Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Rule 11.9, 5636-5639 [2011-2132]
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Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices
srobinson on DSKHWCL6B1PROD with NOTICES
D. Complex Order Entry, Processing,
and Execution
The Commission finds that the
changes to Phlx Rule 1080, Commentary
.08(c)(i) indicating that a Complex Order
with an underlying security component
is eligible to trade only when the
underlying security is open for trading
on its primary market, and the changes
to Phlx Rule 1080, Commentary
.08(e)(vi)(A)(1) and .08(f)(iii) that
indicate that legging may not occur,
either in a COLA or against the CBOOK,
when the underlying security is a
component of a Complex Order, should
help to clarify the operation of the
Phlx’s rules relating to the execution of
Complex Orders with an underlying
stock or ETF component. Similarly, the
Commission believes that adding the
term ‘‘legging’’ to Phlx Rule 1080,
Commentary .08(e)(vi)(A)(1) to refer to
the activity described in that rule could
help to clarify the rule.
The amendment to Phlx Rule 1080,
Commentary .08(e)(i)(B)(2) that permits
the Phlx to determine the time period,
which will not exceed ten seconds, at
the end of a trading session when an
order will not be COLA-eligible should
provide the Phlx with flexibility in
determining the time period within
which the Exchange will not initiate a
COLA during the final seconds of a
trading session. The Commission notes
that the Phlx will establish this time
period in an Options Trader Alert.100
The Commission believes that
modifying Phlx Rule 1080, Commentary
.08(b)(ii) to allow SQTs, RSQTs, nonSQT ROTs, specialists, and non-Phlx
market makers on another exchange to
enter Complex Orders with more than
two options components or an
underlying security component as Day
orders, in addition to entering them as
IOC orders, could encourage these
market participants to submit Complex
Orders by providing them with greater
flexibility in entering orders.
The Commission believes that the
amendments to Phlx Rule 1080,
Commentary .08(b)(iii) indicating that
Floor Brokers using the FBMS may not
enter DNA Orders, orders with a stock
or ETF component, or orders with more
than two legs are reasonable because,
according to the Phlx, Floor Brokers are
able to use systems other than FBMS to
access Phlx XL II.101 In addition, the
Commission notes that the Phlx believes
that Floor Brokers are unlikely to need
or request changes to FBMS because
they execute more complex orders in
100 See
101 See
Phlx Rule 1080, Commentary .08(e)(B)(2).
Notice at 78323.
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the trading crowd than through
FBMS.102
The Commission believes that the
changes to Phlx Rules 1080,
Commentary .08(e)(vi)(A)(1), (f)(iii)(A),
and (f)(iii)(B)(1) that place an SQT or
RSQT quoting all components of a
Complex Order on parity with SQTs and
RSQTs quoting a single component are
consistent with the Act. The Phlx
believes that these changes will simplify
the allocation process as PHLX XL II
begins to accept more Complex Order
types.103 In addition, the Phlx believes
that the benefits provided by the current
rules giving priority to SQTs and RSQTs
quoting all components of a Complex
Order are not material, and that they are
not being realized intentionally by
market participants.104 The Commission
notes that under the revised rules,
public customer orders will continue to
have priority over SQTs and RSQTs.105
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,106 that the
proposed rule change (File No. SR–
Phlx–2010–157), as amended, is
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.107
Elizabeth M. Murphy,
Secretary.
below, which Items have been prepared
by the Exchange. The Exchange has
designated the proposed rule change as
constituting a non-controversial rule
change under Rule 19b–4(f)(6) under the
Act,3 which renders the proposal
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 the Substance
of the Proposed Rule Change
The Exchange proposes to amend
Rule 11.9 to add its routing options,
which are currently contained in its fee
schedule, to the rule and to introduce
additional options to the rule. The text
of the proposed rule change is attached
as Exhibit 5 and is available on the
Exchange’s Web site at https://
www.directedge.com, at the Exchange’s
principal office, and at the Public
Reference Room of the Commission.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–63779; File No. SR–EDGX–
2011–01]
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
self-regulatory organization has
prepared summaries, set forth in
Sections A, B and C below, of the most
significant aspects of such statements.
Self-Regulatory Organizations; EDGX
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 11.9
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[FR Doc. 2011–2127 Filed 1–31–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
1. Purpose
January 26, 2011.
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 January
21, 2011, the EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
102 Id.
103 See
Notice at note 29 and accompanying text.
104 Id.
105 See Phlx Rules 1014(g)(vii) and 1080,
Commentary .08(e)(vi)(A)(1), (f)(iii)(A), and
(f)(iii)(B)(1).
106 15 U.S.C. 78s(b)(2).
107 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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The Exchange’s current fee schedule
contains a list of routing options. The
Exchange proposes to move the current
list of routing options from the fee
schedule and codify it in Rule
11.9(a)(3). In addition, the Exchange
proposes to amend the existing routing
option descriptions to provide
additional clarity and introduce
additional routing options to Rule
11.9(a)(3).
The Exchange intends to implement
the rule change upon filing with the
Commission with respect to all routing
options, except ROOC, which the
Exchange intends to implement on or
about February 14, 2011.
3 17
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Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices
First, the Exchange proposes to move
its discussion of available routing
options, which is located at the end of
the fee schedule, and codify it in Rule
11.9(b)(3)(a)–(r).
Currently, the fee schedule has the
following descriptions of routing
strategies:
ROUQ ............
ROUC ............
ROUD ............
ROUE .............
ROUZ .............
INET ...............
ROBA .............
ROBX .............
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ROBY .............
sweeps the EDGX book,
then routes to other destination centers.
sweeps the EDGX book,
then sequentially sweeps
the balance, if any, to the
following destinations:
other destination centers,
then Nasdaq OMX BX,
NYSE, and the remainder
posts to EDGX.
sweeps the EDGX book before being routed to other
destination centers.
sweeps the EDGX book,
then other destination centers, and any remainder
routes to other market
centers.
sweeps the EDGX book before interacting with solicited orders on a price/time
priority basis.
sweeps the EDGX book and
removes liquidity from
Nasdaq, if the order is
marketable, or posts on
Nasdaq, if the order is
non-marketable.
sweeps the EDGX book and
routes to BATS BZX Exchange as an immediate
or cancel (IOC) order, with
the remainder being cancelled if there is no execution.
sweeps the EDGX book and
routes to Nasdaq BX Exchange as an immediate
or cancel (IOC) order, with
the remainder being cancelled if there is no execution.
sweeps the EDGX book and
routes to BATS BYX Exchange as an immediate
or cancel (IOC) order, with
the remainder being cancelled if there is no execution.
The Exchange proposes to amend
Rule 11.9(b)(2) to cross-reference the
routing options listed in proposed Rule
11.9(b)(3), as described in more detail
below.
The Exchange proposes to describe
how its routing options work in Rule
11.9(b)(3). The Exchange’s system
(‘‘System’’) provides a variety of routing
options. Routing options may be
combined with all available order types
and times-in-force, with the exception
of order types and times-in-force whose
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terms are inconsistent with the terms of
a particular routing option. The System
will consider the quotations only of
accessible markets. The term ‘‘System
routing table’’ refers to the proprietary
process for determining the specific
trading venues to which the System
routes orders and the order in which it
routes them. The Exchange reserves the
right to maintain a different System
routing table for different routing
options and to modify the System
routing table at any time without notice.
The System routing options are
described in more detail below.
The ROUC strategy currently states
that under this strategy an order sweeps
the book then sequentially sweeps the
balance, if any, to the following
destinations: Other destination centers,
then Nasdaq OMX BX, NYSE, and the
remainder posts to EDGX. The Exchange
proposes to amend the description to
state that it is 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. The Exchange will
place this proposed description in Rule
11.9(b)(3)(a).
The ROUD strategy description states
that it sweeps the book before being
routed to other destination centers. The
Exchange proposes to revise this
description to state that it checks the
System for available shares and then is
sent sequentially to destinations on the
System routing table. The ROUE routing
strategy currently states that it sweeps
the book, then other destination centers,
and any remainder routes to other
market centers. The Exchange proposes
to revise this description to state that an
order routed under this strategy checks
the System for available shares, and
then is sent to destinations on the
System routing table. The revised
descriptions of the ROUD and ROUE
routing strategies, as described above,
will be placed in proposed Rules
11.9(b)(3)(b)–(c).
The INET strategy is currently
described as a strategy that sweeps the
EDGX book and removes liquidity from
Nasdaq, if the order is marketable, or
posts on Nasdaq, if the order is nonmarketable. The Exchange proposes to
revise the description to read that ‘‘such
an order checks the System for available
shares and then is sent to Nasdaq. If
shares remain unexecuted after routing,
they are posted on Nasdaq book.’’ The
proposed description of the INET
routing strategy, as described above,
will be placed in proposed Rule
11.9(b)(3)(d).
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5637
The Exchange’s current description of
the ROBA strategy states that it is a
strategy under which an order sweeps
the book and routes to BATS BZX
Exchange as an immediate or cancel
(IOC) order, with the remainder being
cancelled if there is no execution. The
Exchange proposes to revise such
description to read that such order
checks the System for available shares
and then is sent to BATS BZX Exchange
as an IOC order. If shares remain
unexecuted after routing, they are
cancelled. The proposed description
will be placed in Rule 11.9(b)(3)(e).
ROBX is currently described as a
strategy under which an order sweeps
the book and routes to Nasdaq BX
Exchange as an IOC order, with the
remainder being cancelled if there is no
execution. This description is proposed
to be revised to read that such order
‘‘checks the System for available shares
and then is sent to Nasdaq BX Exchange
as an immediate or cancel (IOC) order.
If shares remain unexecuted after
routing, they are cancelled.’’
ROBY is currently described as a
strategy under which an order sweeps
the EDGX book and routes to BATS BYX
Exchange as an immediate or cancel
(IOC) order, with the remainder being
cancelled if there is no execution. This
description is proposed to be revised to
state that such order ‘‘checks the System
for available shares and then is sent to
BATS BYX Exchange as an IOC order.
If shares remain unexecuted after
routing, they are cancelled.’’ The revised
descriptions of the ROBX and ROBY
strategies are proposed to be placed in
Rules 11.9(b)(3)(f)–(g).
The Exchange proposes to codify the
following strategies in Rule
11.9(b)(3)(h)–(r) as well:
In proposed rule 11.9(b)(3)(h), the
Exchange proposes to describe the
ROUT routing option as a routing option
under which an order checks the
System for available shares, and then is
sent to destinations on the System
routing table.
In proposed rule 11.9(b)(3)(i), the
Exchange proposes to describe the
ROUX routing option under which an
order checks the System for available
shares and then is sent to destinations
on the System routing table.
In proposed rule 11.9(b)(3)(j), the
Exchange proposes to describe the
RDOT routing option 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. If shares remain
unexecuted after routing, they are sent
to the NYSE.
In proposed rule 11.9(b)(3)(k), the
Exchange proposes to describe the
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RDOX routing option under which an
order checks the System for available
shares, and then is sent to the NYSE.
In proposed rule 11.9(b)(3)(l), the
Exchange proposes to describe the
ROLF routing option under which an
order checks the System for available
shares, and then is sent to LavaFlow
ECN.
In proposed rule 11.9(b)(3)(m), the
Exchange proposes to describe the
ROPA routing option under which an
order checks the System for available
shares and then is sent to NYSE Arca as
an immediate or cancel order (IOC). If
shares remain unexecuted after routing,
they are cancelled.
In proposed rule 11.9(b)(3)(n), the
Exchange proposes to describe the IOCX
routing option under which an order
checks the System for available shares
and then is sent to EDGA.
In proposed rule 11.9(b)(3)(o), the
Exchange proposes to describe the IOCT
routing option under which an order
checks the System for available shares
and then is sent sequentially to
destinations on the System routing
table. If shares remain unexecuted after
routing, they are sent to EDGA.
In proposed rule 11.9(b)(3)(p), the
Exchange proposes to describe the
ROOC routing option 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 proposed
Rule 11.9(b)(3)(h), above.
The Exchange also proposes to
introduce the SWPA and SWPB routing
strategies and add them to proposed
Rules 11.9(b)(3)(q)–(r). Under the SWPA
strategy, an order would check the
System for available shares and then
would be sent to Protected Quotations
and only for displayed size. Under this
strategy, orders would not have to
contain sufficient size to execute against
all Protected Quotations (emphasis
added). If any shares remain
unexecuted, such remainder will be
cancelled back to the User. Under the
SWPB routing strategy, an order would
check the System for available shares
and then is sent to Protected Quotations
and only for displayed size. Under this
strategy, orders would have to contain
sufficient size to execute against all
Protected Quotations. The entire SWPB
order will be cancelled back to the User
immediately if at the time of entry there
is insufficient quantity in the SWPB
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order to fulfill the displayed size of all
Protected Quotations. The Exchange
believes that the proposed introduction
of the SWPA/B routing options will
provide market participants with greater
flexibility in routing orders consistent
with Regulation NMS. This proposed
rule change is similar to NASDAQ Rule
4758(a)(1)(A)(vi) (NASDAQ’s ‘‘MOPP’’
strategy) and BATS Exchange, Inc. Rule
11.13(a)(3)(D) (‘‘Parallel T’’).4
In addition, the Exchange also
believes that the proposed introduction
of the routing options, described above,
will provide market participants with
greater flexibility in routing orders,
without having to develop their own
complicated routing strategies.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b)(5) of the Act,5 which
requires the rules of an exchange to
promote just and equitable principles of
trade, 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. The
proposed change to introduce the
routing options described above will
provide market participants with greater
flexibility in routing orders without
developing complicated order routing
strategies on their own. In addition, it
will provide additional clarity and
specificity to the Exchange’s rules
regarding routing strategies and will
further enhance transparency with
respect to Exchange routing offerings.
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 Regarding 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
Because the foregoing proposed rule
change: (1) Does not significantly affect
4 See, e.g., NASDAQ Rule 4758, BATS Rule
11.13(a)(3)(D).
5 15 U.S.C. 78f(b)(5).
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the protection of investors or the public
interest; (2) does not impose any
significant burden on competition; and
(3) by its terms does not become
operative for 30 days after the date of
this filing, or such shorter time as the
Commission may designate if consistent
with the protection of investors and the
public interest, the proposed rule
change has become effective pursuant to
Section 19(b)(3)(A) 6 of the Act and Rule
19b–4(f)(6) thereunder.7
A proposed rule change filed under
19b–4(f)(6) normally may not become
operative prior to 30 days after the date
of filing.8 However, Rule 19b–
4(f)(6)(iii) 9 permits the Commission to
designate a shorter time if such action
is consistent with the protection of
investors and the public interest. The
Exchange has requested that the
Commission waive the 30-day operative
delay. The Exchange notes that waiver
of this requirement will allow the
Exchange to immediately offer Exchange
Users new routing strategies, and with
respect to the ROOC option, as soon as
the technology for such strategy is
completed. The Commission believes
that waiving the 30-day operative delay
is consistent with the protection of
investors and the public interest
because such waiver would allow the
new routing strategies to become
immediately available, and, with respect
to the ROOC option, available on or
about February 14, 2011, and would
immediately provide additional clarity
and specificity to the Exchange’s rules
regarding routing strategies and further
enhance transparency with respect to
Exchange routing offerings. For this
reason, the Commission designates the
proposed rule change to be operative
upon filing with the Commission.10
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.
6 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6).
8 17 CFR 240.19b–4(f)(6)(iii). In addition, Rule
19b–4(f)(6) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change at least five business
days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
9 Id.
10 For the purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
7 17
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Federal Register / Vol. 76, No. 21 / Tuesday, February 1, 2011 / Notices
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011–2132 Filed 1–31–11; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an e-mail to rulecomments@sec.gov. Please include File
Number SR–EDGX–2011–01 on the
subject line.
[Release No. 34–63778; File No. SR–EDGA–
2011–01]
Self-Regulatory Organizations; EDGA
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Amend Rule 11.9
January 26, 2011.
Paper Comments
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 January
21, 2011, the EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) filed with the
Securities and Exchange Commission
All submissions should refer to File
(‘‘Commission’’) the proposed rule
change as described in Items I and II
Number SR–EDGX–2011–01. This file
below, which Items have been prepared
number should be included on the
subject line if e-mail is used. To help the by the Exchange. The Exchange has
designated the proposed rule change as
Commission process and review your
constituting a non-controversial rule
comments more efficiently, please use
only one method. The Commission will change under Rule 19b–4(f)(6) under the
3
post all comments on the Commission’s Act, which renders the proposal
effective upon filing with the
Web site (https://www.sec.gov/rules/
sro.shtml). Copies of the submission, all Commission. The Commission is
publishing this notice to solicit
subsequent amendments, all written
statements with respect to the proposed comments on the proposed rule change
from interested persons.
rule change that are filed with the
I. Self-Regulatory Organization’s
Commission, and all written
Statement of the Terms of the Substance
communications relating to the
of the Proposed Rule Change
proposed rule change between the
Commission and any person, other than
The Exchange proposes to amend
those that may be withheld from the
Rule 11.9 to add its routing options,
public in accordance with the
which are currently contained in its fee
provisions of 5 U.S.C. 552, will be
schedule, to the rule and to introduce
available for Web site viewing and
additional options to the rule. The text
printing in the Commission’s Public
of the proposed rule change is attached
Reference Room, 100 F Street, NE.,
as Exhibit 5 and is available on the
Exchange’s Web site at https://
Washington, DC 20549, on official
www.directedge.com, at the Exchange’s
business days between the hours of 10
principal office, and at the Public
a.m. and 3 p.m. Copies of such filing
also will be available for inspection and Reference Room of the Commission.
copying at the principal office of the
II. Self-Regulatory Organization’s
Exchange. All comments received will
Statement of the Purpose of, and
be posted without change; the
Statutory Basis for, the Proposed Rule
Commission does not edit personal
Change
identifying information from
In its filing with the Commission, the
submissions. You should submit only
Exchange included statements
information that you wish to make
concerning the purpose of, and basis for,
publicly available. All submissions
the proposed rule change and discussed
should refer to File Number SR–EDGX–
2011–01 and should be submitted on or
11 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
before February 22, 2011.
srobinson on DSKHWCL6B1PROD with NOTICES
• Send paper comments in triplicate
to Elizabeth M. Murphy, Secretary,
Securities and Exchange Commission,
100 F Street, NE., Washington, DC
20549–1090.
2 17
3 17
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PO 00000
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
self-regulatory organization has
prepared summaries, set forth in
Sections A, B and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange’s current fee schedule
contains a list of routing options. The
Exchange proposes to move the current
list of routing options from the fee
schedule and codify it in Rule
11.9(a)(3). In addition, the Exchange
proposes to amend the existing routing
option descriptions to provide
additional clarity and introduce
additional routing options to Rule
11.9(a)(3).
The Exchange intends to implement
the rule change upon filing with the
Commission with respect to all routing
options, except ROOC, which the
Exchange intends to implement on or
about February 14, 2011.
First, the Exchange proposes to move
its discussion of available routing
options, which is located at the end of
the fee schedule, and codify it in Rule
11.9(b)(3)(a)–(s).
Currently, the fee schedule has the
following descriptions of routing
strategies:
ROUQ ............
ROUC ............
ROUD ............
ROUE .............
ROUZ .............
INET ...............
CFR 240.19b–4.
CFR 240.19b–4(f)(6).
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01FEN1
sweeps the EDGA book,
then routes to other destination centers.
sweeps the EDGA book,
then sequentially sweeps
the balance, if any, to the
following destinations:
other destination centers,
then Nasdaq OMX BX,
NYSE, and the remainder
posts to EDGX.
sweeps the EDGA book before being routed to other
destination centers.
sweeps the EDGA book,
then other destination centers, and any remainder
routes to other market
centers.
sweeps the EDGA book before interacting with solicited orders on a price/time
priority basis.
sweeps the EDGA book and
removes liquidity from
Nasdaq, if the order is
marketable, or posts on
Nasdaq, if the order is
non-marketable.
]]>Agencies
[Federal Register Volume 76, Number 21 (Tuesday, February 1, 2011)]
[Notices]
[Pages 5636-5639]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-2132]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-63779; File No. SR-EDGX-2011-01]
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
Rule 11.9
January 26, 2011.
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 January 21, 2011, the EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. The Exchange
has designated the proposed rule change as constituting a non-
controversial rule change under Rule 19b-4(f)(6) under the Act,\3\
which renders the proposal 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\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to amend Rule 11.9 to add its routing
options, which are currently contained in its fee schedule, to the rule
and to introduce additional options to the rule. The text of the
proposed rule change is attached as Exhibit 5 and is available on the
Exchange's Web site at https://www.directedge.com, at the Exchange's
principal office, and at the Public Reference Room of the Commission.
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 self-regulatory organization has prepared summaries,
set forth in Sections A, B and C below, of the most significant aspects
of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange's current fee schedule contains a list of routing
options. The Exchange proposes to move the current list of routing
options from the fee schedule and codify it in Rule 11.9(a)(3). In
addition, the Exchange proposes to amend the existing routing option
descriptions to provide additional clarity and introduce additional
routing options to Rule 11.9(a)(3).
The Exchange intends to implement the rule change upon filing with
the Commission with respect to all routing options, except ROOC, which
the Exchange intends to implement on or about February 14, 2011.
[[Page 5637]]
First, the Exchange proposes to move its discussion of available
routing options, which is located at the end of the fee schedule, and
codify it in Rule 11.9(b)(3)(a)-(r).
Currently, the fee schedule has the following descriptions of
routing strategies:
------------------------------------------------------------------------
------------------------------------------------------------------------
ROUQ................................... sweeps the EDGX book, then
routes to other destination
centers.
ROUC................................... sweeps the EDGX book, then
sequentially sweeps the
balance, if any, to the
following destinations: other
destination centers, then
Nasdaq OMX BX, NYSE, and the
remainder posts to EDGX.
ROUD................................... sweeps the EDGX book before
being routed to other
destination centers.
ROUE................................... sweeps the EDGX book, then
other destination centers, and
any remainder routes to other
market centers.
ROUZ................................... sweeps the EDGX book before
interacting with solicited
orders on a price/time
priority basis.
INET................................... sweeps the EDGX book and
removes liquidity from Nasdaq,
if the order is marketable, or
posts on Nasdaq, if the order
is non-marketable.
ROBA................................... sweeps the EDGX book and routes
to BATS BZX Exchange as an
immediate or cancel (IOC)
order, with the remainder
being cancelled if there is no
execution.
ROBX................................... sweeps the EDGX book and routes
to Nasdaq BX Exchange as an
immediate or cancel (IOC)
order, with the remainder
being cancelled if there is no
execution.
ROBY................................... sweeps the EDGX book and routes
to BATS BYX Exchange as an
immediate or cancel (IOC)
order, with the remainder
being cancelled if there is no
execution.
------------------------------------------------------------------------
The Exchange proposes to amend Rule 11.9(b)(2) to cross-reference
the routing options listed in proposed Rule 11.9(b)(3), as described in
more detail below.
The Exchange proposes to describe how its routing options work in
Rule 11.9(b)(3). The Exchange's system (``System'') provides a variety
of routing options. Routing options may be combined with all available
order types and times-in-force, with the exception of order types and
times-in-force whose terms are inconsistent with the terms of a
particular routing option. The System will consider the quotations only
of accessible markets. The term ``System routing table'' refers to the
proprietary process for determining the specific trading venues to
which the System routes orders and the order in which it routes them.
The Exchange reserves the right to maintain a different System routing
table for different routing options and to modify the System routing
table at any time without notice. The System routing options are
described in more detail below.
The ROUC strategy currently states that under this strategy an
order sweeps the book then sequentially sweeps the balance, if any, to
the following destinations: Other destination centers, then Nasdaq OMX
BX, NYSE, and the remainder posts to EDGX. The Exchange proposes to
amend the description to state that it is 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. The Exchange will place this proposed
description in Rule 11.9(b)(3)(a).
The ROUD strategy description states that it sweeps the book before
being routed to other destination centers. The Exchange proposes to
revise this description to state that it checks the System for
available shares and then is sent sequentially to destinations on the
System routing table. The ROUE routing strategy currently states that
it sweeps the book, then other destination centers, and any remainder
routes to other market centers. The Exchange proposes to revise this
description to state that an order routed under this strategy checks
the System for available shares, and then is sent to destinations on
the System routing table. The revised descriptions of the ROUD and ROUE
routing strategies, as described above, will be placed in proposed
Rules 11.9(b)(3)(b)-(c).
The INET strategy is currently described as a strategy that sweeps
the EDGX book and removes liquidity from Nasdaq, if the order is
marketable, or posts on Nasdaq, if the order is non-marketable. The
Exchange proposes to revise the description to read that ``such an
order checks the System for available shares and then is sent to
Nasdaq. If shares remain unexecuted after routing, they are posted on
Nasdaq book.'' The proposed description of the INET routing strategy,
as described above, will be placed in proposed Rule 11.9(b)(3)(d).
The Exchange's current description of the ROBA strategy states that
it is a strategy under which an order sweeps the book and routes to
BATS BZX Exchange as an immediate or cancel (IOC) order, with the
remainder being cancelled if there is no execution. The Exchange
proposes to revise such description to read that such order checks the
System for available shares and then is sent to BATS BZX Exchange as an
IOC order. If shares remain unexecuted after routing, they are
cancelled. The proposed description will be placed in Rule
11.9(b)(3)(e).
ROBX is currently described as a strategy under which an order
sweeps the book and routes to Nasdaq BX Exchange as an IOC order, with
the remainder being cancelled if there is no execution. This
description is proposed to be revised to read that such order ``checks
the System for available shares and then is sent to Nasdaq BX Exchange
as an immediate or cancel (IOC) order. If shares remain unexecuted
after routing, they are cancelled.''
ROBY is currently described as a strategy under which an order
sweeps the EDGX book and routes to BATS BYX Exchange as an immediate or
cancel (IOC) order, with the remainder being cancelled if there is no
execution. This description is proposed to be revised to state that
such order ``checks the System for available shares and then is sent to
BATS BYX Exchange as an IOC order. If shares remain unexecuted after
routing, they are cancelled.'' The revised descriptions of the ROBX and
ROBY strategies are proposed to be placed in Rules 11.9(b)(3)(f)-(g).
The Exchange proposes to codify the following strategies in Rule
11.9(b)(3)(h)-(r) as well:
In proposed rule 11.9(b)(3)(h), the Exchange proposes to describe
the ROUT routing option as a routing option under which an order checks
the System for available shares, and then is sent to destinations on
the System routing table.
In proposed rule 11.9(b)(3)(i), the Exchange proposes to describe
the ROUX routing option under which an order checks the System for
available shares and then is sent to destinations on the System routing
table.
In proposed rule 11.9(b)(3)(j), the Exchange proposes to describe
the RDOT routing option 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. If shares remain unexecuted
after routing, they are sent to the NYSE.
In proposed rule 11.9(b)(3)(k), the Exchange proposes to describe
the
[[Page 5638]]
RDOX routing option under which an order checks the System for
available shares, and then is sent to the NYSE.
In proposed rule 11.9(b)(3)(l), the Exchange proposes to describe
the ROLF routing option under which an order checks the System for
available shares, and then is sent to LavaFlow ECN.
In proposed rule 11.9(b)(3)(m), the Exchange proposes to describe
the ROPA routing option under which an order checks the System for
available shares and then is sent to NYSE Arca as an immediate or
cancel order (IOC). If shares remain unexecuted after routing, they are
cancelled.
In proposed rule 11.9(b)(3)(n), the Exchange proposes to describe
the IOCX routing option under which an order checks the System for
available shares and then is sent to EDGA.
In proposed rule 11.9(b)(3)(o), the Exchange proposes to describe
the IOCT routing option under which an order checks the System for
available shares and then is sent sequentially to destinations on the
System routing table. If shares remain unexecuted after routing, they
are sent to EDGA.
In proposed rule 11.9(b)(3)(p), the Exchange proposes to describe
the ROOC routing option 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 proposed Rule 11.9(b)(3)(h),
above.
The Exchange also proposes to introduce the SWPA and SWPB routing
strategies and add them to proposed Rules 11.9(b)(3)(q)-(r). Under the
SWPA strategy, an order would check the System for available shares and
then would be sent to Protected Quotations and only for displayed size.
Under this strategy, orders would not have to contain sufficient size
to execute against all Protected Quotations (emphasis added). If any
shares remain unexecuted, such remainder will be cancelled back to the
User. Under the SWPB routing strategy, an order would check the System
for available shares and then is sent to Protected Quotations and only
for displayed size. Under this strategy, orders would have to contain
sufficient size to execute against all Protected Quotations. The entire
SWPB order will be cancelled back to the User immediately if at the
time of entry there is insufficient quantity in the SWPB order to
fulfill the displayed size of all Protected Quotations. The Exchange
believes that the proposed introduction of the SWPA/B routing options
will provide market participants with greater flexibility in routing
orders consistent with Regulation NMS. This proposed rule change is
similar to NASDAQ Rule 4758(a)(1)(A)(vi) (NASDAQ's ``MOPP'' strategy)
and BATS Exchange, Inc. Rule 11.13(a)(3)(D) (``Parallel T'').\4\
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\4\ See, e.g., NASDAQ Rule 4758, BATS Rule 11.13(a)(3)(D).
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In addition, the Exchange also believes that the proposed
introduction of the routing options, described above, will provide
market participants with greater flexibility in routing orders, without
having to develop their own complicated routing strategies.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b)(5) of the Act,\5\ which requires the rules of an
exchange to promote just and equitable principles of trade, 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. The proposed change to introduce the routing options
described above will provide market participants with greater
flexibility in routing orders without developing complicated order
routing strategies on their own. In addition, it will provide
additional clarity and specificity to the Exchange's rules regarding
routing strategies and will further enhance transparency with respect
to Exchange routing offerings.
---------------------------------------------------------------------------
\5\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.
C. Self-Regulatory Organization's Statement on Comments Regarding 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
Because the foregoing proposed rule change: (1) Does not
significantly affect the protection of investors or the public
interest; (2) does not impose any significant burden on competition;
and (3) by its terms does not become operative for 30 days after the
date of this filing, or such shorter time as the Commission may
designate if consistent with the protection of investors and the public
interest, the proposed rule change has become effective pursuant to
Section 19(b)(3)(A) \6\ of the Act and Rule 19b-4(f)(6) thereunder.\7\
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\6\ 15 U.S.C. 78s(b)(3)(A).
\7\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
A proposed rule change filed under 19b-4(f)(6) normally may not
become operative prior to 30 days after the date of filing.\8\ However,
Rule 19b-4(f)(6)(iii) \9\ permits the Commission to designate a shorter
time if such action is consistent with the protection of investors and
the public interest. The Exchange has requested that the Commission
waive the 30-day operative delay. The Exchange notes that waiver of
this requirement will allow the Exchange to immediately offer Exchange
Users new routing strategies, and with respect to the ROOC option, as
soon as the technology for such strategy is completed. The Commission
believes that waiving the 30-day operative delay is consistent with the
protection of investors and the public interest because such waiver
would allow the new routing strategies to become immediately available,
and, with respect to the ROOC option, available on or about February
14, 2011, and would immediately provide additional clarity and
specificity to the Exchange's rules regarding routing strategies and
further enhance transparency with respect to Exchange routing
offerings. For this reason, the Commission designates the proposed rule
change to be operative upon filing with the Commission.\10\
---------------------------------------------------------------------------
\8\ 17 CFR 240.19b-4(f)(6)(iii). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
\9\ Id.
\10\ For the purposes only of waiving the 30-day operative
delay, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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.
[[Page 5639]]
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 e-mail to rule-comments@sec.gov. Please include
File Number SR-EDGX-2011-01 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-2011-01. 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 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 a.m. and 3
p.m. Copies of such 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 publicly available. All submissions
should refer to File Number SR-EDGX-2011-01 and should be submitted on
or before February 22, 2011.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2011-2132 Filed 1-31-11; 8:45 am]
BILLING CODE 8011-01-P
