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, 966-970 [2012-31752]

Download as PDF 966 Federal Register / Vol. 78, No. 4 / Monday, January 7, 2013 / Notices Filing Dates: The application was filed on September 7, 2012. Applicant’s Address: 11815 N. Pennsylvania Street, Carmel, IN 46032. For the Commission, by the Division of Investment Management, pursuant to delegated authority. Elizabeth M. Murphy, Secretary. [Release No. 34–68554; File No. SR–EDGX– 2012–48] 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 [FR Doc. 2012–31753 Filed 1–4–13; 8:45 am] BILLING CODE 8011–01–P December 31, 2012. SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold a Closed Meeting on Thursday, January 10, 2013 at 2:00 p.m. Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the Closed Meeting. Certain staff members who have an interest in the matters also may be present. The General Counsel of the Commission, or his designee, has certified that, in his opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) and 17 CFR 200.402(a)(3), (5), (7), 9(ii) and (10) permit consideration of the scheduled matters at the Closed Meeting. Commissioner Paredes, as duty officer, voted to consider the items listed for the Closed Meeting in a closed session. The subject matter of the Closed Meeting scheduled for Thursday, January 10, 2013 will be: Institution and settlement of injunctive actions; institution and settlement of administrative proceedings; and litigation matters. wreier-aviles on DSK7SPTVN1PROD with SECURITIES AND EXCHANGE COMMISSION At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551–5400. 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 December 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. Dated: January 3, 2013. Elizabeth M. Murphy, Secretary. 1 15 [FR Doc. 2013–00126 Filed 1–3–13; 4:15 pm] 2 17 BILLING CODE 8011–01–P VerDate Mar<15>2010 15:16 Jan 04, 2013 Jkt 229001 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 As defined in Exchange Rule 1.5(n). PO 00000 Frm 00039 Fmt 4703 Sfmt 4703 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 lower the default 4 rebate at the top of its fee schedule for adding liquidity in securities at or above $1.00 on EDGX from a rebate of $0.0023 per share to a rebate of $0.0021 per share. This change will also be reflected in the following added liquidity flags: Flags B, V, Y, 3, and 4. The Exchange notes that Members will still qualify for all tiered rebates, as discussed in Footnotes 1, 2, or 13 on the Exchange’s fee schedule.5 The Exchange proposes to increase the default rate for removing liquidity from EDGX in securities priced below $1 from 0.10% of the dollar value of the transaction to 0.30% of the dollar value of the transaction.6 As a result of the increase in rate, all flags that remove liquidity from the EDGX Book in securities priced less than $1.00 would be assessed a fee of 0.30% of the dollar value of the transaction. These include Flags N, W, 6, BB, MT, PI, PR, and ZR.7 For customer internalization, which occurs when two orders presented to the Exchange from the same Member (i.e., MPID) are presented separately and not in a paired manner, but nonetheless inadvertently match with one another,8 the Exchange currently charges $0.00035 per share per side of an execution (for adding liquidity and for removing liquidity) for Flags EA, ER, and 5. This charge occurs in lieu of the standard or tiered rebate/removal rates. Therefore, Members currently incur a total transaction cost of $0.0007 per share for both sides of an execution for customer internalization. In SR–EDGX–2011–13,9 the Exchange represented that it ‘‘will work promptly to ensure that the internalization fee is 4 ‘‘Default’’ refers to the standard rebated provided to Members for orders that add liquidity to the Exchange absent Members qualifying for additional volume tiered pricing. The Exchange notes that Members may qualify for a higher rebate than the default rebate if they satisfy the volume tier requirements outlined in Footnotes 1, 2, or 13. 5 References herein to ‘‘Footnotes’’ refer only to footnotes on the Exchange’s fee schedule and not to footnotes within the current filing. 6 This fee is consistent with the limitations of Regulation NMS, SEC Rule 610(c), for securities with a price of less than $1.00. 7 The Exchange notes that the rates in the table of flags on its fee schedule all apply to orders in securities priced $1 and over and therefore, no amendment is necessary to the rates displayed on this table at this time. 8 Members are advised to consult Rule 12.2 respecting fictitious trading. 9 See Securities Exchange Release No. 64452 (May 10, 2011), 76 FR 28110, 28111 (May 13, 2011) (SR– EDGX–2011–13). E:\FR\FM\07JAN1.SGM 07JAN1 Federal Register / Vol. 78, No. 4 / Monday, January 7, 2013 / Notices wreier-aviles on DSK7SPTVN1PROD with no more favorable than each prevailing maker/taker spread.’’ In order to ensure that the internalization fee is no more favorable than the proposed maker/taker spread of $0.0009 for the standard add rate (proposed rebate of $0.0021) and standard removal rate ($0.0030 charge per share), the Exchange is proposing to charge $0.00045 per side for customer internalization (flags EA, ER and 5). However, if a Member posts 10,000,000 shares or more of average daily volume (‘‘ADV’’) to EDGX, then the Member would get the current rate of $0.0001 per share per side for customer internalization.10 If this occurs, then the Member’s rate for inadvertently matching with itself decreases to $0.0001 per share per side, as reflected in Footnote 11, as the Member has met the least restrictive criteria to satisfy a tier. In each case (both tiered and standard rates), the charge for Members inadvertently matching with themselves is no more favorable than each maker/ taker spread. The applicable rate for customer internalization thus allows the Exchange to discourage potential wash sales. Similarly, as a result of the change in the default rate for removing liquidity in securities priced below $1, the Exchange proposes to place the rate of 0.15% of the dollar value of the transaction per share per side for customer internalization in securities priced below $1 in footnote 11, which is appended to Flags EA, ER, and 5.11 As a result, customers who internalize would be charged 0.15% of the dollar value of the transaction instead of the applicable add or remove rate for securities priced below $1.00. This proposed internalization fee is no more favorable than the proposed maker/taker spread. The Exchange also provides, in part, in Footnote 11 that for flags EA/ER 10 EDGX has a variety of tiered rebates ranging from $0.0028–$0.0035 per share, which makes its maker/taker spreads range from $0.0002 (standard removal rate—Super Tier or 0.65% TCV step-up tier rebate), 0 (standard removal rate—Step-Up Take tier or Investor Tier), ¥$0.0001 (standard removal rate—Ultra Tier rebate), ¥$0.0002 (standard removal rate—Mega Tier rebate of $0.0032), ¥$0.0003 (standard removal rate—Market Depth Tier rebate of $0.0033 per share), and ¥$0.0005 (standard removal rate—Mega Tier rebate of $0.0035 per share). As a result of the customer internalization charge, Members who internalized would be charged $0.0001 per share per side of an execution (total of $0.0002 per share) instead of capturing the maker/taker spreads resulting from achieving the tiered rebates. 11 This rate is derived from calculating the spread between adding and removing liquidity in securities below $1 and assuming a security is priced at $0.99 and dividing that result by two (2) to account for each side of the transaction. (0.30% × 1 share × $0.99) –(rebate of $0.00003 per share) = $0.00294/2 =$.00147 per share/$0.99 × 100 = approx. 0.15% of the dollar value of the transaction. VerDate Mar<15>2010 15:16 Jan 04, 2013 Jkt 229001 (internalization), if a Member internalizes more than 4% of their ADV on EDGX (added, removed, and routed liquidity) and the Member, at a minimum, meets the criteria for the Mega Tier rebate of $0.0032 per share in Footnote 1, then the Member receives the applicable rebate in Footnote 1 for adding liquidity, or is charged the applicable removal rate in Footnote 1. The Exchange also proposes to eliminate this rebate. The Exchange notes that Members can still qualify for an internalization rate of $0.0001 per share per side if they meet the other criteria outlined in Footnote 11 of the fee schedule. The Exchange also proposes to eliminate one method to achieve the Mega Tier rebate on its fee schedule. In Footnote 1, Members can qualify for the Mega Tier rebate and be provided a $0.0032 rebate per share for liquidity added on EDGX in either of two ways: (i) if the Member on a daily basis, measured monthly, posts 0.75% of the Total Consolidated Volume (‘‘TCV’’) in ADV; or (ii) if the Member on a daily basis, measured monthly, posts 0.12% of the TCV in ADV more than their February 2011 ADV added to EDGX. TCV is defined as volume reported by all exchanges and trade reporting facilities to the consolidated transaction reporting plans for Tapes A, B and C securities for the month prior to the month in which the fees are calculated. The Exchange proposes to delete the method provided in clause (i) of qualifying for the Mega Tier. Members can still qualify for the Mega Tier rebate by meeting the criteria in clause (ii), as outlined above. Retail Order Ports In SR–EDGX–2012–47,12 the Exchange provided that Members were 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) in order to qualify for the rates on Flags ZA and ZR. The Exchange defined a Retail Order in Footnote 4 to mean ‘‘(i) an agency order that originates from a natural person; (ii) is submitted to EDGX by a Member, provided that no change is made to the terms of the order; and (iii) the order does not originate from a trading algorithm or any other computerized methodology.’’ The Exchange also provided that Members must submit a signed written attestation, in a form prescribed by the Exchange, that they 12 See Securities Exchange Act Release No. 68310 (November 28, 2012), 77 FR 71860 (December 4, 2012) (SR–EDGX–2012–47). PO 00000 Frm 00040 Fmt 4703 Sfmt 4703 967 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 above requirements. Currently, Retail Orders may be submitted by Members on an order-byorder basis via FIX in order to qualify for the rates on Flags ZA (rebate of $0.0032 per share) and ZR (fee of $0.0030 per share). The Exchange proposes to amend the language in Footnote 4 on its fee schedule to allow Members to designate certain of their FIX ports at the Exchange as ‘‘Retail Order Ports’’ in order to qualify for the rates on Flags ZA and ZR. The attestation requirement, as described above and in SR–EDGX–2012–47,13 will continue to apply to all Members who submit Retail Orders, whether on an order-by-order basis or via Retail Order Ports. Members are not required to designate orders as Retail Orders. The Exchange proposes to implement these amendments to its fee schedule on January 1, 2013. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,14 in general, and furthers the objectives of Section 6(b)(4),15 in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its Members and other persons using its facilities. The Exchange believes that its proposal to lower the rebate from $0.0023 per share to $0.0021 per share is an equitable allocation of reasonable dues, fees and other charges as it will enable the Exchange to retain additional funds to offset increased administrative, regulatory, and other infrastructure costs associated with operating an exchange. The rate is reasonable in that it is comparable to rebates for adding liquidity offered by NYSE Arca, Inc. (rebates of 0.0021 per share for Tapes A/ C securities, $0.0022 per share for Tape B securities) 16 and on NASDAQ Stock Market LLC 17 (rebate of $0.0020 per share). The Exchange believes that the proposed rebate is non-discriminatory in that it applies uniformly to all Members. 13 Id. 14 15 U.S.C. 78f. U.S.C. 78f(b)(4). 16 NYSE Arca, Inc., NYSE Arca Equities Trading Fees, http://usequities.nyx.com/markets/nyse-arcaequities/trading-fees. 17 NASDAQ Stock Market LLC, Price List— Trading & Connectivity, http:// www.nasdaqtrader.com/ Trader.aspx?id=PriceListTrading2. 15 15 E:\FR\FM\07JAN1.SGM 07JAN1 968 Federal Register / Vol. 78, No. 4 / Monday, January 7, 2013 / Notices wreier-aviles on DSK7SPTVN1PROD with In addition, the Exchange believes that its proposal to increase the default removal rate in securities priced below $1.00 from 0.10% of the dollar value of the transaction to 0.30% of the dollar value of the transaction is an equitable allocation of reasonable dues, fees and other charges as it will enable the Exchange to retain additional funds to offset increased administrative, regulatory, and other infrastructure costs associated with operating an exchange. The rate is reasonable in that it is comparable to fees for removing liquidity in securities priced below $1.00 offered by New York Stock Exchange LLC 18 and NASDAQ Stock Market LLC 19 (each exchange assesses fees of 0.30% of the dollar value of the transaction). The Exchange believes that the increased fee for customer internalization from $0.00035 to $0.00045 per share per side of an execution for Flags EA, ER (regular trading session) and 5 (pre and post market) represents an equitable allocation of reasonable dues, fees, and other charges as it is designed to discourage Members from inadvertently matching with one another, thereby discouraging potential wash sales. The increased fee also allows the Exchange to offset its administrative, clearing, and other operating costs incurred in executing such trades. Finally, the fee is equitable in that it is consistent 20 with the EDGX fee structure that has a proposed maker/taker spread of $0.0009 per share (where the standard rebate to add liquidity on EDGX is proposed to be $0.0021 per share and the standard fee to remove liquidity is $0.0030 per share). This increased fee per side of an execution on Flags EA, ER, and 5 ($0.00045 per side instead of $0.00035 per side per share), yields a total cost of $0.0009, thus making the internalization fee consistent with the current maker/ taker spreads.21 The Exchange believes that the proposed rate is nondiscriminatory in that it applies uniformly to all Members. The Exchange’s fee for customer internalization for securities priced below $1.00 of 0.15% of the dollar value 18 New York Stock Exchange Price List 2012, http://usequities.nyx.com/sites/usequities.nyx.com/ files/nyse_price_list_11_09_12.pdf. 19 NASDAQ Stock Market LLC, Price List— Trading & Connectivity, http:// www.nasdaqtrader.com/ Trader.aspx?id=PriceListTrading2. 20 In each case, the internalization fee is no more favorable to the Member than each prevailing maker/taker spread. 21 The Exchange will continue to ensure that the internalization fee is no more favorable than each prevailing maker/taker spread. VerDate Mar<15>2010 15:16 Jan 04, 2013 Jkt 229001 of the transaction, as represented in footnote 11 appended to flags EA, ER, and 5, represents an equitable allocation of reasonable dues, fees, and other charges as it is designed to discourage Members from inadvertently matching with one another, thereby discouraging potential wash sales. The fee also allows the Exchange to offset its administrative, clearing, and other operating costs incurred in executing such trades. Finally, the fee is equitable in that it is consistent 22 with the EDGX fee structure that has a proposed maker/ taker spread of 0.15% of dollar value of the transaction per share per side, where the standard rebate to add liquidity on EDGX in securities priced below $1.00 is a rebate of $0.00003 per share and the proposed standard fee to remove liquidity is 0.30% of the dollar value of the transaction. The Exchange believes that the proposed rate is nondiscriminatory in that it applies uniformly to all Members. The deletion of the clause (i) in Footnote 1 as a method to qualify for the Mega Tier rebate of $0.0032 is equitable and reasonable as the rebate did not have the intended effect of incentivizing Members to add liquidity to EDGX by posting 0.75% of the TCV in ADV to EDGX. The Exchange also notes that with the deletion of this method of qualifying for the Mega Tier rebate of $0.0032, Members will continue to be subject to the other fees and tiers listed on the Exchange’s fee schedule and can continue to achieve the rebate of $0.0032 per share through alternative criteria (posting 0.12% of the TCV in ADV more than the Member’s February 2011 ADV added to EDGX). The Exchange also notes that the tier’s elimination will have a minimal impact on its Members as only one Member qualified for such rebate in the past three months. Lastly, the Exchange also believes that the proposed amendment is non-discriminatory because it applies uniformly to all Members. Similarly, the proposed elimination of Footnote 11’s rebate is equitable and reasonable in that Members also were not incentivized to add, remove, and route liquidity to EDGX. As a result of the internalization rebate, Members who internalized and met the criteria to satisfy the Mega Tier and the volume threshold of 4% of their ADV on EDGX would be rebated $0.00032 per share per side of an execution (the applicable rebate in Footnote 1 for adding liquidity) and be charged $0.0030 per share per side of an execution (the applicable removal rate in Footnote 1, in this case). As a result of the elimination of this tier in Footnote 11, Members will continue to be subject to the other fees and tiers listed on the Exchange’s fee schedule. The Exchange also notes that the tier’s elimination will have a minimal impact on its Members as only one Member qualified for such rebate in the past three months. Lastly, the Exchange also believes that the proposed amendment is nondiscriminatory because it applies uniformly to all Members. Finally, the Exchange’s proposal to expand the ability to use Retail Orders to those Members who prefer to designate certain of their FIX ports on the Exchange as ‘‘Retail Order Ports’’ represents an additional, voluntary choice that the Exchange provides to its Members in order to utilize Retail Orders. The additional option thus allows Members an alternative method through which Retail Orders can be designated, while ensuring that Members are required to have written policies and procedures designed to assure that they will only designate orders as Retail Orders if all requirements of a Retail Order are met. The Exchange believes that the proposed rule change is equitable and not unfairly discriminatory because it provides a second method for Retail Order designation and allows each Member to choose the designation method most convenient to it, recognizing that individual firms have different internal system configurations. By providing alternative avenues for Members to designate orders as Retail Orders, the Exchange believes that Members will choose the designation method that is most operationally efficient, potentially reducing transaction costs. The proposal is also non-discriminatory in that it applies uniformly to all Members equally. The Exchange also expects that this alternative way to designate orders as Retail Orders would incentivize more Members to utilize Retail Orders. The Exchange also notes that NYSE Arca currently supports Retail Order Ports.23 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 22 In each case, the internalization fee is no more favorable to the Member than each prevailing maker/taker spread. 23 See Exchange Act Release No. 67540 (July 30, 2012), 77 FR 46539 (August 3, 2012) (SR– NYSEArca–2012–77). PO 00000 Frm 00041 Fmt 4703 Sfmt 4703 E:\FR\FM\07JAN1.SGM 07JAN1 Federal Register / Vol. 78, No. 4 / Monday, January 7, 2013 / Notices wreier-aviles on DSK7SPTVN1PROD with deepening the Exchange’s liquidity pool, supporting the quality of price discovery, promoting market transparency and improving investor protection. 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 nondiscriminatory 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 either on an orderby-order basis or via designated Retail Order Ports 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 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 rebates 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 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. Proposing to allow Members to designate Retail Order Ports increases competition with exchanges such as NYSE Arca that currently allow such practice 24 and does not impose any burden on intramarket competition as all Members have an additional way to designate Retail Orders. The Exchange believes that its proposals to lower the rebate from 24 Id. VerDate Mar<15>2010 15:16 Jan 04, 2013 Jkt 229001 $0.0023 per share to $0.0021 per share will also assist in increasing competition in that its proposed rebate is comparable to rebates for adding liquidity offered by NYSE Arca, Inc. (rebates of $0.0021 per share for adding liquidity in Tapes A/C securities and $0.0022 per share for adding liquidity in Tape B securities) 25 and on NASDAQ Stock Market LLC 26 (rebate of $0.0020 per share). Similarly, the Exchange believes that its increase in its default removal rate in securities priced less than $1.00 from 0.10% of the dollar value of the transaction to 0.30% of the dollar value of the transaction will also assist in increasing competition as its proposed fee is comparable to fees on NYSE and NASDAQ for removing liquidity in securities priced below $1.00. The Exchange believes that both proposals will have no burden on intramarket competition as the rates apply uniformly to all Members that place orders in securities priced at or above $1.00 or below $1.00. The Exchange believes that its proposal to eliminate one method to achieve the Mega Tier on its fee schedule and eliminate its rebate for internalization in Footnote 11 will have no burden on intermarket or intramarket competition as Members are able to qualify for other tiered rebates and discounts at the Exchange or move their order flow to competing exchanges. Finally, the Exchange believes that its internalization rates for all securities (priced $1.00 and above and below $1.00) will also not burden intermarket or intramarket competition as the proposed rates in both cases are no more favorable than Members achieving the maker/taker spreads between the default add and remove rates on EDGX. 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) 25 NYSE Arca, Inc., NYSE Arca Equities Trading Fees, http://usequities.nyx.com/markets/nyse-arcaequities/trading-fees. 26 NASDAQ Stock Market LLC, Price List— Trading & Connectivity, http:// www.nasdaqtrader.com/ Trader.aspx?id=PriceListTrading2. PO 00000 Frm 00042 Fmt 4703 Sfmt 4703 969 of the Act 27 and Rule 19b–4(f)(2) 28 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 (http://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–EDGX–2012–48 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–2012–48. 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 (http://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; 27 15 28 17 E:\FR\FM\07JAN1.SGM U.S.C. 78s(b)(3)(A). CFR 19b–4(f)(2). 07JAN1 970 Federal Register / Vol. 78, No. 4 / Monday, January 7, 2013 / Notices 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– 2012–48 and should be submitted on or before January 28, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 Elizabeth M. Murphy, Secretary. [FR Doc. 2012–31752 Filed 1–4–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–68553; File No. SR–FICC– 2012–10] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Remove the Fee Related to the DTCC GCF Repo Index® From the Fee Structure of the Government Securities Division December 31, 2012. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder 2 notice is hereby given that on December 21, 2012 Fixed Income Clearing Corporation (‘‘FICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed change as described in Items I and II below, which Items have been prepared primarily by FICC. The Commission is publishing this notice to solicit comments on the proposed change from interested persons. wreier-aviles on DSK7SPTVN1PROD with I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FICC proposes to remove the fee related to the DTCC GCF Repo Index® from the Fee Structure of the Government Securities Division. The text of the proposed rule change was filed with the Commission as Exhibit 5 to the filing. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, FICC included statements concerning the purpose of and basis for the proposed rule change and discussed any 29 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 VerDate Mar<15>2010 15:16 Jan 04, 2013 Jkt 229001 comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FICC has prepared summaries, set forth in sections (A), (B), and (C) below, of the most significant aspects of these statements.3 (A) Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change The purpose of this filing is to discontinue the $250.00 monthly fee that GCF Repo® participants are required to pay in connection with the DTCC GCF Repo Index®. On October 18, 2010, FICC filed SR– FICC 2010–07 4 which permitted FICC to charge a monthly fee of $250 to all GCF Repo® participants. This fee covered the development and maintenance costs of the DTCC GCF Repo Index®. Because DTCC and NYSE Liffe have entered into an agreement whereby NYSE Liffe agrees to list futures based on the DTCC GCF Repo Index®, it is no longer necessary for FICC to charge a monthly fee to the GCF Repo® participants. As a result, the fee will be discontinued as of January 2, 2013 and the GSD Fee Structure will be revised to reflect this change. FICC believes that the proposed rule is consistent with the Act and the rules and regulations promulgated thereunder because it promotes the prompt and accurate clearance and settlement of securities transactions by helping ensures that participants are not charged unnecessary fees. (B) Self-Regulatory Organization’s Statement on Burden on Competition FICC does not believe that the proposed rule change would impose any burden on competition. (C) Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others Written comments on the proposed rule change have not been solicited or received. FICC will notify the Commission of any other written comments received by FICC. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 3 The Commission has modified the text of the summaries prepared by FICC. 4 See Securities Exchange Act Release No. 34– 63215 (October 29, 2010); 75 FR 213 (November 4, 2010) (SR–FICC–2010–07). PO 00000 Frm 00043 Fmt 4703 Sfmt 4703 19(b)(3)(A)(ii) of the Act 5 and Rule 19b– 4(f)(2) 6 thereunder because they constitute a change 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 Act.7 Electronic Comments • Use the Commissions Internet comment form (http://www.sec.gov/ rules/sro.shtml) or Send an email to rule-comments@sec.gov. Please include File Number SR–FICC–2012–10 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–FICC–2012–10. 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 (http://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 such filing also will be available for inspection and copying at the principal office of FICC and on FICC’s Web site at http://www.dtcc.com/downloads/ legal/rule_filings/2012/ficc/SR-FICC2012-10.pdf All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You 5 15 U.S.C. 78s(b)(3)(A)(ii). CFR 240.19b–4(f)(2). 7 15 U.S.C. 78s(b)(3)(C). 6 17 E:\FR\FM\07JAN1.SGM 07JAN1

Agencies

[Federal Register Volume 78, Number 4 (Monday, January 7, 2013)]
[Notices]
[Pages 966-970]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2012-31752]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-68554; File No. SR-EDGX-2012-48]


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

December 31, 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 December 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.
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    \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.
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    \3\ As defined in Exchange Rule 1.5(n).
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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 lower the default \4\ rebate at the top of 
its fee schedule for adding liquidity in securities at or above $1.00 
on EDGX from a rebate of $0.0023 per share to a rebate of $0.0021 per 
share. This change will also be reflected in the following added 
liquidity flags: Flags B, V, Y, 3, and 4. The Exchange notes that 
Members will still qualify for all tiered rebates, as discussed in 
Footnotes 1, 2, or 13 on the Exchange's fee schedule.\5\
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    \4\ ``Default'' refers to the standard rebated provided to 
Members for orders that add liquidity to the Exchange absent Members 
qualifying for additional volume tiered pricing. The Exchange notes 
that Members may qualify for a higher rebate than the default rebate 
if they satisfy the volume tier requirements outlined in Footnotes 
1, 2, or 13.
    \5\ References herein to ``Footnotes'' refer only to footnotes 
on the Exchange's fee schedule and not to footnotes within the 
current filing.
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    The Exchange proposes to increase the default rate for removing 
liquidity from EDGX in securities priced below $1 from 0.10% of the 
dollar value of the transaction to 0.30% of the dollar value of the 
transaction.\6\ As a result of the increase in rate, all flags that 
remove liquidity from the EDGX Book in securities priced less than 
$1.00 would be assessed a fee of 0.30% of the dollar value of the 
transaction. These include Flags N, W, 6, BB, MT, PI, PR, and ZR.\7\
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    \6\ This fee is consistent with the limitations of Regulation 
NMS, SEC Rule 610(c), for securities with a price of less than 
$1.00.
    \7\ The Exchange notes that the rates in the table of flags on 
its fee schedule all apply to orders in securities priced $1 and 
over and therefore, no amendment is necessary to the rates displayed 
on this table at this time.
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    For customer internalization, which occurs when two orders 
presented to the Exchange from the same Member (i.e., MPID) are 
presented separately and not in a paired manner, but nonetheless 
inadvertently match with one another,\8\ the Exchange currently charges 
$0.00035 per share per side of an execution (for adding liquidity and 
for removing liquidity) for Flags EA, ER, and 5. This charge occurs in 
lieu of the standard or tiered rebate/removal rates. Therefore, Members 
currently incur a total transaction cost of $0.0007 per share for both 
sides of an execution for customer internalization.
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    \8\ Members are advised to consult Rule 12.2 respecting 
fictitious trading.
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    In SR-EDGX-2011-13,\9\ the Exchange represented that it ``will work 
promptly to ensure that the internalization fee is

[[Page 967]]

no more favorable than each prevailing maker/taker spread.'' In order 
to ensure that the internalization fee is no more favorable than the 
proposed maker/taker spread of $0.0009 for the standard add rate 
(proposed rebate of $0.0021) and standard removal rate ($0.0030 charge 
per share), the Exchange is proposing to charge $0.00045 per side for 
customer internalization (flags EA, ER and 5). However, if a Member 
posts 10,000,000 shares or more of average daily volume (``ADV'') to 
EDGX, then the Member would get the current rate of $0.0001 per share 
per side for customer internalization.\10\ If this occurs, then the 
Member's rate for inadvertently matching with itself decreases to 
$0.0001 per share per side, as reflected in Footnote 11, as the Member 
has met the least restrictive criteria to satisfy a tier. In each case 
(both tiered and standard rates), the charge for Members inadvertently 
matching with themselves is no more favorable than each maker/taker 
spread. The applicable rate for customer internalization thus allows 
the Exchange to discourage potential wash sales.
---------------------------------------------------------------------------

    \9\ See Securities Exchange Release No. 64452 (May 10, 2011), 76 
FR 28110, 28111 (May 13, 2011) (SR-EDGX-2011-13).
    \10\ EDGX has a variety of tiered rebates ranging from $0.0028-
$0.0035 per share, which makes its maker/taker spreads range from 
$0.0002 (standard removal rate--Super Tier or 0.65% TCV step-up tier 
rebate), 0 (standard removal rate--Step-Up Take tier or Investor 
Tier), -$0.0001 (standard removal rate--Ultra Tier rebate), -$0.0002 
(standard removal rate--Mega Tier rebate of $0.0032), -$0.0003 
(standard removal rate--Market Depth Tier rebate of $0.0033 per 
share), and -$0.0005 (standard removal rate--Mega Tier rebate of 
$0.0035 per share). As a result of the customer internalization 
charge, Members who internalized would be charged $0.0001 per share 
per side of an execution (total of $0.0002 per share) instead of 
capturing the maker/taker spreads resulting from achieving the 
tiered rebates.
---------------------------------------------------------------------------

    Similarly, as a result of the change in the default rate for 
removing liquidity in securities priced below $1, the Exchange proposes 
to place the rate of 0.15% of the dollar value of the transaction per 
share per side for customer internalization in securities priced below 
$1 in footnote 11, which is appended to Flags EA, ER, and 5.\11\ As a 
result, customers who internalize would be charged 0.15% of the dollar 
value of the transaction instead of the applicable add or remove rate 
for securities priced below $1.00. This proposed internalization fee is 
no more favorable than the proposed maker/taker spread.
---------------------------------------------------------------------------

    \11\ This rate is derived from calculating the spread between 
adding and removing liquidity in securities below $1 and assuming a 
security is priced at $0.99 and dividing that result by two (2) to 
account for each side of the transaction. (0.30% x 1 share x $0.99) 
-(rebate of $0.00003 per share) = $0.00294/2 =$.00147 per share/
$0.99 x 100 = approx. 0.15% of the dollar value of the transaction.
---------------------------------------------------------------------------

    The Exchange also provides, in part, in Footnote 11 that for flags 
EA/ER (internalization), if a Member internalizes more than 4% of their 
ADV on EDGX (added, removed, and routed liquidity) and the Member, at a 
minimum, meets the criteria for the Mega Tier rebate of $0.0032 per 
share in Footnote 1, then the Member receives the applicable rebate in 
Footnote 1 for adding liquidity, or is charged the applicable removal 
rate in Footnote 1. The Exchange also proposes to eliminate this 
rebate. The Exchange notes that Members can still qualify for an 
internalization rate of $0.0001 per share per side if they meet the 
other criteria outlined in Footnote 11 of the fee schedule.
    The Exchange also proposes to eliminate one method to achieve the 
Mega Tier rebate on its fee schedule. In Footnote 1, Members can 
qualify for the Mega Tier rebate and be provided a $0.0032 rebate per 
share for liquidity added on EDGX in either of two ways: (i) if the 
Member on a daily basis, measured monthly, posts 0.75% of the Total 
Consolidated Volume (``TCV'') in ADV; or (ii) if the Member on a daily 
basis, measured monthly, posts 0.12% of the TCV in ADV more than their 
February 2011 ADV added to EDGX. TCV is defined as volume reported by 
all exchanges and trade reporting facilities to the consolidated 
transaction reporting plans for Tapes A, B and C securities for the 
month prior to the month in which the fees are calculated. The Exchange 
proposes to delete the method provided in clause (i) of qualifying for 
the Mega Tier. Members can still qualify for the Mega Tier rebate by 
meeting the criteria in clause (ii), as outlined above.

Retail Order Ports

    In SR-EDGX-2012-47,\12\ the Exchange provided that Members were 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) in order to qualify for the rates on 
Flags ZA and ZR. The Exchange defined a Retail Order in Footnote 4 to 
mean ``(i) an agency order that originates from a natural person; (ii) 
is submitted to EDGX by a Member, provided that no change is made to 
the terms of the order; and (iii) the order does not originate from a 
trading algorithm or any other computerized methodology.'' The Exchange 
also provided that Members must submit a signed written attestation, in 
a form prescribed by the Exchange, that they have implemented policies 
and procedures that are reasonably designed to ensure that every order 
designated by the Member as a Retail Order complies with the above 
requirements.
---------------------------------------------------------------------------

    \12\ See Securities Exchange Act Release No. 68310 (November 28, 
2012), 77 FR 71860 (December 4, 2012) (SR-EDGX-2012-47).
---------------------------------------------------------------------------

    Currently, Retail Orders may be submitted by Members on an order-
by-order basis via FIX in order to qualify for the rates on Flags ZA 
(rebate of $0.0032 per share) and ZR (fee of $0.0030 per share). The 
Exchange proposes to amend the language in Footnote 4 on its fee 
schedule to allow Members to designate certain of their FIX ports at 
the Exchange as ``Retail Order Ports'' in order to qualify for the 
rates on Flags ZA and ZR. The attestation requirement, as described 
above and in SR-EDGX-2012-47,\13\ will continue to apply to all Members 
who submit Retail Orders, whether on an order-by-order basis or via 
Retail Order Ports. Members are not required to designate orders as 
Retail Orders.
---------------------------------------------------------------------------

    \13\ Id.
---------------------------------------------------------------------------

    The Exchange proposes to implement these amendments to its fee 
schedule on January 1, 2013.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\14\ in general, and 
furthers the objectives of Section 6(b)(4),\15\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and other persons using its 
facilities.
---------------------------------------------------------------------------

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

    The Exchange believes that its proposal to lower the rebate from 
$0.0023 per share to $0.0021 per share is an equitable allocation of 
reasonable dues, fees and other charges as it will enable the Exchange 
to retain additional funds to offset increased administrative, 
regulatory, and other infrastructure costs associated with operating an 
exchange. The rate is reasonable in that it is comparable to rebates 
for adding liquidity offered by NYSE Arca, Inc. (rebates of 0.0021 per 
share for Tapes A/C securities, $0.0022 per share for Tape B 
securities) \16\ and on NASDAQ Stock Market LLC \17\ (rebate of $0.0020 
per share). The Exchange believes that the proposed rebate is non-
discriminatory in that it applies uniformly to all Members.
---------------------------------------------------------------------------

    \16\ NYSE Arca, Inc., NYSE Arca Equities Trading Fees, http://usequities.nyx.com/markets/nyse-arca-equities/trading-fees.
    \17\ NASDAQ Stock Market LLC, Price List--Trading & 
Connectivity, http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.

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[[Page 968]]

    In addition, the Exchange believes that its proposal to increase 
the default removal rate in securities priced below $1.00 from 0.10% of 
the dollar value of the transaction to 0.30% of the dollar value of the 
transaction is an equitable allocation of reasonable dues, fees and 
other charges as it will enable the Exchange to retain additional funds 
to offset increased administrative, regulatory, and other 
infrastructure costs associated with operating an exchange. The rate is 
reasonable in that it is comparable to fees for removing liquidity in 
securities priced below $1.00 offered by New York Stock Exchange LLC 
\18\ and NASDAQ Stock Market LLC \19\ (each exchange assesses fees of 
0.30% of the dollar value of the transaction).
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    \18\ New York Stock Exchange Price List 2012, http://usequities.nyx.com/sites/usequities.nyx.com/files/nyse_price_list_11_09_12.pdf.
    \19\ NASDAQ Stock Market LLC, Price List--Trading & 
Connectivity, http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
---------------------------------------------------------------------------

    The Exchange believes that the increased fee for customer 
internalization from $0.00035 to $0.00045 per share per side of an 
execution for Flags EA, ER (regular trading session) and 5 (pre and 
post market) represents an equitable allocation of reasonable dues, 
fees, and other charges as it is designed to discourage Members from 
inadvertently matching with one another, thereby discouraging potential 
wash sales. The increased fee also allows the Exchange to offset its 
administrative, clearing, and other operating costs incurred in 
executing such trades. Finally, the fee is equitable in that it is 
consistent \20\ with the EDGX fee structure that has a proposed maker/
taker spread of $0.0009 per share (where the standard rebate to add 
liquidity on EDGX is proposed to be $0.0021 per share and the standard 
fee to remove liquidity is $0.0030 per share).
---------------------------------------------------------------------------

    \20\ In each case, the internalization fee is no more favorable 
to the Member than each prevailing maker/taker spread.
---------------------------------------------------------------------------

    This increased fee per side of an execution on Flags EA, ER, and 5 
($0.00045 per side instead of $0.00035 per side per share), yields a 
total cost of $0.0009, thus making the internalization fee consistent 
with the current maker/taker spreads.\21\ The Exchange believes that 
the proposed rate is non-discriminatory in that it applies uniformly to 
all Members.
---------------------------------------------------------------------------

    \21\ The Exchange will continue to ensure that the 
internalization fee is no more favorable than each prevailing maker/
taker spread.
---------------------------------------------------------------------------

    The Exchange's fee for customer internalization for securities 
priced below $1.00 of 0.15% of the dollar value of the transaction, as 
represented in footnote 11 appended to flags EA, ER, and 5, represents 
an equitable allocation of reasonable dues, fees, and other charges as 
it is designed to discourage Members from inadvertently matching with 
one another, thereby discouraging potential wash sales. The fee also 
allows the Exchange to offset its administrative, clearing, and other 
operating costs incurred in executing such trades. Finally, the fee is 
equitable in that it is consistent \22\ with the EDGX fee structure 
that has a proposed maker/taker spread of 0.15% of dollar value of the 
transaction per share per side, where the standard rebate to add 
liquidity on EDGX in securities priced below $1.00 is a rebate of 
$0.00003 per share and the proposed standard fee to remove liquidity is 
0.30% of the dollar value of the transaction. The Exchange believes 
that the proposed rate is non-discriminatory in that it applies 
uniformly to all Members.
---------------------------------------------------------------------------

    \22\ In each case, the internalization fee is no more favorable 
to the Member than each prevailing maker/taker spread.
---------------------------------------------------------------------------

    The deletion of the clause (i) in Footnote 1 as a method to qualify 
for the Mega Tier rebate of $0.0032 is equitable and reasonable as the 
rebate did not have the intended effect of incentivizing Members to add 
liquidity to EDGX by posting 0.75% of the TCV in ADV to EDGX. The 
Exchange also notes that with the deletion of this method of qualifying 
for the Mega Tier rebate of $0.0032, Members will continue to be 
subject to the other fees and tiers listed on the Exchange's fee 
schedule and can continue to achieve the rebate of $0.0032 per share 
through alternative criteria (posting 0.12% of the TCV in ADV more than 
the Member's February 2011 ADV added to EDGX). The Exchange also notes 
that the tier's elimination will have a minimal impact on its Members 
as only one Member qualified for such rebate in the past three months. 
Lastly, the Exchange also believes that the proposed amendment is non-
discriminatory because it applies uniformly to all Members.
    Similarly, the proposed elimination of Footnote 11's rebate is 
equitable and reasonable in that Members also were not incentivized to 
add, remove, and route liquidity to EDGX. As a result of the 
internalization rebate, Members who internalized and met the criteria 
to satisfy the Mega Tier and the volume threshold of 4% of their ADV on 
EDGX would be rebated $0.00032 per share per side of an execution (the 
applicable rebate in Footnote 1 for adding liquidity) and be charged 
$0.0030 per share per side of an execution (the applicable removal rate 
in Footnote 1, in this case). As a result of the elimination of this 
tier in Footnote 11, Members will continue to be subject to the other 
fees and tiers listed on the Exchange's fee schedule. The Exchange also 
notes that the tier's elimination will have a minimal impact on its 
Members as only one Member qualified for such rebate in the past three 
months. Lastly, the Exchange also believes that the proposed amendment 
is non-discriminatory because it applies uniformly to all Members.
    Finally, the Exchange's proposal to expand the ability to use 
Retail Orders to those Members who prefer to designate certain of their 
FIX ports on the Exchange as ``Retail Order Ports'' represents an 
additional, voluntary choice that the Exchange provides to its Members 
in order to utilize Retail Orders. The additional option thus allows 
Members an alternative method through which Retail Orders can be 
designated, while ensuring that Members are required to have written 
policies and procedures designed to assure that they will only 
designate orders as Retail Orders if all requirements of a Retail Order 
are met.
    The Exchange believes that the proposed rule change is equitable 
and not unfairly discriminatory because it provides a second method for 
Retail Order designation and allows each Member to choose the 
designation method most convenient to it, recognizing that individual 
firms have different internal system configurations. By providing 
alternative avenues for Members to designate orders as Retail Orders, 
the Exchange believes that Members will choose the designation method 
that is most operationally efficient, potentially reducing transaction 
costs. The proposal is also non-discriminatory in that it applies 
uniformly to all Members equally.
    The Exchange also expects that this alternative way to designate 
orders as Retail Orders would incentivize more Members to utilize 
Retail Orders. The Exchange also notes that NYSE Arca currently 
supports Retail Order Ports.\23\ 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

[[Page 969]]

deepening the Exchange's liquidity pool, supporting the quality of 
price discovery, promoting market transparency and improving investor 
protection. 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 either on an 
order-by-order basis or via designated Retail Order Ports 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.
---------------------------------------------------------------------------

    \23\ See Exchange Act Release No. 67540 (July 30, 2012), 77 FR 
46539 (August 3, 2012) (SR-NYSEArca-2012-77).
---------------------------------------------------------------------------

    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 rebates 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

    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. Proposing to allow Members to designate Retail Order Ports 
increases competition with exchanges such as NYSE Arca that currently 
allow such practice \24\ and does not impose any burden on intramarket 
competition as all Members have an additional way to designate Retail 
Orders.
---------------------------------------------------------------------------

    \24\ Id.
---------------------------------------------------------------------------

    The Exchange believes that its proposals to lower the rebate from 
$0.0023 per share to $0.0021 per share will also assist in increasing 
competition in that its proposed rebate is comparable to rebates for 
adding liquidity offered by NYSE Arca, Inc. (rebates of $0.0021 per 
share for adding liquidity in Tapes A/C securities and $0.0022 per 
share for adding liquidity in Tape B securities) \25\ and on NASDAQ 
Stock Market LLC \26\ (rebate of $0.0020 per share). Similarly, the 
Exchange believes that its increase in its default removal rate in 
securities priced less than $1.00 from 0.10% of the dollar value of the 
transaction to 0.30% of the dollar value of the transaction will also 
assist in increasing competition as its proposed fee is comparable to 
fees on NYSE and NASDAQ for removing liquidity in securities priced 
below $1.00. The Exchange believes that both proposals will have no 
burden on intramarket competition as the rates apply uniformly to all 
Members that place orders in securities priced at or above $1.00 or 
below $1.00.
---------------------------------------------------------------------------

    \25\ NYSE Arca, Inc., NYSE Arca Equities Trading Fees, http://usequities.nyx.com/markets/nyse-arca-equities/trading-fees.
    \26\ NASDAQ Stock Market LLC, Price List--Trading & 
Connectivity, http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
---------------------------------------------------------------------------

    The Exchange believes that its proposal to eliminate one method to 
achieve the Mega Tier on its fee schedule and eliminate its rebate for 
internalization in Footnote 11 will have no burden on intermarket or 
intramarket competition as Members are able to qualify for other tiered 
rebates and discounts at the Exchange or move their order flow to 
competing exchanges. Finally, the Exchange believes that its 
internalization rates for all securities (priced $1.00 and above and 
below $1.00) will also not burden intermarket or intramarket 
competition as the proposed rates in both cases are no more favorable 
than Members achieving the maker/taker spreads between the default add 
and remove rates on EDGX.

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 \27\ and Rule 19b-4(f)(2) \28\ 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.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(3)(A).
    \28\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-EDGX-2012-48 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-2012-48. 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 (http://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;

[[Page 970]]

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-2012-48 and should be submitted on or before January 28, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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Elizabeth M. Murphy,
Secretary.
[FR Doc. 2012-31752 Filed 1-4-13; 8:45 am]
BILLING CODE 8011-01-P