier. The Exchange proposes to divide a Member's
Flag 5 volume as such because the Exchange's systems cannot currently
delineate orders yielding Flag 5 that added from those that removed
liquidity for purposes of determining whether a Member satisfies a
certain tier.
Implementation Date
The Exchange proposes to implement these amendments to its Fee
Schedule on December 1, 2014.
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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Retail Order Tier
The Exchange believes that easing the criteria required to achieve
the Retail Order Tier is reasonable, equitable and not unfairly
discriminatory because it would continue to encourage Members to send
additional Retail Orders that add liquidity to the Exchange for
execution in order to qualify for an incrementally higher rebate for
such executions that add liquidity. The potential for increased volume
from Retail Orders would increase potential revenue to the Exchange,
and allow the Exchange to spread its administrative and infrastructure
costs over a greater number of shares, leading to lower per share
costs. These lower per share costs in turn would allow the Exchange to
pass on the savings to Members in the form of lower fees. The increased
liquidity benefits all investors by deepening EDGX's liquidity pool,
offering additional flexibility for all investors to enjoy cost
savings, supporting the quality of price discovery, promoting market
transparency and improving investor protection. The Exchange notes that
a significant percentage of the orders of individual investors are
executed over-the-counter.\11\ The Exchange believes that it is thus
appropriate to continue to create a financial incentive to bring more
retail order flow to a public market, such as the Exchange, over off-
exchange venues. The Exchange believes that investor protection and
transparency is promoted by rewarding displayed liquidity on exchanges
over off-exchange executions. In this regard, the Exchange believes
that maintaining or increasing the proportion of Retail Orders in
exchange-listed securities that are executed on a registered national
securities exchange (rather than relying on certain available off-
exchange execution methods) would contribute to investors' confidence
in the fairness of their transactions and would benefit all investors
by deepening the Exchange's liquidity pool, supporting the quality of
price discovery, promoting market
[[Page 73918]]
transparency and improving investor protection.
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\11\ See Concept Release on Equity Market Structure, Securities
Exchange Act Release No. 61358 (January 14, 2010), 75 FR 3594
(January 21, 2010) (noting that dark pools and internalizing broker-
dealers executed approximately 25.4% of share volume in September
2009). See also Mary L. Schapiro, Strengthening Our Equity Market
Structure (Speech at the Economic Club of New York, Sept. 7, 2010)
(available on the Commission's Web site). In her speech, Chairman
Schapiro noted that nearly 30 percent of volume in U.S.-listed
equities was executed in venues that do not display their liquidity
or make it generally available to the public and the percentage was
increasing nearly every month.
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The Exchange believes that reducing the percentage of TCV required
to achieve the Retail Order Tier from 0.10% to 0.07% for Members'
Retail Orders that add liquidity (Flag ZA) is reasonable, equitable and
not unfairly discriminatory because this percentage continues to be
within a range that the Exchange believes would incentivize Members to
submit Retail Orders to the Exchange in order to qualify for the
applicable rebate of $0.0034 per share. The Exchange notes that certain
other existing pricing tiers within its Fee Schedule make rebates
available to Members that are also based on the Member's level of
activity as a percentage of TCV. These existing percentage thresholds,
depending on other related factors and the level of the corresponding
rebates, are both higher and lower [sic] than the 0.07% proposed
herein.\12\
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\12\ See for example, the Market Depth Tier 1 Rebate ($0.00325
per share rebate), Mega Step-Up Tier Rebate ($0.0032 per share),
Ultra Tier rebate ($0.0031 per share rebate), and Investor Tier
rebate ($0.0032 per share rebate) that are all tied to a percentage
of TCV.
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The Exchange also notes that the revisions to the Retail Order
Tier, including removing the requirement that Members have an ``added
liquidity'' to ``added to removed liquidity'' ratio of at least 85%,
are reasonable in that NYSE Arca, Inc. (``NYSE Arca'') offers a
comparable Retail Order Tier (with an analogous Retail Order
definition) that provides a rebate of $0.0033 per share for its Retail
Orders that provide liquidity on NYSE Arca in Tapes A, B and C
securities for ETP Holders that execute an ADV of Retail Orders that is
0.20% or more of the TCV with no additional criteria.\13\ In addition,
The NASDAQ Stock Market LLC (``Nasdaq'') recently proposed to offer its
members a rebate of $0.0034 per share for Designated Retail Orders, as
defined by Nasdaq, where the member adds Customer and/or Professional
liquidity in Penny Pilot Options and/or Non-Penny Pilot Options of
1.40% or more of national customer volume in multiply-listed equity and
ETF options classes in a month as pursuant to Chapter XV, Section 2 of
the Nasdaq Options Market rules.\14\ Moreover, like existing pricing on
the Exchange and the NYSE that are tied to Member's volume levels as a
percentage of TCV, the proposed Retail Order Tier continues to be
equitable and not unfairly discriminatory because it is available to
all Members on an equal and non-discriminatory basis.
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\13\ See Securities Exchange Act Release No. 69134 (March 14,
2013), 78 FR 17247 (March 20, 2013) (SR-NYSEArca-2013-24). See also,
NYSE Arca Equities, Inc., Schedule of Fees and Charges for Exchange
Services, https://usequities.nyx.com/sites/usequities.nyx.com/files/nyse_arca_marketplace_fees_3_1_13.pdf.
\14\ See Securities Exchange Act Release No. 73648 (November 19,
2014) (SR-Nasdaq-2014-108). See also Nasdaq Price List available at
https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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Added and Removal Flags
The Exchange believes that its proposal to amend two bullets under
the General Notes section of the Fee Schedule that contain the list of
applicable ``added flags'' and ``removal flags'' are [sic] represents
an equitable allocation of reasonable dues, fees, and other charges
among Members and other persons using its facilities. The Exchange
appends Flag EA, ER, and 5 to buy and sell orders that inadvertently
match against each other and share the same MPID (Member shares both
sides of the trade). The Exchange also believes proposed Footnote 10
stating that a Member's monthly volume attributed to Flag 5 will be
divided evenly between the added flags and removal flags when
determining whether that Member satisfied a certain tier represents an
equitable allocation of reasonable dues, fees, and other charges. The
Exchange proposes to divide a Member's Flag 5 volume as such because
Flag 5 includes both added and removed liquidity because the Exchange's
systems cannot currently delineate orders yielding Flag 5 that added
from those that removed liquidity purposes of determining whether a
Member satisfies a certain tier. The Exchange believes that Members
orders that yield Flags EA, ER, or 5 should be included in the
calculation of the ADV threshold as added or removal flags for purposes
of determining whether a tier's criteria has been met. Including such
Flags would be a reasonable means to encourage Members to direct their
orders to the Exchange because they would have certainty that certain
orders will not be excluded from their ADV calculations because it
inadvertently matched against an order sharing the same MPID. Lastly,
the Exchange also believes that the proposed amendment is non-
discriminatory because it applies uniformly to all Members.
B. Self-Regulatory Organization's Statement on Burden on Competition
These proposed rule changes do 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 any of these changes
represent 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 changes will impair the
ability of Members or competing venues to maintain their competitive
standing in the financial markets.
Retail Order Tier
Regarding the Retail Order Tier, the Exchange believes that its
proposal to amend the criteria to achieve the tier will increase
intermarket competition for Retail Orders because the proposed Retail
Order Tier is comparable in price and criteria to NYSE Arca and
Nasdaq's retail order tier.\15\ In addition, the proposed rule change
is in direct response to Nasdaq recently implementing a rebate for
retail orders of $0.0034 per share where the member adds Customer and/
or Professional liquidity in Penny Pilot Options and/or Non-Penny Pilot
Options of 1.40% or more of national customer volume in multiply-listed
equity and ETF options classes in a month as pursuant to Chapter XV,
Section 2 of the Nasdaq Options Market rules.\16\ The Exchange believes
that its proposal would neither increase nor decrease intramarket
competition because the Retail Order Tier would continue to apply
uniformly to all Members and the ability of some Members to meet the
Retail Order Tier would only benefit other Members by contributing to
increased retail liquidity on the Exchange.
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\15\ See NYSE Arca, NYSE Arca Equities Trading Fees--Retail
Order Tier, available at https://usequities.nyx.com/markets/nyse-arca-equities/trading-fees (last visited June 27, 2013). See also
Nasdaq, Price List--Rebate to Add Displayed Designated Retail
Liquidity, available at https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2 (last visited June 27, 2013).
\16\ See supra note 14.
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Added and Removal Flags
The Exchange believes that adding orders yielding Flags EA, ER, and
5 to the ``added flags'' and ``removal flags'' would increase
intermarket competition because it would encourage Members to direct
their orders to the Exchange because they would have certainty that
their orders will not be excluded from their ADV calculations because
it inadvertently matched against an order sharing the same MPID. The
Exchange believes that its proposal would neither increase nor decrease
intramarket competition because the added and removal flags would
continue to apply uniformly to all Members and the ability of some
Members to meet the tiers
[[Page 73919]]
would only benefit other Members by contributing to increased liquidity
and improve market quality at the Exchange.
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 \17\ and paragraph (f) of Rule 19b-4
thereunder.\18\ 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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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 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 (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-EDGX-2014-32 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-2014-32. 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 (https://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-2014-32, and should be
submitted on or before January 2, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29108 Filed 12-11-14; 8:45 am]
BILLING CODE 8011-01-P