Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend EDGX Rule 15.1(a) and (c), 71860-71864 [2012-29239]

Download as PDF 71860 Federal Register / Vol. 77, No. 233 / Tuesday, December 4, 2012 / Notices of the proposed rule change or such shorter time as designated by the Commission, the proposed rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 45 and Rule 19b-4(f)(6) thereunder.46 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. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: mstockstill on DSK4VPTVN1PROD with 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–NYSEMKT–2012–67 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–NYSEMKT–2012–67. 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 45 15 46 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). VerDate Mar<15>2010 17:31 Dec 03, 2012 Jkt 229001 10:00 a.m. and 3:00 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 available publicly. All submissions should refer to File Number SR– NYSEMKT–2012–67 and should be submitted on or before December 26, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.47 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–29179 Filed 12–3–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68312; File No. SR–NSX– 2012–015] Self-Regulatory Organizations; National Stock Exchange, Inc.; Notice of Designation of Longer Period for Commission Action on a Proposed Rule Change Relating to Adoption of Listing Standards for Compensation Committees and Advisors as Required by Rule 10C–1 November 28, 2012. I. Introduction On September 26, 2012, National Stock Exchange, Inc. (‘‘NSX’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’),2 and Rule 19b–4 thereunder,3 proposed a rule change to amend certain of its rules relating to listing standards for compensation committees and advisors. The proposed rule change was published for comment in the Federal Register on October 17, 2012.4 The Commission received no comment letters on this proposal.5 47 17 C.F.R. 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 4 See Securities Exchange Act Release No. 68039 (October 10, 2012), 77 FR 63914 (October 17, 2012) (SR–NSX–2012–15). 5 The Commission notes, however, that fourteen comment letters were received in total concerning similar rule changes proposed by other national securities exchanges. See Securities Exchange Act Release No. 68313, (November 28, 2012) (Notice of Designation of Longer Period for Commission Action on Proposed Rule Changes Relating to Adoption of Listing Standards for Compensation 1 15 PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 Section 19(b)(2) of the Act 6 provides that within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The 45th day from the publication of notice of filing of this proposed rule change is December 1, 2012. The Commission is extending the 45-day time period for Commission action on the proposed rule change. The Commission finds it appropriate to designate a longer period within which to take action on this proposed rule change so that it has sufficient time to consider this proposed rule change, which would revise the rules relating to compensation committee and compensation advisor requirements. Accordingly, the Commission, pursuant to Section 19(b)(2) of the Act,7 designates January 15, 2013, as the date by which the Commission should either approve or disapprove or institute proceedings to determine whether to disapprove this proposed rule change. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.8 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–29241 Filed 12–3–12; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68310; File No. SR–EDGX– 2012–47] Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend EDGX Rule 15.1(a) and (c) November 28, 2012. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the Committees and Advisors as Required by Rule 10C– 1 for BATS Exchange, Inc., NASDAQ OMX BX, Inc. Chicago Board Options Exchange, Inc., The NASDAQ Stock Market LLC, New York Stock Exchange LLC, NYSE Arca LLC, and NYSE MKT LLC). 6 15 U.S.C. 78s(b)(2). 7 15 U.S.C. 78s(b)(2). 8 17 CFR 200.30–3(a)(31). E:\FR\FM\04DEN1.SGM 04DEN1 Federal Register / Vol. 77, No. 233 / Tuesday, December 4, 2012 / Notices ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on November 26, 2012 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, 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 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. mstockstill on DSK4VPTVN1PROD 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 introduce new flags ZA and ZR for Members that utilize Retail Orders. Flag ZA is proposed to be yielded for those Members that use Retail Orders that add liquidity to EDGX and is proposed to be assigned a rebate of $0.0032 per share. Flag ZR is proposed to be yielded for those Members that use Retail Orders that remove liquidity from EDGX and is proposed to be assigned a charge of $0.0030 per share. Footnote 4, in turn, is proposed to be amended to define a ‘‘Retail Order’’ as an agency order that originates from a natural person and is 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 As defined in Exchange Rule 1.5(n). 2 17 VerDate Mar<15>2010 17:31 Dec 03, 2012 Jkt 229001 submitted to the Exchange by a Member, provided that no change is made to the terms of the order (e.g., price or side of market), and the order does not originate from a trading algorithm or any other computerized methodology. The Exchange proposes to append Footnote 4 to its default, non-tiered rebate of $0.0023 per share at the top of its fee schedule to signify a rate change if the conditions in Footnote 4 are met.4 For additional transparency, the Exchange also proposes to append Footnote 4 to the default, non-tiered removal rate of $0.0030 per share, even though a rate change is not signified. The Exchange notes that Members will only be able to designate their orders as ‘‘Retail Orders’’ that add/ remove liquidity using the FIX order entry protocol (FIX) but not the HP–API order entry protocol (HP–API). The Exchange also notes that Members using HP–API only who would like to take advantage of the new ‘‘Retail Order’’ flags can subscribe to FIX logical ports with the first five logical ports being provided free of charge while $500.00/ month is charged for each additional logical port. The Exchange also proposes to specify in Footnote 4 that to the extent Members qualify for a rebate higher than $0.0032 per share through other volume tiers, such as the Mega Tier ($0.0035 per share) or Market Depth Tier ($0.0033 per share), Members will earn the higher rebate on Flag ZA instead of its assigned rate. In addition, to the extent Members qualify for a removal rate lower than $0.0030 per share through any other tier, such as the Mega Tier ($0.0029 per share) or Step-up Take Tier ($0.0028 per share), then Members will earn [sic] the lower removal rate on Flag ZR instead of its assigned rate. A Member would be required to attest, in a form and/or manner prescribed by the Exchange, that they have implemented policies and procedures that are reasonably designed to ensure that every order designated by the Member as a ‘‘Retail Order’’ complies with the Exchange’s definition of a Retail Order, as described above. The proposed use of Flags ZA and ZR to identify Retail Orders would be optional for Members. Accordingly, a Member that does not opt to identify qualified orders as Retail Orders would choose not to make an attestation to the 4 Currently, the Exchange offers Members a default rate rebate of $0.0023 per share for orders in securities at or above $1.00 that add liquidity to the Exchange, where ‘‘default’’ refers to the standard rebate offered by the Exchange to Members absent Members qualifying for additional volume tiered pricing. PO 00000 Frm 00090 Fmt 4703 Sfmt 4703 71861 Exchange and thereby, not receive the rates associated with Flags ZA or ZR. Additionally, a Member would be required to have written policies and procedures reasonably designed to assure that it will only designate orders as Retail Orders if all requirements of a Retail Order are met. Such written policies and procedures must require the Member to (i) exercise due diligence before entering a Retail Order to assure that entry as a Retail Order is in compliance with the requirements specified by the Exchange, and (ii) monitor whether orders entered as Retail Orders meet the applicable requirements. If the Member represents Retail Orders from another broker-dealer customer, the Member’s supervisory procedures must be reasonably designed to assure that the orders it receives from such broker-dealer customer that it designates as Retail Orders meet the definition of a Retail Order. The Member must (i) obtain an annual written representation, in a form acceptable to the Exchange, from each broker-dealer customer that sends it orders to be designated as Retail Orders that entry of such orders as Retail Orders will be in compliance with the requirements specified by the Exchange, and (ii) monitor whether its brokerdealer customer’s Retail Order flow continues to meet the applicable requirements.5 The Exchange further proposes that it may disqualify a Member from qualifying for Flags ZA and ZR if the Exchange determines, in its sole discretion, that a Member has failed to abide by the requirements proposed herein, including, for example, if a Member designates orders submitted to the Exchange as Retail Orders but those orders fail to meet any of the requirements of Retail Orders. Tiered or non-tiered default rates would apply based on the Member’s qualifying levels for a Member that is disqualified from qualifying for Flags ZA and ZR. The Exchange also proposes to amend the text of the first paragraph of Footnote 1 to include Flag ZR as part of the list of ‘‘removal flags,’’ where Flag ZR removes liquidity from the EDGX Book 6 and qualifies for the removal rate of $0.0029 per share in connection with satisfying the criteria for the Mega Tier rebate. The Exchange also proposes to amend the text of Footnote 2 to include Flag ZR as part of the ‘‘remove liquidity’’ flags 5 The Financial Industry Regulatory Authority, Inc., on behalf of the Exchange, will review a Member’s compliance with these requirements through an exam-based review of the Member’s internal controls. 6 As defined in Exchange Rule 1.5(d). E:\FR\FM\04DEN1.SGM 04DEN1 71862 Federal Register / Vol. 77, No. 233 / Tuesday, December 4, 2012 / Notices listed therein that qualify for the StepUp Take Tier reduced charge of $0.0028 per share for the removal flags.7 The Exchange proposes to amend the text of Footnote 13, sections (i) and (ii), to include Flags ZA and ZR as qualifying ‘‘added flags’’ and ‘‘removal flags,’’ respectively, for the Investor Tier. The Exchange proposes to implement these amendments to its fee schedule on December 1, 2012. 2. Statutory Basis mstockstill on DSK4VPTVN1PROD with The Exchange believes that the proposed rule change is consistent with Section 6(b) of the Act,8 in general, and furthers the objectives of Section 6(b)(4) of the Act,9 in particular, because it provides for the equitable allocation of reasonable dues, fees, and other charges among its Members, issuers and other persons using its facilities and does not unfairly discriminate between customers, issuers, brokers or dealers. The Exchange believes that the proposed rule change is reasonable, equitable and not unfairly discriminatory because it would encourage Members to send additional Retail Orders that add liquidity to the Exchange for execution in order to qualify for an incrementally higher credit for such executions that add liquidity on the Exchange.10 In this regard, the Exchange believes that maintaining or increasing the proportion of Retail Orders in exchangelisted securities that are executed on a registered national securities exchange (rather than relying on certain available off-exchange execution methods) would contribute to investors’ confidence in the fairness of their transactions and would benefit all investors by deepening the Exchange’s liquidity pool, supporting the quality of price discovery, promoting market transparency and improving investor protection. The Exchange notes that a significant percentage of the orders of individual investors are executed over-the7 The Exchange notes that where Members that have Retail Orders that add liquidity to EDGX and also qualify for the Step-Up Take Tier, the Exchange would provide such Members the more favorable rebate of $0.0032 per share. This is made clear in the language in the second paragraph of proposed Footnote 4, as described above. 8 15 U.S.C. 78f. 9 15 U.S.C. 78f(b)(4). 10 The Exchanges notes that the removal fee through Flag ZR is the same as the default, nontiered removal rate. Thus, the Exchange believes that there would be a neutral effect on removers of liquidity as the Exchange is neither incenting nor disincentivizing the use of Flag ZR. VerDate Mar<15>2010 17:31 Dec 03, 2012 Jkt 229001 counter.11 The Exchange believes that it is thus appropriate to create a financial incentive to bring more retail order flow to a public market, such as the Exchange over off-exchange venues. The Exchange believes that investor protection and transparency is promoted by rewarding displayed liquidity on exchanges over off-exchange executions. By offering a proposed rebate of $0.0032 per share for Flag ZA, the Exchange believes it will encourage use of Retail Orders, while maintaining consistency with the Exchange’s overall pricing philosophy of encouraging displayed liquidity. The Exchange places a higher value on displayed liquidity because the Exchange believes that displayed liquidity is a public good that benefits investors and traders generally by providing greater price transparency and enhancing public price discovery, which ultimately lead to substantial reductions in transaction costs. The Exchange also notes that the Commission recently approved a similar proposal by the New York Stock Exchange, Inc. (‘‘NYSE’’) and NYSE MKT LLC (‘‘NYSE MKT’’).12 Accordingly, the proposal generally encourages competition between exchange venues for retail order flow and encourages additional retail order flow. The Exchange believes that a differential pricing structure for Retail Orders is not unfairly discriminatory. As stated in the NYSE RLP Approval Order, the ‘‘Commission has previously recognized that the markets generally distinguish between individual retail investors, whose orders are considered desirable by liquidity providers because such retail investors are presumed on average to be less informed about shortterm price movements, and professional traders, whose orders are presumed on average to be more informed.’’ 13 The 11 See Concept Release on Equity Market Structure, Securities Exchange Act Release No. 61358 (January 14, 2010), 75 FR 3594 (January 21, 2010) (noting that dark pools and internalizing broker-dealers executed approximately 25.4% of share volume in September 2009). See also Mary L. Schapiro, Strengthening Our Equity Market Structure (Speech at the Economic Club of New York, Sept. 7, 2010) (available on the Commission’s Web site). In her speech, Chairman Schapiro noted that nearly 30 percent of volume in U.S.-listed equities was executed in venues that do not display their liquidity or make it generally available to the public and the percentage was increasing nearly every month. 12 See Securities Exchange Act Release No. 67347 (July 3, 2012), 77 FR 40673 (July 10, 2012) (SR–NYSE–2011–55; SR–NYSEAmex– 2011–84) (the ‘‘RLP Approval Order’’). 13 See Securities Exchange Act Release No. 67347 (July 3, 2012), 77 FR 40673 (July 10, 2012) (SR–NYSE–2011–55; SR–NYSEAmex– 2011–84) (the ‘‘NYSE RLP Approval Order’’). In PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 Exchange’s proposed differential pricing structure for Retail Orders raises similar policy considerations as the rules approved by the Commission in the NYSE RLP Approval Order, which account for the difference of assumed information and sophistication level between different trading participants by providing Retail Orders access to better rebates. The Exchange understands that Section 6(b)(5) of the Act 14 prohibits an exchange from establishing rules that are designed to permit unfair discrimination between market participants. However, Section 6(b)(5) of the Act does not prohibit exchange members or other broker-dealers from discriminating, so long as their activities are otherwise consistent with the federal securities laws. While the Exchange believes that markets and price discovery optimally function through the interactions of diverse flow types, it also believes that growth in internalization has required differentiation of retail order flow from other order flow types. The differentiation proposed herein by the Exchange is not designed to permit unfair discrimination, but instead to promote a competitive process around retail executions such that retail investors would receive better rebates than they currently do through bilateral internalization arrangements. Additionally, the Exchange believes that the proposed Retail Order rate for Flag ZA (rebate of $0.0032 per share) will incentivize Members to submit Retail Orders that add liquidity to the Exchange. As a result of the additional liquidity, the Exchange believes that this would result in improved market quality. The Exchange also believes that the proposed rates for Retail Orders (Flags conjunction with the approval of the NYSE Retail Liquidity Program, a nearly identical program was proposed and approved to operate on NYSE MKT (formerly, the American Stock Exchange), at 40679– 40680 (citing Concept Release on Equity Market Structure and approval of an options exchange program related to price improvement for retail orders). Certain options exchanges deploy this same rationale today through pricing structures that vary for a trading participant based on the capacity of the contra-side trading participant. See, e.g., Securities Exchange Act Release No. 63632 (January 3, 2011), 76 FR 1205 (January 7, 2011) (SR–BATS–2010–038) (notice of filing and immediate effectiveness of proposal to modify fees for BATS Exchange Inc. (‘‘BATS’’) Options, including liquidity rebates that are variable depending on the capacity of the contra-party to the transaction; see also Securities Exchange Act Release No. 67171 (June 8, 2012), 77 FR 35732 (June 14, 2012) (SR–NASDAQ–2012–068) (notice of filing and immediate effectiveness of proposal to modify fees for the NASDAQ Options Market, including certain fees and rebates that are variable depending on the capacity of the contraparty to the transaction). 14 15 U.S.C. 78f(b)(5). E:\FR\FM\04DEN1.SGM 04DEN1 mstockstill on DSK4VPTVN1PROD with Federal Register / Vol. 77, No. 233 / Tuesday, December 4, 2012 / Notices ZA and ZR, respectively) are equitable and not unfairly discriminatory because Members could qualify for the same rates (rebate of $0.0032 per share and charge of $0.0030 per share, respectively) through other volume discounts or through the default, nontiered removal rate. For example, Members could achieve the rebate of $0.0032 per share if they satisfy the conditions for the Mega Tier rebate of $0.0032 per share. Members could also achieve the removal fee of $0.0030 per share without satisfying an additional tier as $0.0030 per share is the default rate for removing liquidity on the Exchange’s fee schedule. Thus, the Exchange believes that there would be a neutral effect on removers of liquidity as the Exchange is neither incenting nor disincentivizing the use of Flag ZR. Moreover, the proposed use of Retail Orders, which are available for all Members that utilize FIX, is equitable and not unfairly discriminatory because FIX is available for all Members on an equal and non-discriminatory basis, as all Members can sign up for new logical ports using FIX or HP–API at a cost of $500/month (the first five DIRECT logical ports being provided free). The Exchange also notes that all Members that it expects will send Retail Orders currently maintain logical ports that utilize FIX. The Exchange also notes that the Members that only utilize HP– API are generally those that are more concerned with latency as they trade for their own accounts where their order flow typically would not qualify as retail order flow. Finally, all order entry protocols on the Exchange do not necessarily support all Exchange functions and are designed differently in order to support the Member base most likely to utilize them. The Exchange believes its amendments to footnotes 1, 2, and 13 support the Exchange’s efforts to achieve consistent application and specificity among the flags on the fee schedule and provide transparency for its Members. First, in SR–EDGX–2012– 39, the Exchange discounted certain ‘‘removal flags’’ if a Member satisfied the criteria for the Mega Tier rebate in Footnote 1.15 Since Flag ZR is a removal flag with an assigned rate of $0.0030 per share, the Exchange believes it is appropriate to include Flag ZR in its list of removal flags that would qualify for a discounted removal rate of $0.0029 per share. The Exchange also believes that these proposed amendments are 15 See Securities Exchange Act Release No. 67818 (September 10, 2012), 77 FR 56890 (September 14, 2012) (SR–EDGX–2012–39). VerDate Mar<15>2010 17:31 Dec 03, 2012 Jkt 229001 non-discriminatory because they apply to all Members. Secondly, in SR–EDGX–2012–46,16 the Exchange listed in Footnote 2 of the fee schedule those removal flags that would qualify for the Step-up Take Tier if a Member satisfied the criteria. Since Flag ZR is a removal flag with an assigned rate of $0.0030 per share, the Exchange believes it is appropriate to include Flag ZR in its list of removal flags that would qualify for a discounted removal rate of $0.0028 per share.17 The Exchange also believes that these proposed amendments are nondiscriminatory because they apply to all Members. Finally, in SR–EDGX–2012–12, the Exchange included ‘‘added’’ and ‘‘removal flags’’ in its calculation of the ‘‘add liquidity’’ to ‘‘removed liquidity’’ ratio to qualify for the Investor Tier.18 Since Flag ZR is a removal flag and Flag ZA is an add flag, the Exchange believes it is appropriate to include the volume from both of these flags in its calculation of the ‘‘add liquidity’’ to ‘‘removed liquidity’’ ratio. The Exchange also believes that these proposed amendments are nondiscriminatory because they apply to all Members. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues. In such an environment, the Exchange must continually review, and consider adjusting, its fees and credits to remain competitive with other exchanges. For the reasons described above, the Exchange believes that the proposed rule change reflects this competitive environment. B. Self-Regulatory Organization’s Statement on Burden on Competition This proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. 16 See Securities Exchange Act Release No. 68166 (November 6, 2012), 77 FR 67695 (November 13, 2012) (SR–EDGX–2012–46). 17 The Exchange notes that Flag ZA is not yielded with the Step-Up Take Tier, like other listed add liquidity flags listed in Footnote 2, as the rate provided on the Step-Up Take Tier for adding liquidity (rebate of $0.0030 per share) is not as favorable to Members as the rate yielded on Flag ZA itself (rebate of $0.0032 per share). As a result, Members that have Retail Orders that add liquidity to EDGX would receive the rebate of $0.0032 per share in the situation where the Member also qualifies for the Step-Up Take Tier. This is made clear in the language in the second paragraph of proposed Footnote 4, as described above. 18 See Securities Exchange Act Release No. 66762 (April 6, 2012), 77 FR 22053 (April 12, 2012) (SR– EDGX–2012–12). PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 71863 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 19 and Rule 19b–4(f)(2) 20 thereunder. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. 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–EDGX–2012–47 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–2012–47. 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 19 15 20 17 E:\FR\FM\04DEN1.SGM U.S.C. 78s(b)(3)(A). CFR 19b–4(f)(2). 04DEN1 71864 Federal Register / Vol. 77, No. 233 / Tuesday, December 4, 2012 / Notices 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– 2012–47 and should be submitted on or before December 26, 2012. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2012–29239 Filed 12–3–12; 8:45 am] BILLING CODE 8011–01–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration [Summary Notice No. PE–2012–50] Petition for Exemption; Summary of Petition Received Federal Aviation Administration (FAA), DOT. ACTION: Notice of petition for exemption received. AGENCY: This notice contains a summary of a petition seeking relief from specified requirements of 14 CFR. The purpose of this notice is to improve the public’s awareness of, and participation in, this aspect of FAA’s regulatory activities. Neither publication of this notice nor the inclusion or omission of information in the summary is intended to affect the legal status of the petition or its final disposition. DATE: Comments on this petition must identify the petition docket number and must be received on or before December 24, 2012. ADDRESSES: You may send comments identified by Docket Number FAA– 2012–1132 using any of the following methods: mstockstill on DSK4VPTVN1PROD with SUMMARY: 21 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 17:31 Dec 03, 2012 Jkt 229001 • Government-wide rulemaking Web site: Go to https://www.regulations.gov and follow the instructions for sending your comments electronically. • Mail: Send comments to the Docket Management Facility; U.S. Department of Transportation, 1200 New Jersey Avenue SE., West Building Ground Floor, Room W12–140, Washington, DC 20590. • Fax: Fax comments to the Docket Management Facility at 202–493–2251. • Hand Delivery: Bring comments to the Docket Management Facility in Room W12–140 of the West Building Ground Floor at 1200 New Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. Privacy: We will post all comments we receive, without change, to https:// www.regulations.gov, including any personal information you provide. Using the search function of our docket Web site, anyone can find and read the comments received into any of our dockets, including the name of the individual sending the comment (or signing the comment for an association, business, labor union, etc.). You may review DOT’s complete Privacy Act Statement in the Federal Register published on April 11, 2000 (65 FR 19477–78). Docket: To read background documents or comments received, go to https://www.regulations.gov at any time or to the Docket Management Facility in Room W12–140 of the West Building Ground Floor at 1200 New Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. FOR FURTHER INFORMATION CONTACT: Theresa White, ANM–113, Standardization Branch, Federal Aviation Administration, Transport Airplane Directorate, 1601 Lind Avenue SW., Renton, WA 98057–3356; email Theresa.j.White@FAA.gov; (425) 227– 2956; fax: 425–227–1320; or Andrea Copeland, ARM–208, Office of Rulemaking, Federal Aviation Administration, 800 Independence Avenue SW., Washington, DC 20591; email andrea.copeland@faa.gov; (202) 267–8081. This notice is published pursuant to 14 CFR 11.85. Issued in Washington, DC, on November 29, 2012. Lirio Liu, Director, Office of Rulemaking. Petition for Exemption Docket No.: FAA–2012–1132. Petitioner: The Boeing Company. Sections of 14 CFR Affected: 14 CFR 25.901(c) and 25.981(a)(3). PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 Description of Relief Sought: The petitioner seeks exemption from the provisions of 14 CFR 25.901(c), at Amendments 25–126, and 25.981(a)(3), at Amendments 25–125, at the system level as they apply to the fuel quantity indication system (FQIS) installed on the 767–200/–300/–300F/–400ER airplanes for the fuel quantity processor unit (FQPU) parts obsolescence modification. [FR Doc. 2012–29278 Filed 12–3–12; 8:45 am] BILLING CODE 4910–13–P DEPARTMENT OF TRANSPORTATION Federal Aviation Administration [Summary Notice No. PE–2012–46] Petition for Exemption; Summary of Petition Received Federal Aviation Administration (FAA), DOT. ACTION: Notice of petition for exemption received. AGENCY: This notice contains a summary of a petition seeking relief from specified requirements of 14 CFR. The purpose of this notice is to improve the public’s awareness of, and participation in, this aspect of FAA’s regulatory activities. Neither publication of this notice nor the inclusion or omission of information in the summary is intended to affect the legal status of the petition or its final disposition. DATES: Comments on this petition must identify the petition docket number and must be received on or before December 24, 2012. ADDRESSES: You may send comments identified by Docket Number FAA– 2012–0579 using any of the following methods: • Government-wide rulemaking Web site: Go to https://www.regulations.gov and follow the instructions for sending your comments electronically. • Mail: Send comments to the Docket Management Facility; U.S. Department of Transportation, 1200 New Jersey Avenue SE., West Building Ground Floor, Room W12–140, Washington, DC 20590. • Fax: Fax comments to the Docket Management Facility at 202–493–2251. • Hand Delivery: Bring comments to the Docket Management Facility in Room W12–140 of the West Building Ground Floor at 1200 New Jersey Avenue SE., Washington, DC, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. Privacy: We will post all comments we receive, without change, to https:// SUMMARY: E:\FR\FM\04DEN1.SGM 04DEN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 77, Number 233 (Tuesday, December 4, 2012)]
[Notices]
[Pages 71860-71864]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-29239]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68310; File No. SR-EDGX-2012-47]

Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend
EDGX Rule 15.1(a) and (c)

November 28, 2012.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the

[[Page 71861]]

``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 26, 2012 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, 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.
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

The Exchange proposes to amend its fees and rebates applicable to
Members \3\ of the Exchange pursuant to EDGX Rule 15.1(a) and (c). 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 introduce new flags ZA and ZR for Members
that utilize Retail Orders. Flag ZA is proposed to be yielded for those
Members that use Retail Orders that add liquidity to EDGX and is
proposed to be assigned a rebate of $0.0032 per share. Flag ZR is
proposed to be yielded for those Members that use Retail Orders that
remove liquidity from EDGX and is proposed to be assigned a charge of
$0.0030 per share. Footnote 4, in turn, is proposed to be amended to
define a ``Retail Order'' as an agency order that originates from a
natural person and is submitted to the Exchange by a Member, provided
that no change is made to the terms of the order (e.g., price or side
of market), and the order does not originate from a trading algorithm
or any other computerized methodology. The Exchange proposes to append
Footnote 4 to its default, non-tiered rebate of $0.0023 per share at
the top of its fee schedule to signify a rate change if the conditions
in Footnote 4 are met.\4\ For additional transparency, the Exchange
also proposes to append Footnote 4 to the default, non-tiered removal
rate of $0.0030 per share, even though a rate change is not signified.
---------------------------------------------------------------------------

\4\ Currently, the Exchange offers Members a default rate rebate
of $0.0023 per share for
orders in securities at or above $1.00 that add liquidity to the
Exchange, where ``default''
refers to the standard rebate offered by the Exchange to Members
absent Members
qualifying for additional volume tiered pricing.
---------------------------------------------------------------------------

The Exchange notes that Members will only be able to designate
their orders as ``Retail Orders'' that add/remove liquidity using the
FIX order entry protocol (FIX) but not the HP-API order entry protocol
(HP-API). The Exchange also notes that Members using HP-API only who
would like to take advantage of the new ``Retail Order'' flags can
subscribe to FIX logical ports with the first five logical ports being
provided free of charge while $500.00/month is charged for each
additional logical port.
The Exchange also proposes to specify in Footnote 4 that to the
extent Members qualify for a rebate higher than $0.0032 per share
through other volume tiers, such as the Mega Tier ($0.0035 per share)
or Market Depth Tier ($0.0033 per share), Members will earn the higher
rebate on Flag ZA instead of its assigned rate. In addition, to the
extent Members qualify for a removal rate lower than $0.0030 per share
through any other tier, such as the Mega Tier ($0.0029 per share) or
Step-up Take Tier ($0.0028 per share), then Members will earn [sic] the
lower removal rate on Flag ZR instead of its assigned rate.
A Member would be required to attest, in a form and/or manner
prescribed by the Exchange, that they have implemented policies and
procedures that are reasonably designed to ensure that every order
designated by the Member as a ``Retail Order'' complies with the
Exchange's definition of a Retail Order, as described above. The
proposed use of Flags ZA and ZR to identify Retail Orders would be
optional for Members. Accordingly, a Member that does not opt to
identify qualified orders as Retail Orders would choose not to make an
attestation to the Exchange and thereby, not receive the rates
associated with Flags ZA or ZR.
Additionally, a Member would be required to have written policies
and procedures reasonably designed to assure that it will only
designate orders as Retail Orders if all requirements of a Retail Order
are met. Such written policies and procedures must require the Member
to (i) exercise due diligence before entering a Retail Order to assure
that entry as a Retail Order is in compliance with the requirements
specified by the Exchange, and (ii) monitor whether orders entered as
Retail Orders meet the applicable requirements. If the Member
represents Retail Orders from another broker-dealer customer, the
Member's supervisory procedures must be reasonably designed to assure
that the orders it receives from such broker-dealer customer that it
designates as Retail Orders meet the definition of a Retail Order. The
Member must (i) obtain an annual written representation, in a form
acceptable to the Exchange, from each broker-dealer customer that sends
it orders to be designated as Retail Orders that entry of such orders
as Retail Orders will be in compliance with the requirements specified
by the Exchange, and (ii) monitor whether its broker-dealer customer's
Retail Order flow continues to meet the applicable requirements.\5\
---------------------------------------------------------------------------

\5\ The Financial Industry Regulatory Authority, Inc., on behalf
of the Exchange, will review a Member's compliance with these
requirements through an exam-based review of the Member's internal
controls.
---------------------------------------------------------------------------

The Exchange further proposes that it may disqualify a Member from
qualifying for Flags ZA and ZR if the Exchange determines, in its sole
discretion, that a Member has failed to abide by the requirements
proposed herein, including, for example, if a Member designates orders
submitted to the Exchange as Retail Orders but those orders fail to
meet any of the requirements of Retail Orders. Tiered or non-tiered
default rates would apply based on the Member's qualifying levels for a
Member that is disqualified from qualifying for Flags ZA and ZR.
The Exchange also proposes to amend the text of the first paragraph
of Footnote 1 to include Flag ZR as part of the list of ``removal
flags,'' where Flag ZR removes liquidity from the EDGX Book \6\ and
qualifies for the removal rate of $0.0029 per share in connection with
satisfying the criteria for the Mega Tier rebate.
---------------------------------------------------------------------------

\6\ As defined in Exchange Rule 1.5(d).
---------------------------------------------------------------------------

The Exchange also proposes to amend the text of Footnote 2 to
include Flag ZR as part of the ``remove liquidity'' flags

[[Page 71862]]

listed therein that qualify for the Step-Up Take Tier reduced charge of
$0.0028 per share for the removal flags.\7\
---------------------------------------------------------------------------

\7\ The Exchange notes that where Members that have Retail
Orders that add liquidity to EDGX and also qualify for the Step-Up
Take Tier, the Exchange would provide such Members the more
favorable rebate of $0.0032 per share. This is made clear in the
language in the second paragraph of proposed Footnote 4, as
described above.
---------------------------------------------------------------------------

The Exchange proposes to amend the text of Footnote 13, sections
(i) and (ii), to include Flags ZA and ZR as qualifying ``added flags''
and ``removal flags,'' respectively, for the Investor Tier.
The Exchange proposes to implement these amendments to its fee
schedule on December 1, 2012.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act,\8\ in general, and furthers the
objectives of Section 6(b)(4) of the Act,\9\ in particular, because it
provides for the equitable allocation of reasonable dues, fees, and
other charges among its Members, issuers and other persons using its
facilities and does not unfairly discriminate between customers,
issuers, brokers or dealers.
---------------------------------------------------------------------------

\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

The Exchange believes that the proposed rule change is reasonable,
equitable and not unfairly discriminatory because it would encourage
Members to send additional Retail Orders that add liquidity to the
Exchange for execution in order to qualify for an incrementally higher
credit for such executions that add liquidity on the Exchange.\10\ In
this regard, the Exchange believes that maintaining or increasing the
proportion of Retail Orders in exchange-listed securities that are
executed on a registered national securities exchange (rather than
relying on certain available off-exchange execution methods) would
contribute to investors' confidence in the fairness of their
transactions and would benefit all investors by deepening the
Exchange's liquidity pool, supporting the quality of price discovery,
promoting market transparency and improving investor protection.
---------------------------------------------------------------------------

\10\ The Exchanges notes that the removal fee through Flag ZR is
the same as the default, non-tiered removal rate. Thus, the Exchange
believes that there would be a neutral effect on removers of
liquidity as the Exchange is neither incenting nor disincentivizing
the use of Flag ZR.
---------------------------------------------------------------------------

The Exchange notes that a significant percentage of the orders of
individual investors are executed over-the-counter.\11\ The Exchange
believes that it is thus appropriate to create a financial incentive to
bring more retail order flow to a public market, such as the Exchange
over off-exchange venues. The Exchange believes that investor
protection and transparency is promoted by rewarding displayed
liquidity on exchanges over off-exchange executions. By offering a
proposed rebate of $0.0032 per share for Flag ZA, the Exchange believes
it will encourage use of Retail Orders, while maintaining consistency
with the Exchange's overall pricing philosophy of encouraging displayed
liquidity. The Exchange places a higher value on displayed liquidity
because the Exchange believes that displayed liquidity is a public good
that benefits investors and traders generally by providing greater
price transparency and enhancing public price discovery, which
ultimately lead to substantial reductions in transaction costs.
---------------------------------------------------------------------------

\11\ See Concept Release on Equity Market Structure, Securities
Exchange Act Release No. 61358 (January 14, 2010), 75 FR 3594
(January 21, 2010) (noting that dark pools and internalizing broker-
dealers executed approximately 25.4% of share volume in September
2009). See also Mary L. Schapiro, Strengthening Our Equity Market
Structure (Speech at the Economic Club of New York, Sept. 7, 2010)
(available on the Commission's Web site). In her speech, Chairman
Schapiro noted that nearly 30 percent of volume in U.S.-listed
equities was executed in venues that do not display their liquidity
or make it generally available to the public and the percentage was
increasing nearly every month.
---------------------------------------------------------------------------

The Exchange also notes that the Commission recently approved a
similar proposal by the New York Stock Exchange, Inc. (``NYSE'') and
NYSE MKT LLC (``NYSE MKT'').\12\ Accordingly, the proposal generally
encourages competition between exchange venues for retail order flow
and encourages additional retail order flow.
---------------------------------------------------------------------------

\12\ See Securities Exchange Act Release No. 67347 (July 3,
2012), 77 FR 40673 (July 10,
2012) (SR-NYSE-2011-55; SR-NYSEAmex-2011-84) (the ``RLP Approval
Order'').
---------------------------------------------------------------------------

The Exchange believes that a differential pricing structure for
Retail Orders is not unfairly discriminatory. As stated in the NYSE RLP
Approval Order, the ``Commission has previously recognized that the
markets generally distinguish between individual retail investors,
whose orders are considered desirable by liquidity providers because
such retail investors are presumed on average to be less informed about
short-term price movements, and professional traders, whose orders are
presumed on average to be more informed.'' \13\ The Exchange's proposed
differential pricing structure for Retail Orders raises similar policy
considerations as the rules approved by the Commission in the NYSE RLP
Approval Order, which account for the difference of assumed information
and sophistication level between different trading participants by
providing Retail Orders access to better rebates.
---------------------------------------------------------------------------

\13\ See Securities Exchange Act Release No. 67347 (July 3,
2012), 77 FR 40673 (July 10,
2012) (SR-NYSE-2011-55; SR-NYSEAmex-2011-84) (the ``NYSE RLP
Approval Order''). In conjunction with the approval of the NYSE
Retail Liquidity Program, a nearly identical program was proposed
and approved to operate on NYSE MKT (formerly, the American Stock
Exchange), at 40679-40680 (citing Concept Release on Equity Market
Structure and approval of an options exchange program related to
price improvement for retail orders). Certain options exchanges
deploy this same rationale today through pricing structures that
vary for a trading participant based on the capacity of the contra-
side trading participant. See, e.g., Securities Exchange Act Release
No. 63632 (January 3, 2011), 76 FR 1205 (January 7, 2011) (SR-BATS-
2010-038) (notice of filing and immediate effectiveness of proposal
to modify fees for BATS Exchange Inc. (``BATS'') Options, including
liquidity rebates that are variable depending on the capacity of the
contra-party to the transaction; see also Securities Exchange Act
Release No. 67171 (June 8, 2012), 77 FR 35732 (June 14, 2012) (SR-
NASDAQ-2012-068) (notice of filing and immediate effectiveness of
proposal to modify fees for the NASDAQ Options Market, including
certain fees and rebates that are variable depending on the capacity
of the contra-party to the transaction).
---------------------------------------------------------------------------

The Exchange understands that Section 6(b)(5) of the Act \14\
prohibits an exchange from establishing rules that are designed to
permit unfair discrimination between market participants. However,
Section 6(b)(5) of the Act does not prohibit exchange members or other
broker-dealers from discriminating, so long as their activities are
otherwise consistent with the federal securities laws. While the
Exchange believes that markets and price discovery optimally function
through the interactions of diverse flow types, it also believes that
growth in internalization has required differentiation of retail order
flow from other order flow types. The differentiation proposed herein
by the Exchange is not designed to permit unfair discrimination, but
instead to promote a competitive process around retail executions such
that retail investors would receive better rebates than they currently
do through bilateral internalization arrangements. Additionally, the
Exchange believes that the proposed Retail Order rate for Flag ZA
(rebate of $0.0032 per share) will incentivize Members to submit Retail
Orders that add liquidity to the Exchange. As a result of the
additional liquidity, the Exchange believes that this would result in
improved market quality.
---------------------------------------------------------------------------

\14\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

The Exchange also believes that the proposed rates for Retail
Orders (Flags

[[Page 71863]]

ZA and ZR, respectively) are equitable and not unfairly discriminatory
because Members could qualify for the same rates (rebate of $0.0032 per
share and charge of $0.0030 per share, respectively) through other
volume discounts or through the default, non-tiered removal rate. For
example, Members could achieve the rebate of $0.0032 per share if they
satisfy the conditions for the Mega Tier rebate of $0.0032 per share.
Members could also achieve the removal fee of $0.0030 per share without
satisfying an additional tier as $0.0030 per share is the default rate
for removing liquidity on the Exchange's fee schedule. Thus, the
Exchange believes that there would be a neutral effect on removers of
liquidity as the Exchange is neither incenting nor disincentivizing the
use of Flag ZR.
Moreover, the proposed use of Retail Orders, which are available
for all Members that utilize FIX, is equitable and not unfairly
discriminatory because FIX is available for all Members on an equal and
non-discriminatory basis, as all Members can sign up for new logical
ports using FIX or HP-API at a cost of $500/month (the first five
DIRECT logical ports being provided free). The Exchange also notes that
all Members that it expects will send Retail Orders currently maintain
logical ports that utilize FIX. The Exchange also notes that the
Members that only utilize HP-API are generally those that are more
concerned with latency as they trade for their own accounts where their
order flow typically would not qualify as retail order flow. Finally,
all order entry protocols on the Exchange do not necessarily support
all Exchange functions and are designed differently in order to support
the Member base most likely to utilize them.
The Exchange believes its amendments to footnotes 1, 2, and 13
support the Exchange's efforts to achieve consistent application and
specificity among the flags on the fee schedule and provide
transparency for its Members. First, in SR-EDGX-2012-39, the Exchange
discounted certain ``removal flags'' if a Member satisfied the criteria
for the Mega Tier rebate in Footnote 1.\15\ Since Flag ZR is a removal
flag with an assigned rate of $0.0030 per share, the Exchange believes
it is appropriate to include Flag ZR in its list of removal flags that
would qualify for a discounted removal rate of $0.0029 per share. The
Exchange also believes that these proposed amendments are non-
discriminatory because they apply to all Members.
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\15\ See Securities Exchange Act Release No. 67818 (September
10, 2012), 77 FR 56890 (September 14, 2012) (SR-EDGX-2012-39).
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Secondly, in SR-EDGX-2012-46,\16\ the Exchange listed in Footnote 2
of the fee schedule those removal flags that would qualify for the
Step-up Take Tier if a Member satisfied the criteria. Since Flag ZR is
a removal flag with an assigned rate of $0.0030 per share, the Exchange
believes it is appropriate to include Flag ZR in its list of removal
flags that would qualify for a discounted removal rate of $0.0028 per
share.\17\ The Exchange also believes that these proposed amendments
are non-discriminatory because they apply to all Members.
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\16\ See Securities Exchange Act Release No. 68166 (November 6,
2012), 77 FR 67695 (November 13, 2012) (SR-EDGX-2012-46).
\17\ The Exchange notes that Flag ZA is not yielded with the
Step-Up Take Tier, like other listed add liquidity flags listed in
Footnote 2, as the rate provided on the Step-Up Take Tier for adding
liquidity (rebate of $0.0030 per share) is not as favorable to
Members as the rate yielded on Flag ZA itself (rebate of $0.0032 per
share). As a result, Members that have Retail Orders that add
liquidity to EDGX would receive the rebate of $0.0032 per share in
the situation where the Member also qualifies for the Step-Up Take
Tier. This is made clear in the language in the second paragraph of
proposed Footnote 4, as described above.
---------------------------------------------------------------------------

Finally, in SR-EDGX-2012-12, the Exchange included ``added'' and
``removal flags'' in its calculation of the ``add liquidity'' to
``removed liquidity'' ratio to qualify for the Investor Tier.\18\ Since
Flag ZR is a removal flag and Flag ZA is an add flag, the Exchange
believes it is appropriate to include the volume from both of these
flags in its calculation of the ``add liquidity'' to ``removed
liquidity'' ratio. The Exchange also believes that these proposed
amendments are non-discriminatory because they apply to all Members.
---------------------------------------------------------------------------

\18\ See Securities Exchange Act Release No. 66762 (April 6,
2012), 77 FR 22053 (April 12, 2012) (SR-EDGX-2012-12).
---------------------------------------------------------------------------

The Exchange notes that it operates in a highly competitive market
in which market participants can readily favor competing venues. In
such an environment, the Exchange must continually review, and consider
adjusting, its fees and credits to remain competitive with other
exchanges. For the reasons described above, the Exchange believes that
the proposed rule change reflects this competitive environment.

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

This 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 \19\ and Rule 19b-4(f)(2) \20\ thereunder. At
any time within 60 days of the filing of such proposed rule change, the
Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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-2012-47 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-2012-47. 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

[[Page 71864]]

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-2012-47 and should be submitted on or before
December 26, 2012.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
---------------------------------------------------------------------------

\21\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2012-29239 Filed 12-3-12; 8:45 am]
BILLING CODE 8011-01-P

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