Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to the EDGX Exchange, Inc. Fee Schedule, 67695-67699 [2012-27492]

Download as PDF srobinson on DSK4SPTVN1PROD with Federal Register / Vol. 77, No. 219 / Tuesday, November 13, 2012 / Notices can avoid any potential BOX away execution fee by simply not sending any orders to BOX where BOX is not on the NBBO for the options series in question. BOX believes that any firm with the technical sophistication to interact with its own customer order flow via the PIP will encounter no difficulties in avoiding sending an order to BOX which risks being routed away by BOX. Furthermore, such Participants can ensure that this never happens by choosing to instruct BOX not to route their customer orders. This will ensure that where BOX cannot execute any portion of an order at a price equal to NBBO, the BOX trading system will return the order to the submitting Participant after the BOX quantity at NBBO has executed with the order. BOX notes that the away fee exemption will be equally available to order consolidator firms that are the most significant users of Directed Orders, using them to route orders for price improvement to their affiliated market maker. For all the reasons stated above, BOX believes that all firms wishing to offer price improvement to their customers will be on equal footing under the BOX proposal. Each is free to choose the mechanism he finds suits his business model best and BOX believes no firm will encounter unreasonable levels of away execution transaction fees. The Exchange believes the proposed routing fee structure is equitable and not unfairly discriminatory because the incentive to send Public Customer orders to BOX via Directed Order is available to all Participants on an equal basis. The Exchange believes it is reasonable and equitable to provide Participants (A) an incentive to trade on BOX, and (B) the ability to route a limited amount of customer orders at no cost, because transactions executed on BOX increase BOX market activity and market quality. Greater liquidity and additional volume executed on BOX aids the price and volume discovery process. Participant trading on BOX also results in revenue that BOX is able to use to provide routing services for a limited amount of customer orders at no cost to Participants. Accordingly, the Exchange believes that the proposal is not unfairly discriminatory because it promotes enhancing BOX market quality. As discussed above, BOX Participants can manage their own routing to different options exchanges or can utilize a myriad of other routing solutions that are available to market participants. VerDate Mar<15>2010 17:08 Nov 09, 2012 Jkt 229001 B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. 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)(ii) of the Exchange Act 12 and Rule 19b–4(f)(2) thereunder,13 because it establishes or changes a due, fee, or other charge applicable only to a member. 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 Exchange 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: Electronic Comments • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml ); or • Send an email to rulecomments@sec.gov. Please include File Number SR–BOX–2012–017 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–BOX–2012–017. 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–BOX– 2012–017 and should be submitted on or before December 4, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.14 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–27491 Filed 11–9–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68166; File No. SR–EDGX– 2012–46] Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to the EDGX Exchange, Inc. Fee Schedule November 6, 2012. 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 1, 2012, EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which items have been prepared by the self-regulatory organization. The 14 17 12 15 U.S.C. 78s(b)(3)(A)(ii). 13 17 CFR 240.19b–4(f)(2). PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 67695 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\13NON1.SGM 13NON1 67696 Federal Register / Vol. 77, No. 219 / Tuesday, November 13, 2012 / Notices 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 proposes to amend its fees and rebates applicable to Members 3 of the Exchange pursuant to EDGX Rule 15.1(a) and (c). All of the changes described herein are applicable to EDGX Members. The text of the proposed rule change is available on the Exchange’s Internet Web site at 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 self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements. srobinson on DSK4SPTVN1PROD with 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 add the Step-up Take Tier to the Exchange’s fee schedule in Footnote 2. A Member will qualify for the Step-up Take Tier by (i) adding an average daily volume (‘‘ADV’’) of at least 2 million shares on a daily basis, measured monthly more than that Member’s September 2012 added ADV (the ‘‘September Added Baseline’’); and (ii) removing at least 0.40% total consolidated volume (‘‘TCV’’) on a daily basis, measured monthly more than that Member’s September 2012 removed ADV (the ‘‘September Removal Baseline’’). Members qualifying for the Step-up Take Tier will earn a rebate of $0.0030 per share for orders that add liquidity and yield Flags B, V, Y, 3 and 4, and will be assessed a fee of $0.0028 per share for orders that remove liquidity and yield Flags N, W, BB, PI, and 6.4 3 As defined in Exchange Rule 1.5(n). Exchange notes that to the extent Members qualify for a rebate higher than $0.0030 per share through other volume tiers, such as the Mega Tier, Market Depth Tier or the Ultra Tier, they will earn 4 The VerDate Mar<15>2010 17:08 Nov 09, 2012 Jkt 229001 Accordingly, the Exchange proposes to append Footnote 2 to the default rates for adding and removing liquidity on the fee schedule, and Flags B, V, Y, 3, 4, N, W, BB, PI, and 6. The Exchange believes the Step-Up Take Tier will encourage large market participants, who are not currently large takers, to grow their take volume over an established baseline in order to achieve the tier. In Footnote 8 of the fee schedule that is appended to Flag SW., the Exchange proposes to assess a fee of $0.0025 per share in lieu of the current fee of $0.0023 per share for Members’ orders that are routed using the SWPA, SWPB or SWPC routing strategies 5 and remove liquidity from the New York Stock Exchange (‘‘NYSE’’), yielding Flag D. This proposed change represents a passthrough of the rate that Direct Edge ECN LLC d/b/a DE Route (‘‘DE Route’’), the Exchange’s affiliated routing broker dealer, is charged for routing orders to NYSE, in response to the pricing changes in NYSE’s filing with the Securities and Exchange Commission (‘‘SEC’’).6 Accordingly, the Exchange proposes to delete the reference to the fee of $0.0023 per share in Footnote 8 because the rate for Flag D is $0.0025 per share. Therefore, the Exchange will assess a charge of $0.0025 for Members’ orders that are routed using the SWPA, SWPB or SWPC routing strategies and remove liquidity from NYSE, yielding Flag D. In addition, the Exchange proposes deleting the reference to ‘‘either’’ in the text of Footnote 8 given it is grammatically incorrect. The Exchange notes that its proposed deletion does not alter the intended purpose of the footnote. In Footnote 3 of the fee schedule that is appended to Flags C, D, J, L and 2, the Exchange proposes to assess a fee of 0.30% of the dollar value of the transaction in lieu of the current fee of $0.0023 per share for stocks priced below $1.00 that are routed or re-routed to NYSE and remove liquidity, yielding Flag D.7 This proposed change now represents a pass-through of the rate that the higher rebate on the add flags instead of the Step-up Take Tier. In addition, such Members will still qualify for the reduced charge of $0.0028 per share for the removal flags. 5 As defined in Exchange Rules 11.9(b)(3)(o), (p) and (q). 6 See Securities Exchange Release No. 68021 (October 9, 2012), 77 FR 63406 (October 16, 2012) (SR–NYSE–2012–50). 7 The Exchange does not propose to amend the rates for stocks priced below $1.00 that are routed to Nasdaq OMX BX (‘‘BX’’) or NASDAQ, yielding Flags C, J, L and 2, as described in Footnote 3 of the fee schedule. PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 DE Route is charged for routing orders to NYSE that remove liquidity.8 On Flag RS, the Exchange proposes to offer a rebate of $0.0026 per share 9 in lieu of the current rebate of $0.0016 per share for orders that are routed to the Nasdaq OMX PSX (‘‘PSX’’) and add liquidity. This proposed change represents a pass-through of the rebate that DE Route receives for routing orders to PSX, in response to recent pricing changes in PSX’s filing with the SEC.10 Currently, the Exchange charges Members a rate of $0.0027 per share for orders that are routed to PSX using the ROUC or ROUE routing strategies,11 yielding Flag K. The Exchange proposes to increase the rate to $0.0028 per share for orders that yield Flag K in response to recent pricing changes in PSX’s filing with the SEC.12 The Exchange proposes adding the title ‘‘EdgeBook Depth Fees’’ to the fee schedule describing the fees for the EdgeBook Depth X to increase the transparency of the fee schedule for Members. The Exchange also proposes deleting the dollar sign ($) on the fee table next to the fees on Flags N, W, 6, BB and PI. The Exchange regards this change as non-substantive in nature and is intended to conform to the other rates displayed on the fee table. The Exchange proposes to implement these amendments to its fee schedule on November 1, 2012. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Securities and Exchange Act of 1934 (the ‘‘Act’’),13 in general, and furthers the objectives of Section 6(b)(4),14 in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its 8 Prior to March 1, 2012, the NYSE Price List generally specified that the applicable rate was the lesser of (i) 0.3% of the total dollar value of the transaction and (ii) $0.0023 per share. See Securities Exchange Act Release No. 66600, (March 14, 2012), 77 FR 16298 (March 20, 2012) (SR– NYSE–2012–07). Effective March 1, 2012, the rate for these transactions with a per-share price of less than $1.00 is now 0.3% of the total dollar value of the transaction. 9 The Exchange notes that it is passing through the standard rebate of $0.0026 per share even though it possibly can achieve a tiered rebate of $0.0028 per share if it meets certain criteria. 10 See Securities Exchange Release No. 68052 (October 12, 2012), 77 FR 64170 (October 18, 2012) (SR–PHLX–2012–119). 11 As defined in Exchange Rules 11.9(b)(3)(a) and (c). 12 See Securities Exchange Release No. 68052 (October 12, 2012), 77 FR 64170 (October 18, 2012) (SR–PHLX–2012–119). 13 15 U.S.C. 78f. 14 15 U.S.C. 78f(b)(4). E:\FR\FM\13NON1.SGM 13NON1 srobinson on DSK4SPTVN1PROD with Federal Register / Vol. 77, No. 219 / Tuesday, November 13, 2012 / Notices Members and other persons using its facilities. The Exchange believes that the proposed Step-up Take Tier 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 requirements of the Step-up Take Tier to add ADV of at least 2 million shares (on a daily basis, measured monthly) more than the Member’s September Added Baseline and to remove at least 0.40% TCV (on a daily basis, measured monthly) more than the Member’s September Removal Baseline incentivizes substantial take volume from Members that generally add and remove volume from the Exchange by offering Members an increased add rebate of $0.0030 per share and a discounted removal rate of $0.0028 per share. The Exchange also believes that establishing Member’s September Added Baseline and September Removal Baselines rewards liquidity provision attributes, encourages price discovery and market transparency by encouraging growth in liquidity over a defined baseline. The Exchange believes the Step-Up Take Tier will also encourage large market participants, who are not currently large takers, to grow their take volume over an established baseline in order to achieve the tier. In addition, the Exchange believes that these proposed amendments are non-discriminatory because they apply uniformly to all Members. The Exchange believes the Step-up Take Tier will increase volume on the Exchange. Therefore, the Exchange can increase the add rebate from $0.0023 per share to $0.0030 per share and discount the removal rate from $0.0030 per share to $0.0028 per share. The increased volume increases potential revenue to the Exchange, and allows 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 higher rebates and 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. Volume-based rebates such as the one proposed herein have been widely adopted in the cash equities markets, and are equitable because they are open to all Members on an equal basis and provide discounts that are reasonably related to the value to an VerDate Mar<15>2010 17:08 Nov 09, 2012 Jkt 229001 exchange’s market quality associated with higher levels of market activity, such as higher levels of liquidity provision and introduction of higher volumes of orders into the price and volume discovery processes. The Step-Up Take Tier represents an equitable allocation of reasonable dues, fees, and other charges. First, the StepUp Take Tier allows the Exchange to compete with other exchanges such as NASDAQ, NYSE ARCA and BATS BZX in offering a discounted removal rate that is designed to incent fee sensitive liquidity takers to EDGX if they are willing to increase or grow their volume over an established baseline. This incentive recognizes that liquidity takers often have different trading strategies and types of order flow that they typically handle—such as market orders, marketable limit orders, or proprietary removal strategies. Thus, when multiple exchanges are quoting at the same price level, the Exchange believes that certain liquidity takers that are incented to achieve the Step-Up Take Tier would be attracted to EDGX first. In turn, this would lead to increased price discovery on EDGX, result in additional prints on the Tape, and would have the effect of bringing additional liquidity providers to the exchange, thus bolstering its standing and value as a market. Since the StepUp Take Tier offers lower removal fees for Members and fosters competition among exchanges, it could translate into costs savings for all market participants and their end customers. The Exchange also believes that the $0.0028 per share removal rate makes EDGX a more attractive venue to take liquidity from, which brings a higher quality of order flow to the EDGX Exchange and supports price discovery on EDGX. Finally, the Exchange believes that the Step-Up Take Tier will also help it to grow its market share as new takers who are incentivized to achieve the Step-Up Take Tier would send additional volume to the Exchange or remove additional shares from the Exchange in future trading opportunities. In addition, the Exchange believes that the proposed Step-Up Take Tier is nondiscriminatory because it applies the same criteria uniformly to all Members. In addition, the criteria for the Stepup Take Tier is also reasonable as compared to similar pricing mechanisms employed by NYSE Arca,15 where NYSE Arca offers customers stepup tiers for Tape B and C securities that 15 See NYSE Arca Equities Trading Fees, https:// usequities.nyx.com/markets/nyse-arca-equities/ trading-fees. See also Securities Exchange Release No. 66568 (March 9, 2012), 77 FR 15819 (March 16, 2012) (SR–NYSEARCA–2012–17). PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 67697 discount the default removal rate of $0.0030 per share when a baseline ADV is achieved. The Tape B Step Up Tier requires customers to add in excess of the greater of (i) 0.25% of US Tape B ADV over a January 2012 benchmark or (ii) 20% more than their January 2012 benchmark to earn a discounted removal rate of $0.0026 per share. In addition, the Tape C Step Up Tier requires customers to add in excess of the greater of (i) 0.10% of US Tape C ADV over a January 2012 benchmark or (ii) 20% more than their January 2012 benchmark plus 20%to earn a discounted removal rate of $0.0029 per share. The Exchange’s discounted removal rate from $0.0030 per share to $0.0028 per share for Members that achieve the Step-up Take Tier is also reasonable because it is within the range of discounts offered by NYSE Arca, where the default removal rate is $0.0030 per share and customers that qualify for the step-up earn discounts of $0.0026 per share or $0.0029 per share. The proposed rate change in Footnote 8 associated with routing orders to NYSE through DE Route on the Exchange’s fee schedule is a passthrough rate from DE Route to the Exchange and from the Exchange, in turn, to its Members. The Exchange’s proposal represents an equitable allocation of reasonable dues, fees, and other charges among Members of the Exchange and other persons using its facilities because the Exchange does not levy additional fees or offer additional rebates for orders that it routes to NYSE through DE Route. The Exchange notes that routing through DE Route is voluntary. Currently, in Footnote 8, for orders yielding Flag D that use the SWPA, SWPB, or SWPC routing strategies and remove liquidity from NYSE, NYSE charged DE Route a fee of $0.0023 per share, which, in turn, was passed through to the Exchange. The Exchange, in turn, charged its Members a fee of $0.0023 per share as a passthrough. On October 1, 2012, NYSE increased the rate it charges its customers, such as DE Route, from $0.0023 per share to a charge of $0.0025 per share for orders that are routed or re-routed to NYSE and remove liquidity. Therefore, the Exchange believes that the proposed change in Footnote 8 from a fee of $0.0023 per share to a fee of $0.0025 per share is equitable and reasonable because it accounts for the pricing changes on NYSE. In addition, the proposal allows the Exchange to continue to charge its Members a passthrough rate for orders that are routed or re-routed to NYSE and remove liquidity using DE Route. Lastly, the Exchange E:\FR\FM\13NON1.SGM 13NON1 67698 Federal Register / Vol. 77, No. 219 / Tuesday, November 13, 2012 / Notices srobinson on DSK4SPTVN1PROD with also believes that the proposed amendment is non-discriminatory because it applies uniformly to all Members. The proposed rate change in Footnote 3 associated with routing orders to NYSE through DE Route now represents a pass-through rate from DE Route to the Exchange and from the Exchange, in turn, to its Members. The Exchange’s proposal represents an equitable allocation of reasonable dues, fees, and other charges among Members of the Exchange and other persons using its facilities because the Exchange does not levy additional fees or offer additional rebates for orders that it routes to NYSE through DE Route. The Exchange notes that routing through DE Route is voluntary. For stocks priced below $1.00 that are routed or re-routed to NYSE and remove liquidity, DE Route charged its Members a fee of $0.0023 per share.16 NYSE modified the rate it charged its customers, such as DE Route, effective March 2012, to a charge of 0.30% of the dollar value of the transaction 17 for stocks priced below $1.00 that remove liquidity. Therefore, the Exchange believes that the proposed change in Footnote 3 from a fee of $0.0023 per share to a fee of 0.30% of the dollar value of the transaction is equitable and reasonable because it allows the Exchange to now charge its Members a pass-through rate for orders that are routed or re-routed to NYSE and remove liquidity using DE Route. Lastly, the Exchange also believes that the proposed amendment is nondiscriminatory because it applies uniformly to all Members. The proposed rate change for Flag RS associated with routing orders to PSX through DE Route on the Exchange’s fee schedule is a pass-through rate from DE Route to the Exchange and from the Exchange, in turn, to its Members. The Exchange’s proposal represents an equitable allocation of reasonable dues, fees, and other charges among Members of the Exchange and other persons using its facilities because the Exchange does not levy additional fees or offer additional rebates for orders that it routes to PSX through DE Route. The Exchange notes that routing through DE Route is voluntary. Currently, for orders yielding Flag RS, PSX offers DE Route a rebate of $0.0016 per share, which, in turn, is passed through to the Exchange. The Exchange, in turn, offers its Members a rebate of $0.0016 per share as a pass-through. On October 1, 2012, PSX increased the rebate it offers its customers, such as DE Route, from $0.0016 per share to a rebate of $0.0026 per share 18 for orders that are routed to PSX and add liquidity. Therefore, the Exchange believes that the proposed change for Flag RS from a rebate of $0.0016 per share to a rebate of $0.0026 per share is equitable and reasonable because it accounts for the pricing changes on PSX. In addition, the proposal allows the Exchange to continue to charge its Members a passthrough of the standard rebate 19 for orders that are routed to PSX and add liquidity using DE Route. Lastly, the Exchange also believes that the proposed amendment is nondiscriminatory because it applies uniformly to all Members. The Exchange believes that its proposal to amend the rate for Flag K represents an equitable allocation of reasonable dues, fees and other charges among its Members and other persons using its facilities. DE Route is charged either a fee of $0.0028 per share or $0.0030 per share depending on the routing strategy employed.20 Because the Exchange does not distinguish between ROUC and ROUE when yielding Flag K, the Exchange proposes to assess a charge of $0.0028 per share for Members orders that are routed to PSX using either ROUC or ROUE, which represents the more favorable of the two rates for its Members. The Exchange’s proposal to offer its Members the more favorable of two rates is a reasonable pricing strategy because it is similar to the pricing strategy of Flag C on EDGA Exchange, Inc. (‘‘EDGA’’), where EDGA offers its customers the more favorable rebate of $0.0014 per share for orders routed to BX that remove liquidity regardless of whether the Member achieves the tiered volume necessary to exceed the default rebate of $0.0005 per share.21 In addition, the rate of $0.0028 per share for Flag K is reasonable because it is similar to the rates charged by PSX for orders routed to its exchange, where PSX assesses charges 16 Prior to March 1, 2012, the NYSE Price List generally specified that the applicable rate was the lesser of (i) 0.30% of the total dollar value of the transaction and (ii) $0.0023 per share. See Securities Exchange Act Release No. 66600, (March 14, 2012), 77 FR 16298 (March 20, 2012) (SR– NYSE–2012–07). Effective March 1, 2012, the rate for these transactions with a per-share price of less than $1.00 is now 0.3% of the total dollar value of the transaction. 17 Id. 18 The Exchange notes that it is passing through the standard rebate of $0.0026 per share even though it possibly can achieve a tiered rebate of $0.0028 per share if it meets certain criteria. 19 Id. 20 See NASDAQ OMX PSX, Price List—Trading and Connectivity, https://www.nasdaqtrader.com/ Trader.aspx?id=PSX_pricing. 21 See Securities Exchange Release No. 67980 (October 4, 2012), 77 FR 61800 (October 11, 2012) (SR–EDGA–2012–45). VerDate Mar<15>2010 17:08 Nov 09, 2012 Jkt 229001 PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 between $0.0028 per share and $0.0030 per share depending on the routing strategy employed.22 Lastly, the Exchange also believes that the proposed amendment is nondiscriminatory because it applies uniformly to all Members. The Exchange’s proposal to add the title ‘‘EdgeBook Depth Fees’’ to the fee schedule increases transparency on the fee schedule for Members and does not represent any change in EdgeBook Depth fees. 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 nondiscriminatory in that they apply uniformly to all Members. The Exchange believes the fees and credits remain competitive with those charged by other venues and therefore continue to be reasonable and equitably allocated to Members. B. Self-Regulatory Organization’s Statement on Burden on Competition The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from Members or other interested parties. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 23 and Rule 19b–4(f)(2) 24 thereunder. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of 22 See NASDAQ OMX PSX, Price List—Trading and Connectivity, https://www.nasdaqtrader.com/ Trader.aspx?id=PSX_pricing. 23 15 U.S.C. 78s(b)(3)(A). 24 17 CFR 19b–4(f)(2). E:\FR\FM\13NON1.SGM 13NON1 Federal Register / Vol. 77, No. 219 / Tuesday, November 13, 2012 / Notices 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: For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Kevin M. O’Neill, Deputy Secretary. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION 1. Purpose [Release No. 34–68168; File No. SR–EDGA– 2012–46] • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–EDGX–2012–46 on the subject line. Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to the EDGA Exchange, Inc. Fee Schedule srobinson on DSK4SPTVN1PROD with • 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–2012–46. 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– 2012–46 and should be submitted on or before December 4, 2012. VerDate Mar<15>2010 17:08 Nov 09, 2012 Jkt 229001 The self-regulatory organization has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements. BILLING CODE 8011–01–P [FR Doc. 2012–27492 Filed 11–9–12; 8:45 am] Electronic Comments Paper Comments 67699 November 6, 2012. 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 1, 2012, EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which items have been prepared by the self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to amend its fees and rebates applicable to Members 3 of the Exchange pursuant to EDGA Rule 15.1(a) and (c). All of the changes described herein are applicable to EDGA Members. The text of the proposed rule change is available on the Exchange’s Internet Web site at www.directedge.com, at the Exchange’s principal office, and at the Public Reference Room of the Commission. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. 25 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 As defined in Exchange Rule 1.5(n). 1 15 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 In Footnote 8 of the fee schedule that is appended to Flag SW., the Exchange proposes to assess a fee of $0.0025 per share in lieu of the current fee of $0.0023 per share for Members’ orders that are routed using the SWPA, SWPB or SWPC routing strategies 4 and remove liquidity from the New York Stock Exchange (‘‘NYSE’’), yielding Flag D. This proposed change represents a passthrough of the rate that Direct Edge ECN LLC d/b/a DE Route (‘‘DE Route’’), the Exchange’s affiliated routing broker dealer, is charged for routing orders to NYSE, in response to the pricing changes in NYSE’s filing with the Securities and Exchange Commission (‘‘SEC’’).5 Accordingly, the Exchange proposes to delete the reference to the fee of $0.0023 per share in Footnote 8 because the rate for Flag D is $0.0025 per share. Therefore, the Exchange will assess a charge of $0.0025 for Members’ orders that are routed using the SWPA, SWPB or SWPC routing strategies and remove liquidity from NYSE, yielding Flag D. In Footnote 3 of the fee schedule that is appended to Flags C, D, J, L and 2, the Exchange proposes to assess a fee of 0.30% of the dollar value of the transaction in lieu of the current fee of $0.0023 per share for stocks priced below $1.00 that are routed or re-routed to NYSE and remove liquidity, yielding Flag D.6 This proposed change now represents a pass-through of the rate that DE Route is charged for routing orders to NYSE that remove liquidity.7 4 As defined in Exchange Rules 11.9(b)(3)(o), (p) and (q). 5 See Securities Exchange Release No. 68021 (October 9, 2012), 77 FR 63406 (October 16, 2012) (SR–NYSE–2012–50). 6 The Exchange does not propose to amend the rates for stocks priced below $1.00 that are routed to Nasdaq OMX BX (‘‘BX’’) or NASDAQ, yielding Flags C, J, L and 2, as described in Footnote 3 of the fee schedule. 7 Prior to March 1, 2012, the NYSE Price List generally specified that the applicable rate was the lesser of (i) 0.30% of the total dollar value of the transaction and (ii) $0.0023 per share. See Securities Exchange Act Release No. 66600, (March 14, 2012), 77 FR 16298 (March 20, 2012) (SR– NYSE–2012–07). Effective March 1, 2012, the rate for these transactions with a per-share price of less than $1.00 is now 0.3% of the total dollar value of the transaction. E:\FR\FM\13NON1.SGM 13NON1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 219 (Tuesday, November 13, 2012)]
[Notices]
[Pages 67695-67699]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-27492]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68166; File No. SR-EDGX-2012-46]

Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Relating to
Amendments to the EDGX Exchange, Inc. Fee Schedule

November 6, 2012.
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 1, 2012, EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which items have been prepared by the self-regulatory
organization. The

[[Page 67696]]

Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange proposes to amend its fees and rebates applicable to
Members \3\ of the Exchange pursuant to EDGX Rule 15.1(a) and (c). All
of the changes described herein are applicable to EDGX Members. The
text of the proposed rule change is available on the Exchange's
Internet Web site at www.directedge.com, at the Exchange's principal
office, and at the Public Reference Room of the Commission.
---------------------------------------------------------------------------

\3\ As defined in Exchange Rule 1.5(n).
---------------------------------------------------------------------------

II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change

In its filing with the Commission, the self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in sections A, B and C below, of the
most significant aspects of such statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule Change

1. Purpose
The Exchange proposes to add the Step-up Take Tier to the
Exchange's fee schedule in Footnote 2. A Member will qualify for the
Step-up Take Tier by (i) adding an average daily volume (``ADV'') of at
least 2 million shares on a daily basis, measured monthly more than
that Member's September 2012 added ADV (the ``September Added
Baseline''); and (ii) removing at least 0.40% total consolidated volume
(``TCV'') on a daily basis, measured monthly more than that Member's
September 2012 removed ADV (the ``September Removal Baseline'').
Members qualifying for the Step-up Take Tier will earn a rebate of
$0.0030 per share for orders that add liquidity and yield Flags B, V,
Y, 3 and 4, and will be assessed a fee of $0.0028 per share for orders
that remove liquidity and yield Flags N, W, BB, PI, and 6.\4\
Accordingly, the Exchange proposes to append Footnote 2 to the default
rates for adding and removing liquidity on the fee schedule, and Flags
B, V, Y, 3, 4, N, W, BB, PI, and 6. The Exchange believes the Step-Up
Take Tier will encourage large market participants, who are not
currently large takers, to grow their take volume over an established
baseline in order to achieve the tier.
---------------------------------------------------------------------------

\4\ The Exchange notes that to the extent Members qualify for a
rebate higher than $0.0030 per share through other volume tiers,
such as the Mega Tier, Market Depth Tier or the Ultra Tier, they
will earn the higher rebate on the add flags instead of the Step-up
Take Tier. In addition, such Members will still qualify for the
reduced charge of $0.0028 per share for the removal flags.
---------------------------------------------------------------------------

In Footnote 8 of the fee schedule that is appended to Flag SW., the
Exchange proposes to assess a fee of $0.0025 per share in lieu of the
current fee of $0.0023 per share for Members' orders that are routed
using the SWPA, SWPB or SWPC routing strategies \5\ and remove
liquidity from the New York Stock Exchange (``NYSE''), yielding Flag D.
This proposed change represents a pass-through of the rate that Direct
Edge ECN LLC d/b/a DE Route (``DE Route''), the Exchange's affiliated
routing broker dealer, is charged for routing orders to NYSE, in
response to the pricing changes in NYSE's filing with the Securities
and Exchange Commission (``SEC'').\6\ Accordingly, the Exchange
proposes to delete the reference to the fee of $0.0023 per share in
Footnote 8 because the rate for Flag D is $0.0025 per share. Therefore,
the Exchange will assess a charge of $0.0025 for Members' orders that
are routed using the SWPA, SWPB or SWPC routing strategies and remove
liquidity from NYSE, yielding Flag D. In addition, the Exchange
proposes deleting the reference to ``either'' in the text of Footnote 8
given it is grammatically incorrect. The Exchange notes that its
proposed deletion does not alter the intended purpose of the footnote.
---------------------------------------------------------------------------

\5\ As defined in Exchange Rules 11.9(b)(3)(o), (p) and (q).
\6\ See Securities Exchange Release No. 68021 (October 9, 2012),
77 FR 63406 (October 16, 2012) (SR-NYSE-2012-50).
---------------------------------------------------------------------------

In Footnote 3 of the fee schedule that is appended to Flags C, D,
J, L and 2, the Exchange proposes to assess a fee of 0.30% of the
dollar value of the transaction in lieu of the current fee of $0.0023
per share for stocks priced below $1.00 that are routed or re-routed to
NYSE and remove liquidity, yielding Flag D.\7\ This proposed change now
represents a pass-through of the rate that DE Route is charged for
routing orders to NYSE that remove liquidity.\8\
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\7\ The Exchange does not propose to amend the rates for stocks
priced below $1.00 that are routed to Nasdaq OMX BX (``BX'') or
NASDAQ, yielding Flags C, J, L and 2, as described in Footnote 3 of
the fee schedule.
\8\ Prior to March 1, 2012, the NYSE Price List generally
specified that the applicable rate was the lesser of (i) 0.3% of the
total dollar value of the transaction and (ii) $0.0023 per share.
See Securities Exchange Act Release No. 66600, (March 14, 2012), 77
FR 16298 (March 20, 2012) (SR-NYSE-2012-07). Effective March 1,
2012, the rate for these transactions with a per-share price of less
than $1.00 is now 0.3% of the total dollar value of the transaction.
---------------------------------------------------------------------------

On Flag RS, the Exchange proposes to offer a rebate of $0.0026 per
share \9\ in lieu of the current rebate of $0.0016 per share for orders
that are routed to the Nasdaq OMX PSX (``PSX'') and add liquidity. This
proposed change represents a pass-through of the rebate that DE Route
receives for routing orders to PSX, in response to recent pricing
changes in PSX's filing with the SEC.\10\
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\9\ The Exchange notes that it is passing through the standard
rebate of $0.0026 per share even though it possibly can achieve a
tiered rebate of $0.0028 per share if it meets certain criteria.
\10\ See Securities Exchange Release No. 68052 (October 12,
2012), 77 FR 64170 (October 18, 2012) (SR-PHLX-2012-119).
---------------------------------------------------------------------------

Currently, the Exchange charges Members a rate of $0.0027 per share
for orders that are routed to PSX using the ROUC or ROUE routing
strategies,\11\ yielding Flag K. The Exchange proposes to increase the
rate to $0.0028 per share for orders that yield Flag K in response to
recent pricing changes in PSX's filing with the SEC.\12\
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\11\ As defined in Exchange Rules 11.9(b)(3)(a) and (c).
\12\ See Securities Exchange Release No. 68052 (October 12,
2012), 77 FR 64170 (October 18, 2012) (SR-PHLX-2012-119).
---------------------------------------------------------------------------

The Exchange proposes adding the title ``EdgeBook Depth Fees'' to
the fee schedule describing the fees for the EdgeBook Depth X to
increase the transparency of the fee schedule for Members.
The Exchange also proposes deleting the dollar sign ($) on the fee
table next to the fees on Flags N, W, 6, BB and PI. The Exchange
regards this change as non-substantive in nature and is intended to
conform to the other rates displayed on the fee table.
The Exchange proposes to implement these amendments to its fee
schedule on November 1, 2012.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Securities and Exchange Act of
1934 (the ``Act''),\13\ in general, and furthers the objectives of
Section 6(b)(4),\14\ in particular, as it is designed to provide for
the equitable allocation of reasonable dues, fees and other charges
among its

[[Page 67697]]

Members and other persons using its facilities.
---------------------------------------------------------------------------

\13\ 15 U.S.C. 78f.
\14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

The Exchange believes that the proposed Step-up Take Tier 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 requirements of the Step-up Take Tier to add ADV of at
least 2 million shares (on a daily basis, measured monthly) more than
the Member's September Added Baseline and to remove at least 0.40% TCV
(on a daily basis, measured monthly) more than the Member's September
Removal Baseline incentivizes substantial take volume from Members that
generally add and remove volume from the Exchange by offering Members
an increased add rebate of $0.0030 per share and a discounted removal
rate of $0.0028 per share. The Exchange also believes that establishing
Member's September Added Baseline and September Removal Baselines
rewards liquidity provision attributes, encourages price discovery and
market transparency by encouraging growth in liquidity over a defined
baseline. The Exchange believes the Step-Up Take Tier will also
encourage large market participants, who are not currently large
takers, to grow their take volume over an established baseline in order
to achieve the tier. In addition, the Exchange believes that these
proposed amendments are non-discriminatory because they apply uniformly
to all Members.
The Exchange believes the Step-up Take Tier will increase volume on
the Exchange. Therefore, the Exchange can increase the add rebate from
$0.0023 per share to $0.0030 per share and discount the removal rate
from $0.0030 per share to $0.0028 per share. The increased volume
increases potential revenue to the Exchange, and allows 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 higher rebates and 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. Volume-based rebates
such as the one proposed herein have been widely adopted in the cash
equities markets, and are equitable because they are open to all
Members on an equal basis and provide discounts that are reasonably
related to the value to an exchange's market quality associated with
higher levels of market activity, such as higher levels of liquidity
provision and introduction of higher volumes of orders into the price
and volume discovery processes.
The Step-Up Take Tier represents an equitable allocation of
reasonable dues, fees, and other charges. First, the Step-Up Take Tier
allows the Exchange to compete with other exchanges such as NASDAQ,
NYSE ARCA and BATS BZX in offering a discounted removal rate that is
designed to incent fee sensitive liquidity takers to EDGX if they are
willing to increase or grow their volume over an established baseline.
This incentive recognizes that liquidity takers often have different
trading strategies and types of order flow that they typically handle--
such as market orders, marketable limit orders, or proprietary removal
strategies. Thus, when multiple exchanges are quoting at the same price
level, the Exchange believes that certain liquidity takers that are
incented to achieve the Step-Up Take Tier would be attracted to EDGX
first. In turn, this would lead to increased price discovery on EDGX,
result in additional prints on the Tape, and would have the effect of
bringing additional liquidity providers to the exchange, thus
bolstering its standing and value as a market. Since the Step-Up Take
Tier offers lower removal fees for Members and fosters competition
among exchanges, it could translate into costs savings for all market
participants and their end customers. The Exchange also believes that
the $0.0028 per share removal rate makes EDGX a more attractive venue
to take liquidity from, which brings a higher quality of order flow to
the EDGX Exchange and supports price discovery on EDGX. Finally, the
Exchange believes that the Step-Up Take Tier will also help it to grow
its market share as new takers who are incentivized to achieve the
Step-Up Take Tier would send additional volume to the Exchange or
remove additional shares from the Exchange in future trading
opportunities. In addition, the Exchange believes that the proposed
Step-Up Take Tier is non-discriminatory because it applies the same
criteria uniformly to all Members.
In addition, the criteria for the Step-up Take Tier is also
reasonable as compared to similar pricing mechanisms employed by NYSE
Arca,\15\ where NYSE Arca offers customers step-up tiers for Tape B and
C securities that discount the default removal rate of $0.0030 per
share when a baseline ADV is achieved. The Tape B Step Up Tier requires
customers to add in excess of the greater of (i) 0.25% of US Tape B ADV
over a January 2012 benchmark or (ii) 20% more than their January 2012
benchmark to earn a discounted removal rate of $0.0026 per share. In
addition, the Tape C Step Up Tier requires customers to add in excess
of the greater of (i) 0.10% of US Tape C ADV over a January 2012
benchmark or (ii) 20% more than their January 2012 benchmark plus 20%to
earn a discounted removal rate of $0.0029 per share. The Exchange's
discounted removal rate from $0.0030 per share to $0.0028 per share for
Members that achieve the Step-up Take Tier is also reasonable because
it is within the range of discounts offered by NYSE Arca, where the
default removal rate is $0.0030 per share and customers that qualify
for the step-up earn discounts of $0.0026 per share or $0.0029 per
share.
---------------------------------------------------------------------------

\15\ See NYSE Arca Equities Trading Fees, https://usequities.nyx.com/markets/nyse-arca-equities/trading-fees. See also
Securities Exchange Release No. 66568 (March 9, 2012), 77 FR 15819
(March 16, 2012) (SR-NYSEARCA-2012-17).
---------------------------------------------------------------------------

The proposed rate change in Footnote 8 associated with routing
orders to NYSE through DE Route on the Exchange's fee schedule is a
pass-through rate from DE Route to the Exchange and from the Exchange,
in turn, to its Members. The Exchange's proposal represents an
equitable allocation of reasonable dues, fees, and other charges among
Members of the Exchange and other persons using its facilities because
the Exchange does not levy additional fees or offer additional rebates
for orders that it routes to NYSE through DE Route. The Exchange notes
that routing through DE Route is voluntary. Currently, in Footnote 8,
for orders yielding Flag D that use the SWPA, SWPB, or SWPC routing
strategies and remove liquidity from NYSE, NYSE charged DE Route a fee
of $0.0023 per share, which, in turn, was passed through to the
Exchange. The Exchange, in turn, charged its Members a fee of $0.0023
per share as a pass-through. On October 1, 2012, NYSE increased the
rate it charges its customers, such as DE Route, from $0.0023 per share
to a charge of $0.0025 per share for orders that are routed or re-
routed to NYSE and remove liquidity. Therefore, the Exchange believes
that the proposed change in Footnote 8 from a fee of $0.0023 per share
to a fee of $0.0025 per share is equitable and reasonable because it
accounts for the pricing changes on NYSE. In addition, the proposal
allows the Exchange to continue to charge its Members a pass-through
rate for orders that are routed or re-routed to NYSE and remove
liquidity using DE Route. Lastly, the Exchange

[[Page 67698]]

also believes that the proposed amendment is non-discriminatory because
it applies uniformly to all Members.
The proposed rate change in Footnote 3 associated with routing
orders to NYSE through DE Route now represents a pass-through rate from
DE Route to the Exchange and from the Exchange, in turn, to its
Members. The Exchange's proposal represents an equitable allocation of
reasonable dues, fees, and other charges among Members of the Exchange
and other persons using its facilities because the Exchange does not
levy additional fees or offer additional rebates for orders that it
routes to NYSE through DE Route. The Exchange notes that routing
through DE Route is voluntary. For stocks priced below $1.00 that are
routed or re-routed to NYSE and remove liquidity, DE Route charged its
Members a fee of $0.0023 per share.\16\ NYSE modified the rate it
charged its customers, such as DE Route, effective March 2012, to a
charge of 0.30% of the dollar value of the transaction \17\ for stocks
priced below $1.00 that remove liquidity. Therefore, the Exchange
believes that the proposed change in Footnote 3 from a fee of $0.0023
per share to a fee of 0.30% of the dollar value of the transaction is
equitable and reasonable because it allows the Exchange to now charge
its Members a pass-through rate for orders that are routed or re-routed
to NYSE and remove liquidity using DE Route. Lastly, the Exchange also
believes that the proposed amendment is non-discriminatory because it
applies uniformly to all Members.
---------------------------------------------------------------------------

\16\ Prior to March 1, 2012, the NYSE Price List generally
specified that the applicable rate was the lesser of (i) 0.30% of
the total dollar value of the transaction and (ii) $0.0023 per
share. See Securities Exchange Act Release No. 66600, (March 14,
2012), 77 FR 16298 (March 20, 2012) (SR-NYSE-2012-07). Effective
March 1, 2012, the rate for these transactions with a per-share
price of less than $1.00 is now 0.3% of the total dollar value of
the transaction.
\17\ Id.
---------------------------------------------------------------------------

The proposed rate change for Flag RS associated with routing orders
to PSX through DE Route on the Exchange's fee schedule is a pass-
through rate from DE Route to the Exchange and from the Exchange, in
turn, to its Members. The Exchange's proposal represents an equitable
allocation of reasonable dues, fees, and other charges among Members of
the Exchange and other persons using its facilities because the
Exchange does not levy additional fees or offer additional rebates for
orders that it routes to PSX through DE Route. The Exchange notes that
routing through DE Route is voluntary. Currently, for orders yielding
Flag RS, PSX offers DE Route a rebate of $0.0016 per share, which, in
turn, is passed through to the Exchange. The Exchange, in turn, offers
its Members a rebate of $0.0016 per share as a pass-through. On October
1, 2012, PSX increased the rebate it offers its customers, such as DE
Route, from $0.0016 per share to a rebate of $0.0026 per share \18\ for
orders that are routed to PSX and add liquidity. Therefore, the
Exchange believes that the proposed change for Flag RS from a rebate of
$0.0016 per share to a rebate of $0.0026 per share is equitable and
reasonable because it accounts for the pricing changes on PSX. In
addition, the proposal allows the Exchange to continue to charge its
Members a pass-through of the standard rebate \19\ for orders that are
routed to PSX and add liquidity using DE Route. Lastly, the Exchange
also believes that the proposed amendment is non-discriminatory because
it applies uniformly to all Members.
---------------------------------------------------------------------------

\18\ The Exchange notes that it is passing through the standard
rebate of $0.0026 per share even though it possibly can achieve a
tiered rebate of $0.0028 per share if it meets certain criteria.
\19\ Id.
---------------------------------------------------------------------------

The Exchange believes that its proposal to amend the rate for Flag
K represents an equitable allocation of reasonable dues, fees and other
charges among its Members and other persons using its facilities. DE
Route is charged either a fee of $0.0028 per share or $0.0030 per share
depending on the routing strategy employed.\20\ Because the Exchange
does not distinguish between ROUC and ROUE when yielding Flag K, the
Exchange proposes to assess a charge of $0.0028 per share for Members
orders that are routed to PSX using either ROUC or ROUE, which
represents the more favorable of the two rates for its Members. The
Exchange's proposal to offer its Members the more favorable of two
rates is a reasonable pricing strategy because it is similar to the
pricing strategy of Flag C on EDGA Exchange, Inc. (``EDGA''), where
EDGA offers its customers the more favorable rebate of $0.0014 per
share for orders routed to BX that remove liquidity regardless of
whether the Member achieves the tiered volume necessary to exceed the
default rebate of $0.0005 per share.\21\ In addition, the rate of
$0.0028 per share for Flag K is reasonable because it is similar to the
rates charged by PSX for orders routed to its exchange, where PSX
assesses charges between $0.0028 per share and $0.0030 per share
depending on the routing strategy employed.\22\ Lastly, the Exchange
also believes that the proposed amendment is non-discriminatory because
it applies uniformly to all Members.
---------------------------------------------------------------------------

\20\ See NASDAQ OMX PSX, Price List--Trading and Connectivity,
https://www.nasdaqtrader.com/Trader.aspx?id=PSX_pricing.
\21\ See Securities Exchange Release No. 67980 (October 4,
2012), 77 FR 61800 (October 11, 2012) (SR-EDGA-2012-45).
\22\ See NASDAQ OMX PSX, Price List--Trading and Connectivity,
https://www.nasdaqtrader.com/Trader.aspx?id=PSX_pricing.
---------------------------------------------------------------------------

The Exchange's proposal to add the title ``EdgeBook Depth Fees'' to
the fee schedule increases transparency on the fee schedule for Members
and does not represent any change in EdgeBook Depth fees.
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.

B. Self-Regulatory Organization's Statement on Burden on Competition

The proposed rule change does not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.

C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others

The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from Members or other interested
parties.

III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action

The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \23\ and Rule 19b-4(f)(2) \24\ thereunder. At
any time within 60 days of the filing of such proposed rule change, the
Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of

[[Page 67699]]

investors, or otherwise in furtherance of the purposes of the Act.
---------------------------------------------------------------------------

\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 17 CFR 19b-4(f)(2).
---------------------------------------------------------------------------

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-2012-46 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-2012-46. 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-2012-46 and should be
submitted on or before December 4, 2012.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
---------------------------------------------------------------------------

\25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-27492 Filed 11-9-12; 8:45 am]
BILLING CODE 8011-01-P

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