Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to Amendments to the EDGA Exchange, Inc. Fee Schedule, 15777-15783 [2013-05584]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 78, Number 48 (Tuesday, March 12, 2013)]
[Notices]
[Pages 15777-15783]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05584]



[[Page 15777]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69043; File No. SR-EDGA-2013-09]


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

March 5, 2013.
    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 February 28, 2013, EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
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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 EDGA Rule 15.1(a) and (c). All 
of the changes described herein are applicable to EDGA Members. The 
text of the proposed rule change is available on the Exchange's 
Internet Web site at www.directedge.com, at the Exchange's principal 
office, and at the Public Reference Room of the Commission.
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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's default \4\ rates for securities priced below $1.00 
that add, remove or route liquidity are listed on the Exchange's fee 
schedule. Under ``Liquidity Flags and Associated Fees,'' the Exchange 
proposes to modify the title of the existing column from ``Fee/
(Rebate)'' to ``Fee/(Rebate) Securities at or above $1.00.'' The 
Exchanges also proposes to insert a column titled ``Fee/(Rebate) 
Securities below $1.00'' to list the rate that corresponds to each 
liquidity flag for securities priced below $1.00 in order to increase 
the transparency of the Exchange's fee schedule, as described in 
greater detail below. In addition, the Exchange proposes to delete the 
text under ``Liquidity Flags and Associated Fees'' that states ``unless 
otherwise noted, the following rebates and fees apply to orders in 
securities priced $1 and over'' because this text is no longer accurate 
given the Exchange's proposed changes.
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    \4\ Where ``default'' refers to the standard rate that the 
Exchange charges its Members for orders that add, remove, or route 
liquidity from the Exchange absent Members qualifying for additional 
volume tiered pricing. The Exchange maintains default rates for 
securities at or above $1.00 and securities priced below $1.00 for 
orders that add, remove, and route liquidity. The Exchange notes 
that a Member may qualify for a higher rebate if the Member 
satisfies the volume tier requirements outlined in Footnotes 1, 2, 
4, 6, 16 and 17 of the fee schedule for securities priced at or 
above $1.00. The Exchange notes that the volume from securities 
priced below $1.00 contributes toward volume tiered requirements for 
securities priced at or above $1.00 as outlined in Footnotes 1, 2, 
4, 6, 16 and 17 of the fee schedule. Unless otherwise stated in 
Footnotes 1 and 2 of the fee schedule, the Exchange does not offer 
volume tiered pricing for securities priced below $1.00.
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    The Exchange's fee schedule states that it assesses no charge as 
the default rate for Members' orders that add liquidity in securities 
priced below $1.00. The Exchange proposes to amend its fee schedule to 
list ``Free'' in the column ``Fee/(Rebate) Securities below $1.00'' for 
Flags B, V, Y, 3, 4, PA, and RP. The Exchange notes that this proposal 
does not modify the current rates it charges its Members for orders 
that yield Flags B, V, Y, 3, 4, PA, and RP for securities priced below 
$1.00 that add liquidity to the Exchange.
    The Exchange's fee schedule states that it assesses no charge as 
the default rate for Members' orders that remove liquidity in 
securities priced below $1.00 provided the Member satisfies the volume 
tier requirements in Footnote 1 of the fee schedule.\5\ The Exchange 
proposes to amend its fee schedule to list ``Free'' in the column 
``Fee/(Rebate) Securities below $1.00'' for Flags N, W, 6, BB, CR, PR, 
PT, and XR. The Exchange notes that this proposal does not modify the 
current rates it charges its Members for orders that yield Flags N, W, 
6, BB, CR, PR, PT, and XR for securities priced below $1.00 that remove 
liquidity from the Exchange.
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    \5\ Footnote 1 of the fee schedule states that all removal rates 
on EDGA are contingent on the attributed Member Participant 
Identifier (``MPID'') adding (including hidden) and/or routing a 
minimum average daily share volume, measured monthly, of 50,000 
shares on EDGA. Any attributed MPID not meeting the aforementioned 
minimum will be charged $0.0030 per share for removing liquidity 
from EDGA for securities priced $1.00 and over and 0.20% of dollar 
value for securities priced less than $1.00.
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    The Exchange's fee schedule states that it charges Members the 
default rate of 0.30% of the dollar value of the transaction for orders 
that route to away trading destinations in securities priced below 
$1.00.\6\ The Exchange proposes to amend its fee schedule to list the 
rate of 0.30% of the dollar value of the transaction in the column 
``Fee/(Rebate) Securities below $1.00'' for Flags D, G, I, J, K, L, O, 
Q, R, S, T, U, X, Z, 2, 7, CL, MT, PX, RR, RT, RX, and SW. The Exchange 
notes that this proposal does not modify the current rates it charges 
its Members for orders that yield Flags D, G, I, J, K, L, O, Q, R, S, 
T, U, X, Z, 2, 7, CL, MT, PX, RR, RT, RX, and SW for securities priced 
below $1.00 that route to away trading destinations and remove 
liquidity. In addition, the Exchange proposes to amend the title of the 
routing liquidity category to ``Routing and Removing Liquidity'' in 
order to increase the transparency of the Exchange's fee schedule. 
Regarding the flags' descriptions contained on the fee schedule, the 
Exchange proposes to delete references to removing liquidity for Flags 
D, G, J, L, U, 2, and RR because the Exchange's references to ``route'' 
imply that the flags route and remove liquidity. In addition, the 
Exchange proposes to make conforming changes to the descriptions of 
Flags U and PX in order to make the descriptions for all flags that 
route and remove liquidity consistent.
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    \6\ This fee is consistent with the limitations of Regulation 
NMS, SEC Rule 610(c), for securities priced below $1.00.
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    The Exchange's fee schedule does not clearly disclose its pricing 
for Members' orders that route to some away trading destinations \7\ 
and add liquidity in

[[Page 15778]]

securities priced below $1.00. The Exchange currently assesses no 
charge to Members for orders that route to these away trading 
destinations and add liquidity because these away trading destinations 
pass through no charge to Direct Edge ECN LLC (d/b/a DE Route) (``DE 
Route''), the Exchange's affiliated routing broker dealer, for adding 
liquidity in securities priced below $1.00. The Exchange proposes to 
amend its fee schedule to assess no charge for Flags A, F, M, P, 8, 9, 
10, RB, RS, RW, RY, and RZ. The Exchange notes that its proposal 
conforms to an existing practice and does not modify the rates that the 
Exchange has been charging its Members for orders that yield Flags A, 
F, M, P, 8, 9, 10, RB, RS, RW, RY, and RZ for securities priced below 
$1.00 that route to away trading destinations and add liquidity. 
Regarding the flags' descriptions contained on the fee schedule, the 
Exchange proposes to make conforming changes to the descriptions of 
Flags M and P in order to make the descriptions for all flags that 
route to these away trading destinations and add liquidity consistent 
and to revise Flag 8 to replace the entity formerly known as NYSE Amex 
with NYSE MKT LLC.
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    \7\ The Exchange currently assess no charge for Members' orders 
that route to the following away trading destinations and add 
liquidity: NYSE Arca, Inc. (``NYSE Arca''), New York Stock Exchange 
LLC (``NYSE''), The NASDAQ Stock Market LLC (``NASDAQ''), LavaFlow 
ECN, NASDAQ OMX BX, Inc.'s (``NASDAQ BX''), CBOE Stock Exchange, 
Inc. (``CBSX''), BATS Y-Exchange, Inc. (``BATS BYX''), BATS 
Exchange, Inc. (``BATS BZX''), EDGX Exchange, Inc. (``EDGX''), 
NASDAQ OMX PSX, Inc. (``NASDAQ PSX''), and NYSE MKT LLC (formerly 
NYSE Amex).
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    The Exchange's fee schedule states that it assesses no charge as 
the default rate for Members' orders that that yield Flag OO in 
securities priced below $1.00, which represents Members' orders that 
are matched at the ``Direct Edge Opening'' and either add or remove 
liquidity. The Exchange proposes to amend its fee schedule to list 
``Free'' for Flag OO in the column ``Fee/(Rebate) Securities below 
$1.00.'' The Exchange notes that this proposal does not modify the 
current rate it charges its Members for orders that yield Flag OO for 
securities priced below $1.00 that are matched at the Direct Edge 
Opening.
    The Exchange's fee schedule does not clearly disclose its pricing 
for Members' orders that yield Flag RC in securities priced below 
$1.00. The Exchange currently assesses no charge for Members' orders 
that yield Flag RC, which route to the National Stock Exchange, Inc. 
(the ``NSX'') and add liquidity. The Exchange proposes to amend its fee 
schedule to assess no charge for Flag RC. The Exchange notes that its 
proposal conforms to an existing practice and does not modify the rate 
that the Exchange has been charging its Members for orders that yield 
Flag RC for securities priced below $1.00 that route to the NSX and add 
liquidity.
    As provided in Footnote 3 of the fee schedule, the Exchange 
currently assesses a charge of 0.10% of the dollar value of the 
transaction for Members' orders that yield Flag C, which route to 
NASDAQ BX and remove liquidity in securities priced below $1.00. The 
Exchange proposes to amend its fee schedule to list a charge of 0.10% 
of the dollar value of the transaction in the column ``Fee/(Rebate) 
Securities below $1.00'' for Flag C. The Exchange notes that this 
proposal does not modify the current rate it charges its Members for 
orders that yield Flag C for securities priced below $1.00 that route 
to NASDAQ BX and add liquidity. In addition, the Exchange proposes to 
delete ``removes liquidity'' in Flag C's description because the 
Exchange's reference to ``routed'' implies that Flag C routes and 
removes liquidity. The Exchange proposes to delete the text of Footnote 
3 and its associated annotations on the default rate for routing and 
removing liquidity at the top of the fee schedule in addition to Flags 
C, D, J, L, and 2 on the [sic] because the Exchange proposes to list 
these rates in the column ``Fee/(Rebate) Securities below $1.00'' on 
the Exchange's fee schedule. The Exchange proposes to insert 
``intentionally omitted'' in Footnote 3 in place of the deleted text.
    The Exchange notes that Footnote 12 on the fee schedule incorrectly 
lists a flat rate of $0.0010 per share for Members' orders that yield 
Flag BY in securities priced below $1.00. However, in practice, the 
Exchange charges Members 0.10% of the dollar value of the transaction 
for Members' orders that yield Flag BY, which routes to BATS BYX and 
removes liquidity using routing strategies ROUC, ROUE, ROBY, ROBB or 
ROCO.\8\ This rate represents a pass through of the rate that BATS BYX 
charges DE Route. Accordingly, the Exchange proposes to amend its fee 
schedule to assess a charge of 0.10% of the dollar value of the 
transaction for Flag BY. The Exchange notes that its proposal conforms 
to an existing practice and does not modify the rate that the Exchange 
has been charging its Members for orders that yield Flag BY for 
securities priced below $1.00 that route to BATS BYX and remove 
liquidity using routing strategies ROUC, ROUE, ROBY, ROBB or ROCO. In 
addition, the Exchange proposes to delete the text of Footnote 12 and 
its associated annotation on Flag BY on the fee schedule because the 
Exchange proposes to list this rate in the column ``Fee/(Rebate) 
Securities below $1.00.'' The Exchange proposes to insert 
``intentionally omitted'' in Footnote 12 in place of the deleted text. 
In addition, the Exchange proposes to delete ``removes liquidity'' in 
Flag BY's description because the Exchange's reference to ``routed'' 
implies that Flag BY routes and removes liquidity.
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    \8\ As defined in Exchange Rule 11.9(b)(3).
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    Customer internalization generally occurs when one Member presents 
two orders to the Exchange from the same MPID separately, rather than 
in a paired manner, and the two orders inadvertently match with one 
another.\9\ The Exchange's fee schedule states that it assesses the 
default rate of ``Free'' for Members' orders in securities priced below 
$1.00 that yield Flags 5, EA and ER, which are the flags associated 
with customer internalization. The Exchange proposes to amend its fee 
schedule to list ``Free'' in the column ``Fee/(Rebate) Securities below 
$1.00'' for Flags 5, EA and ER. The Exchange notes that this proposal 
does not modify the current rates charged for Members' orders that 
yield Flags 5, EA and ER. The Exchange also notes that the 
internalization fee is no more favorable than the prevailing maker/
taker spread.\10\ The Exchange notes that this proposed internalization 
fee will continue to discourage Members from engaging in potential wash 
sales.
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    \9\ Members are advised to consult Exchange Rule 12.2 regarding 
fictitious trading.
    \10\ See Securities Exchange Release No. 64393 (May 4, 2011), 76 
FR 27370, 27372 (May 11, 2011) (SR-EDGA-2011-14), where the Exchange 
represented that it ``will continue to ensure that the 
internalization fee is no more favorable than each prevailing maker/
taker spread.''
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    The Exchange's fee schedule displays ``Free'' as the default rates 
for Members orders that add or remove liquidity for securities priced 
below $1.00. However, in practice, the Exchange assesses a charge of 
0.10% of the dollar value of the transaction for securities priced 
below $1.00 for Flag HA, for Non-displayed Orders that add liquidity, 
and Flag HR, for Non-displayed Orders that remove liquidity, where 
Members satisfy the volume tier requirements outlined in Footnote 2 of 
the fee schedule. The Exchange proposes to amend its fee schedule to 
assess a charge of 0.10% of the dollar value of the transaction in the 
column ``Fee/(Rebate) Securities below $1.00'' for Flags HA and HR. The 
Exchange notes that its proposal conforms to an existing practice and 
does not modify the rate that the Exchange has been charging its 
Members for orders that yield Flags HA and HR for securities priced 
below $1.00. In addition, the Exchange proposes to amend Footnote 2 of 
the fee

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schedule to state that the Exchange will assess a charge of 0.30% of 
the dollar value of the transaction for Members' orders that yield 
Flags HA or HR in securities priced below $1.00 where Members do not 
satisfy the volume tier requirements. Therefore, the Exchange proposes 
to revise Footnote 2 to state, ``Rates for Flags HA and HR are 
contingent upon Member adding or removing greater than 1,000,000 shares 
non-displayed (hidden) on a daily basis, measured monthly (yields Flags 
HA, HR, DM, DT and RP) or Member posting greater than 8,000,000 shares 
on a daily basis, measured monthly. For securities priced at or above 
$1.00, Members not meeting either minimum will be charged $0.0030 per 
share for Flags HA and HR. For securities priced below $1.00, Members 
not meeting either minimum will be charged 0.30% of the dollar value of 
the transaction.''
    The Exchange's fee schedule displays ``Free'' as the default rates 
for Members' orders that add or remove liquidity for securities priced 
below $1.00. However, in practice, the Exchange assesses a charge of 
0.05% of the dollar value of the transaction for securities priced 
below $1.00 for Flag DM, for Non-displayed Orders that add liquidity 
using the Mid Point Discretionary (``MDO'') \11\ order type, and Flag 
DT, for Non-displayed Orders that remove liquidity using the MDO order 
type. The Exchange proposes to amend its fee schedule to assess a 
charge of 0.05% of the dollar value of the transaction in the column 
``Fee/(Rebate) Securities below $1.00'' for Flags DM and DT. The 
Exchange notes that its proposal conforms to an existing practice and 
does not modify the rate that the Exchange has been charging its 
Members for orders that yield Flags DM and DT for securities priced 
below $1.00.
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    \11\ See Securities Exchange Release No. 67226 (June 20, 2012), 
77 FR 38113 (June 26, 2012) (SR-EDGA-2012-22).
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    The Exchange proposes to implement these amendments to its fee 
schedule on March 1, 2013.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\12\ in general, and 
furthers the objectives of Section 6(b)(4),\13\ 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.
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that its proposal to revise its fee schedule 
to list the default rate that corresponds to each liquidity flag for 
securities priced below $1.00 that add liquidity on the Exchange's fee 
schedule represents an equitable allocation of reasonable dues, fees 
and other charges among its Members and other persons using its 
facilities. Specifically, for Members' orders that add liquidity, the 
Exchange proposes to list the default rate of ``Free'' to Flags B, V, 
Y, 3, 4, PA, and RP. The Exchange's proposal to revise the 
corresponding text on the fee schedule, as described above, will 
increase the level of transparency of the Exchange's fee schedule and 
improve the Exchange's ability to effectively convey the rates for 
securities priced below $1.00 to Members. In addition, the Exchange 
believes it is equitable and reasonable to not charge Members for 
orders that add liquidity in securities priced below $1.00 because it 
will incentivize Members to add liquidity to the Exchange. The Exchange 
also believes its proposal to assess no charge is equitable and 
reasonable because the Exchange incurs only nominal administrative, 
clearing, and other operating costs in executing these trades because 
of the low volume generated by securities priced below $1.00. The 
Exchange notes that its proposal does not modify the current rates it 
charges its Members for orders that yield Flags B, V, Y, 3, 4, PA, and 
RP for securities priced below $1.00 that add liquidity from the 
Exchange. Lastly, the Exchange also believes that these proposed 
amendments are non-discriminatory because they apply uniformly to all 
Members.
    The Exchange believes that its proposal to revise its fee schedule 
to list the default rate that corresponds to each liquidity flag for 
securities priced below $1.00 that remove liquidity on the Exchange's 
fee schedule represents an equitable allocation of reasonable dues, 
fees and other charges among its Members and other persons using its 
facilities. Specifically, for Members' orders that remove liquidity, 
the Exchange proposes to list the default rate of ``Free'' next to 
Flags N, W, 6, BB, CR, PR, PT and XR. The Exchange's proposal to revise 
the corresponding text on the fee schedule, as described above, will 
increase the level of transparency of the Exchange's fee schedule and 
improve the Exchange's ability to effectively convey the rates for 
securities priced below $1.00 to Members. In addition, the Exchange 
believes it is equitable and reasonable to not charge Members for 
orders that remove liquidity in securities priced below $1.00 because 
it will incentivize Members to remove liquidity from the Exchange. The 
Exchange also believes its proposal to assess no charge is equitable 
and reasonable because the Exchange incurs only nominal administrative, 
clearing, and other operating costs in executing these trades because 
of the low volume generated by securities priced below $1.00. The 
Exchange notes that its proposal does not modify the current rates it 
charges its Members for orders that yield Flags N, W, 6, BB, CR, PR, 
PT, and XR for securities priced below $1.00 that remove liquidity from 
the Exchange. Lastly, the Exchange also believes that these proposed 
amendments are non-discriminatory because they apply uniformly to all 
Members.
    The Exchange believes that its proposal to revise its fee schedule 
to list the default rate that corresponds to each liquidity flag for 
securities priced below $1.00 that route and remove liquidity on the 
Exchange's fee schedule represents an equitable allocation of 
reasonable dues, fees and other charges among its Members and other 
persons using its facilities. Specifically, for Members' orders that 
route and remove liquidity, the Exchange proposes to list the default 
rate of 0.30% of the dollar value of the transaction next to Flags D, 
G, I, J, K, L, O, Q, R, S, T, U, X, Z, 2, 7, CL, MT, PX, RR, RT, RX, 
and SW. The Exchange's proposal to revise the corresponding text on the 
fee schedule, as described above, will increase the level of 
transparency of the Exchange's fee schedule and improve the Exchange's 
ability to effectively convey the rates for securities priced below 
$1.00 to Members. In addition, the Exchange believes it is equitable 
and reasonable to charge Members a default routing and removal rate of 
0.30% of the dollar value of the transaction because these fees allow 
the Exchange to offset its administrative, clearing, and other 
operating costs incurred in executing such trades. The Exchange notes 
that routing through DE Route is voluntary. The Exchange also notes 
that its proposal does not modify the current rates it charges its 
Members for orders that yield Flags D, G, I, J, K, L, O, Q, R, S, T, U, 
X, Z, 2, 7, CL, MT, PX, RR, RT, RX, and SW for securities priced below 
$1.00 that route to away trading destinations and remove liquidity. 
Lastly, the Exchange also believes that these proposed amendments are 
non-discriminatory because they apply uniformly to all Members.
    The Exchange believes that its proposal to pass through no charge 
for securities priced below $1.00 that route to some away trading 
destinations and add liquidity represents an equitable

[[Page 15780]]

allocation of reasonable dues, fees and other charges among its Members 
and other persons using its facilities because the Exchange does not 
levy additional fees or offer additional rebates for orders that it 
routes to these away trading destinations through DE Route. The 
Exchange's fee schedule does not clearly disclose its pricing for 
Members' orders that route to these away trading destinations and add 
liquidity in securities priced below $1.00. Currently, the away trading 
destinations assess no charge to DE Route for orders that route to 
those destinations and add liquidity, and DE Route passes through no 
charge to the Exchange and the Exchange passes through no charge to its 
Members. \14\ Therefore, since DE Route is not charged a fee by the 
away trading destination for routing orders that add liquidity to its 
trading center in securities priced below $1.00, the Exchange believes 
it is equitable and reasonable to not charge its Members for orders 
that yield Flags A, F, M, P, 8, 9, 10, RB, RS, RW, RY, and RZ. The 
Exchange's proposal allows the Exchange to continue to charge its 
Members a pass-through rate for orders that are routed to some away 
trading destinations and add liquidity through DE Route. The Exchange 
notes that its proposal conforms to an existing practice and does not 
modify the rates that the Exchange has been charging its Members for 
orders that yield Flags A, F, M, P, 8, 9, 10, RB, RS, RW, RY, and RZ 
for securities priced below $1.00 that route to these away trading 
destinations and add liquidity. The Exchange notes that routing through 
DE Route is voluntary. The Exchange's proposal to revise the 
corresponding text on the fee schedule, as described above, will 
increase the level of transparency of the Exchange's fee schedule and 
improve the Exchange's ability to effectively convey the rates for 
securities priced below $1.00 to Members. Lastly, the Exchange also 
believes that these proposed amendments are non-discriminatory because 
they apply uniformly to all Members.
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    \14\ NYSE Arca, NYSE, NYSE MKT LLC, BATS BZX, BATS BYX, CBSX, 
NASDAQ, NASDAQ BX, NASDAQ PSX, LavaFlow ECN, and EDGX assess 
customers no charge for orders that add liquidity on their 
respective exchanges in securities priced below $1.00. See NYSE 
Arca, NYSE Arca Trading Fees, https://usequities.nyx.com/markets/nyse-arca-equities/trading-fees; NYSE, NYSE Trading Fees, https://usequities.nyx.com/markets/nyse-equities/trading-fees; NYSE MKT LLC, 
NYSE MKT Trading Fees, https://usequities.nyx.com/markets/nyse-mkt-equities/trading-fees; BATS, BATS BZX and BYX Exchange Fee 
Schedules, https://cdn.batstrading.com/resources/regulation/rule_book/BATS-Exchanges_Fee_Schedules.pdf; Chicago Board Options 
Exchange, CBOE Stock Exchange Fees Schedule, https://www.cboe.com/publish/cbsxfeeschedule/cbsxfeeschedule.pdf; NASDAQ, Price List--
Trading and Connectivity, https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2; NASDAQ OMX BX, Inc., NASDAQ OMX BX 
Price List--Trading and Connectivity, https://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing; NASDAQ OMX PSX, Inc., NASDAQ OMX PSX 
Price List--Trading and Connectivity, https://www.nasdaqtrader.com/Trader.aspx?id=PSX_Pricing; LavaFlow ECN, LavaFlow Pricing, https://www.lavatrading.com/solutions/pricing.php; and EDGX Exchange, Inc., 
EDGX Exchange Fee Schedule, https://www.directedge.com/Membership/FeeSchedule/EDGXFeeSchedule.aspx.
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    The Exchange believes that its proposal to revise its fee schedule 
to list the default rate of ``Free'' for securities priced below $1.00 
that yield Flag OO represents an equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities. Members will yield Flag OO when their orders are 
matched at the Direct Edge Opening on EDGA, whether the Member's order 
adds or removes liquidity. Because the Exchange is not a primary 
listing market, Flag OO generates low volume; therefore, the Exchange 
believes its proposal to assess no charge is equitable and reasonable 
given that the Exchange incurs only nominal administrative, clearing, 
and other operating costs in executing trades. The Exchange notes that 
its proposal does not modify the current rate it charges its Members 
for orders that yield Flag OO for securities priced below $1.00 that 
are matched at the Direct Edge Opening. The Exchange's proposal to 
revise the corresponding text on the fee schedule, as described above, 
will increase the level of transparency of the Exchange's fee schedule 
and improve the Exchange's ability to effectively convey the rates for 
securities priced below $1.00 to Members. Lastly, the Exchange also 
believes that the proposed amendment is non-discriminatory because it 
applies uniformly to all Members.
    The Exchange believes that its proposal to assess no charge for 
securities priced below $1.00 that yield Flag RC represents an 
equitable allocation of reasonable dues, fees and other charges among 
its Members and other persons using its facilities. Members will yield 
Flag RC when their orders route to the NSX and add liquidity. The 
Exchange's fee schedule does not clearly disclose its pricing for 
Members' orders that yield Flag RC in securities priced below $1.00. 
The Exchange notes that the NSX offers a rebate to DE Route for 
Members' orders that yield Flag RC. The Exchange also notes that Flag 
RC generates low volume and nominal revenue to the Exchange. Therefore, 
the Exchange believes its proposal to assess no charge is equitable and 
reasonable because the rebate paid by NSX to DE Route and DE Route to 
the Exchange does not offset the administrative, clearing, and other 
operating costs associated with passing through the NSX rebate to 
Members. The Exchange notes that routing through DE Route is voluntary. 
The Exchange also notes that its proposal conforms to an existing 
practice and does not modify the rate that the Exchange has been 
charging its Members for orders that yield Flag RC for securities 
priced below $1.00. The Exchange's proposal to revise the corresponding 
text on the fee schedule, as described above, will increase the level 
of transparency of the Exchange's fee schedule and improve the 
Exchange's ability to effectively convey the rates for securities 
priced below $1.00 to Members. Lastly, the Exchange also believes that 
the proposed amendment is non-discriminatory because it applies 
uniformly to all Members.
    The Exchange believes that its proposal to revise its fee schedule 
to list the rate of 0.10% of the dollar value of the transaction for 
Members' orders that yield Flag C for securities priced below $1.00 
represents an equitable allocation of reasonable dues, fees and other 
charges among its Members and other persons using its facilities 
because it is a pass-through rate and the Exchange does not levy 
additional fees or offer additional rebates for orders that it routes 
to NASDAQ BX through DE Route. Therefore, since DE Route is charged a 
fee by NASDAQ BX for routing orders that remove liquidity to its 
trading center in securities priced below $1.00, the Exchange believes 
it is equitable and reasonable to charge its Members for orders that 
yield Flag C. The Exchange's proposal allows the Exchange to continue 
to charge its Members a pass-through rate for orders that are routed to 
NASDAQ BX and remove liquidity through DE Route. The Exchange notes 
that routing through DE Route is voluntary. The Exchange notes that its 
proposal does not modify the current rate it charges its Members for 
orders that yield Flag C for securities priced below $1.00. The 
Exchange's proposal to revise the corresponding text on the fee 
schedule, as described above and deleting the text of Footnote 3 and 
its associated annotations on Flags C, D, J, L, and 2, will increase 
the level of transparency of the Exchange's fee schedule and improve 
the Exchange's ability to effectively convey the rates for securities 
priced below $1.00 to Members. Lastly, the Exchange also believes that 
this proposed

[[Page 15781]]

amendment is non-discriminatory because it applies uniformly to all 
Members.
    The Exchange believes that its proposal to pass through 0.10% of 
the dollar value of the transaction for Members' orders that yield Flag 
BY for securities priced below $1.00 represents an equitable allocation 
of reasonable dues, fees and other charges among its Members and other 
persons using its facilities because the Exchange does not levy 
additional fees or offer additional rebates for orders that it routes 
to BATS BYX through DE Route. The Exchange notes that Footnote 12 on 
the fee schedule incorrectly lists a flat rate of $0.0010 per share for 
Members' orders that yield Flag BY in securities priced below $1.00. In 
practice, the Exchange charges Members 0.10% of the dollar value of the 
transaction for Members' orders that yield Flag BY. Since DE Route is 
charged a fee by BATS BYX for routing orders that remove liquidity 
using routing strategies ROUC, ROUE, ROBY, ROBB or ROCO to its trading 
center in securities priced below $1.00, the Exchange believes it is 
equitable and reasonable to charge its Members for orders that yield 
Flag BY. The Exchange's proposal allows the Exchange to continue to 
charge its Members a pass-through rate for orders that are routed to 
BATS BYX and remove liquidity through DE Route. The Exchange notes that 
its proposal conforms to an existing practice and does not modify the 
rate that the Exchange has been charging its Members for orders that 
yield Flag BY for securities priced below $1.00. The Exchange notes 
that routing through DE Route is voluntary. The Exchange's proposal to 
revise the corresponding text on the fee schedule, as described above 
and deleting the text of Footnote 12 and its associated annotation on 
Flag BY, will increase the level of transparency of the Exchange's fee 
schedule and improve the Exchange's ability to effectively convey the 
rates for securities priced below $1.00 to Members. Lastly, the 
Exchange also believes that this proposed amendment is non-
discriminatory because it applies uniformly to all Members.
    The Exchange believes that its proposal to revise its fee schedule 
to list the default rate of ``Free'' for securities priced below $1.00 
that yield Flags 5, EA and ER, which are associated with customer 
internalization, represents an equitable allocation of reasonable dues, 
fees and other charges. The Exchange's proposed rate for customer 
internalization is equitable because the rate is consistent with the 
Exchange's proposed maker/taker spread for securities priced below 
$1.00, where the default rate for adding liquidity is ``Free'' and the 
default rate for removing liquidity is ``Free.'' Therefore, in each 
case, the proposed internalization fee of ``Free'' is no more favorable 
to the Member than the proposed maker/taker spread. Since the spread 
for customer internalization equals the Exchange's maker/taker spread, 
the Exchange's proposal continues to discourage Members from engaging 
in potential wash sales. The Exchange notes that its proposal does not 
modify the current rate it charges its Members for orders that yield 
Flags 5, EA or ER for securities priced below $1.00. The Exchange's 
proposal to revise the corresponding text on the fee schedule, as 
described above, will increase the level of transparency of the 
Exchange's fee schedule and improve the Exchange's ability to 
effectively convey the rates for securities priced below $1.00 to 
Members. Lastly, the Exchange believes that these proposed rates are 
non-discriminatory in that they apply uniformly to all Members.
    The Exchange believes that its proposal to assess a charge of 0.10% 
of the dollar value of the transaction for Members' orders in 
securities priced below $1.00 that yield Flags HA and HR represents an 
equitable allocation of reasonable dues, fees and other charges among 
its Members and other persons using its facilities. The Exchange's fee 
schedule displays ``Free'' as the default rates for Members orders that 
add or remove liquidity for securities priced below $1.00. However, in 
practice, the Exchange assesses a charge of 0.10% of the dollar value 
of the transaction for securities priced below $1.00 for Flags HA and 
HR. Because the Exchange assesses no charge as the default rate for 
Members' displayed orders that add or remove liquidity in securities 
priced below $1.00, the Exchange encourages displayed liquidity over 
non-displayed liquidity. The Exchange rewards Members for displaying 
liquidity because displayed liquidity is regarded as a public good that 
benefits investors and traders by providing greater price transparency 
and enhancing public price discovery, which ultimately leads to 
substantial reductions in transaction costs.\15\ The Exchange notes 
that its proposal conforms to an existing practice and does not modify 
the rates that the Exchange has been charging its Members for orders 
that yield Flags HA or HR for securities priced below $1.00. The 
Exchange's proposal to revise the corresponding text on the fee 
schedule, as described above, will increase the level of transparency 
of the Exchange's fee schedule and improve the Exchange's ability to 
effectively convey the rates for securities priced below $1.00 to 
Members. Lastly, the Exchange believes that these proposed rates are 
non-discriminatory in that they apply uniformly to all Members.
---------------------------------------------------------------------------

    \15\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37516 (June 29, 2005); see also Securities 
Exchange Act Release No. 42450 (February 23, 2000), 65 FR 10577, 
10584 n. 53 (February 28, 2000) (SR-NYSE-99-48) (citing academic 
studies finding that the required display of customer limit orders, 
by providing greater price transparency and enhancing public price 
discovery, let to substantial reductions in transaction costs for 
both retail and institutional investors).
---------------------------------------------------------------------------

    The Exchange believes that its proposal to assess a rate of 0.05% 
of the dollar value of the transaction for Flags DM and DT in 
securities priced below $1.00 represents an equitable allocation of 
reasonable dues, fees and other charges among its Members and other 
persons using its facilities. The Exchange's fee schedule displays 
``Free'' as the default rates for Members orders that add or remove 
liquidity for securities priced below $1.00. However, in practice, the 
Exchange assesses a charge of 0.05% of the dollar value of the 
transaction for securities priced below $1.00 for Flags DM and DT. As 
with the rates for Flag DM and DT for securities priced above $1.00, 
the Exchange believes the same pricing justifications continue to 
apply: when the MDO adds liquidity like a displayed Pegged Order, the 
Exchange will assess no charge and Member's order yields Flags B, V, Y, 
3, or 4; and where the MDO adds or removes liquidity, including upon 
entry, within the Member's specified discretionary (hidden) range, then 
it behaves like a Non-Displayed or Discretionary Order, which the 
Exchange proposes to assess a rate of 0.10% of the dollar value of the 
transaction (Flags HA and HR).\16\ Therefore, the Exchange believes 
that its proposal to assess a charge of 0.05% of the dollar value of 
the transaction for Flags DM and DT is equitable because these rates 
represent a blended or hybrid rate between the rates the Exchange 
assesses for Pegged Orders (no charge) and the rates for Non-Displayed 
Orders that add or remove liquidity (fee of 0.10% of the dollar value 
of the transaction). In addition, the Exchange believes the rate for 
the Non-Displayed or discretionary aspect of the order is also 
equitable because it reflects the value the Exchange attributes to the 
MDO's contribution to price discovery, displayed depth of liquidity at 
the

[[Page 15782]]

national best bid/offer, and the added benefit that the Member makes 
the order transparent as compared to a traditional Non-Displayed Order, 
which is hidden on the order book. The Exchange notes that its proposal 
conforms to an existing practice and does not modify the rates that the 
Exchange has been charging its Members for orders that yield Flags DM 
or DT for securities priced below $1.00. The Exchange's proposal to 
revise the corresponding text on the fee schedule, as described above, 
will increase the level of transparency of the Exchange's fee schedule 
and improve the Exchange's ability to effectively convey the rates for 
securities priced below $1.00 to Members. Lastly, the Exchange believes 
that these proposed rates are non-discriminatory in that they apply 
uniformly to all Members.
---------------------------------------------------------------------------

    \16\ See Securities Exchange Release No. 67300 (June 28, 2012), 
77 FR 39783 (July 5, 2012) (SR-EDGA-2012-24).
---------------------------------------------------------------------------

    As described in Section 3, the Exchange proposes to make conforming 
and non-substantive revisions to the fee schedule in general and the 
description of certain flags in particular in order to increase the 
level of transparency of the Exchange's fee schedule, promote 
consistent descriptions and applications, and improve the Exchange's 
ability to effectively convey the rates for securities priced below 
$1.00 to Members.
    The Exchange also notes that it operates in a highly-competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive. The proposed rule change reflects a competitive pricing 
structure designed to incent market participants to direct their order 
flow to the Exchange. The Exchange believes that the proposed rates are 
equitable and non-discriminatory in that they apply uniformly to all 
Members. The Exchange believes the fees and credits remain competitive 
with those charged by other venues and therefore continue to be 
reasonable and equitably allocated to Members.

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

    These proposed rule changes do not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. The Exchange does not believe that any of these changes 
represent a significant departure from previous pricing offered by the 
Exchange or pricing offered by the Exchange's competitors. In addition, 
as described in Section 3, the Exchange proposes to make conforming and 
non-substantive revisions to the fee schedule in general and the 
description of certain flags in particular in order to increase the 
level of transparency of the Exchange's fee schedule, promote 
consistent descriptions and applications, and improve the Exchange's 
ability to effectively convey the rates for securities priced below 
$1.00 to Members.
    Regarding Flags B, V, Y, 3, 4, PA, and RP, the Exchange believes 
that its proposal to amend its fee schedule to list the default rebate 
as ``Free'' in the column ``Fee/(Rebate) Securities below $1.00'' will 
not burden intramarket competition or intermarket competition given 
that the Exchange's proposal does not modify its current rates for 
orders that add liquidity and they apply uniformly to all Members that 
place orders in securities priced below $1.00.
    Regarding Flags N, W, 6, BB, CR, PR, PT, and XR, the Exchange 
believes that its proposal to amend its fee schedule to list the 
default rate as ``Free'' in the column ``Fee/(Rebate) Securities below 
$1.00'' will not burden intramarket competition or intermarket 
competition given that the Exchange's proposal does not modify its 
current rates for orders that remove liquidity and they apply uniformly 
to all Members that place orders in securities priced below $1.00.
    Regarding Flags D, G, I, J, K, L, O, Q, R, S, T, U, X, Z, 2, 7, CL, 
MT, PX, RR, RT, RX, and SW, the Exchange believes that its proposal to 
amend its fee schedule to list the default rate of 0.30% of the dollar 
value of the transaction in the column ``Fee/(Rebate) Securities below 
$1.00'' will not burden intramarket competition or intermarket 
competition given that the Exchange's proposal does not modify its 
current rates for orders that route and remove liquidity and they apply 
uniformly to all Members that place orders in securities priced below 
$1.00.
    Regarding Flags A, F, M, P, 8, 9, 10, RB, RS, RW, RY, and RZ, the 
Exchange's fee schedule does not clearly disclose its pricing for 
Members' orders that route to these away trading destinations and add 
liquidity in securities priced below $1.00. The Exchange believes that 
its proposal to pass through no charge for securities priced below 
$1.00 that route to some away trading destinations and add liquidity 
will increase competition because it is comparable to the rates charged 
by the away trading destinations for adding liquidity. The Exchange 
believes its proposal will not burden intramarket competition or 
intermarket competition given that the Exchange's proposal conforms to 
an existing practice and does not modify the rates for orders that 
route and add liquidity and they apply uniformly to all Members that 
place orders in securities priced below $1.00. The Exchange believes 
that its proposal will increase competition for routing services 
because the market for order execution is competitive and the 
Exchange's proposal provides customers with another alternative to 
route their orders. The Exchange notes that routing through DE Route is 
voluntary.
    Regarding Flag OO, the Exchange believes that its proposal to amend 
its fee schedule to list the default rate of ``Free'' in the column 
``Fee/(Rebate) Securities below $1.00'' will not burden intramarket 
competition or intermarket competition given that the Exchange's 
proposal does not modify its current rate for Flag OO and it applies 
uniformly to all Members that place orders in securities priced below 
$1.00.
    Regarding Flag RC, the Exchange's fee schedule does not clearly 
disclose its pricing for Members' orders yield Flag RC in securities 
priced below $1.00. The Exchange believes that its proposal to assess 
no charge will not burden intramarket competition or intermarket 
competition given that the Exchange's proposal conforms to an existing 
practice and does not modify the rate for Flag RC and it applies 
uniformly to all Members that place orders in securities priced below 
$1.00.
    Regarding Flag C, the Exchange believes that its proposal to amend 
its fee schedule to list a charge of 0.10% of the dollar value of the 
transaction will not burden intramarket competition or intermarket 
competition given that the Exchange's proposal does not modify its 
current rate for Flag C and it applies uniformly to all Members that 
place orders in securities priced below $1.00. By charging a pass-
through rate for securities priced below $1.00 that route to NASDAQ BX 
and remove liquidity, the Exchange will increase competition because it 
is comparable to the rates charged by NASDAQ BX for removing liquidity. 
The Exchange believes that its proposal will increase competition for 
routing services because the market for order execution is competitive 
and the Exchange's proposal provides customers with another alternative 
to route their orders. The Exchange notes that routing through DE Route 
is voluntary.
    Regarding Flag BY, the Exchange notes that Footnote 12 on the fee 
schedule incorrectly lists a flat rate of $0.0010 per share for 
Members' orders that yield Flag BY in securities priced below $1.00. 
However, in practice, the Exchange charges Members 0.10% of the dollar 
value of the transaction for Members' orders that yield Flag BY. The 
Exchange believes that its proposal to pass through a charge of 0.10% 
of the dollar value of the transaction for securities priced below 
$1.00 that route

[[Page 15783]]

to BATS BYX and remove liquidity will increase competition because it 
is comparable to the rates charged by BATS BYX for removing liquidity. 
The Exchange believes its proposal will not burden intramarket 
competition or intermarket competition given that the Exchange's 
proposal conforms to an existing practice and does not modify the rate 
for Flag BY and it applies uniformly to all Members that place orders 
in securities priced below $1.00. The Exchange believes that its 
proposal will increase competition for routing services because the 
market for order execution is competitive and the Exchange's proposal 
provides customers with another alternative to route their orders. The 
Exchange notes that routing through DE Route is voluntary.
    Regarding Flags 5, EA and ER, the Exchange believes that its 
proposal to amend its fee schedule to list the default rate of ``Free'' 
in the column ``Fee/(Rebate) Securities below $1.00'' for customer 
internalization will not burden intermarket or intramarket competition 
as the proposed rate is no more favorable than the Exchange's 
prevailing maker/taker spread. In addition, the Exchange believes that 
its proposal will not burden intramarket competition or intermarket 
competition given that the Exchange's proposal does not modify the 
current rates for Flags 5, EA and ER and they apply uniformly to all 
Members that place orders in securities priced below $1.00.
    Regarding Flags HA and HR, the Exchange's fee schedule displays 
``Free'' as the default rates for Members orders that add or remove 
liquidity for securities priced below $1.00. However, in practice, the 
Exchange assesses a charge of 0.10% of the dollar value of the 
transaction for securities priced below $1.00 for Flags HA and HR. The 
Exchange believes that its proposal to assess a charge of 0.10% of the 
dollar value of the transaction will not burden intramarket competition 
or intermarket competition given that the Exchange's proposal conforms 
to an existing practice and does not modify the rates for Flags HA and 
HR and they apply uniformly to all Members that place orders in 
securities priced below $1.00.
    Regarding Flags DM and DT, the Exchange's fee schedule displays 
``Free'' as the default rates for Members orders that add or remove 
liquidity for securities priced below $1.00. However, in practice, the 
Exchange assesses a charge of 0.05% of the dollar value of the 
transaction for securities priced below $1.00 for Flags DM and DT. The 
Exchange believes that its proposal to assess a charge of 0.05% of the 
dollar value of the transaction will not burden intramarket competition 
or intermarket competition given that the Exchange's proposal conforms 
to an existing practice and does not modify the rate for Flags DM and 
DT and they apply uniformly to all Members that place orders in 
securities priced below $1.00.

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

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

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \17\ and Rule 19b-4(f)(2) \18\ 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.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 19b-4(f)(2)[sic].
---------------------------------------------------------------------------

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-EDGA-2013-09 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-EDGA-2013-09. This file 
number should be included on the subject line if email is used. To help 
the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for Web site viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE., 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-EDGA-2013-09 and should be 
submitted on or before April 2, 2013.
---------------------------------------------------------------------------

    \19\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05584 Filed 3-11-13; 8:45 am]
BILLING CODE 8011-01-P