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, 16003-16006 [2013-05742]
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Federal Register / Vol. 78, No. 49 / Wednesday, March 13, 2013 / Notices
addition to the vigorous competition for
order flow among the options
exchanges, the proposal addresses a
regulatory situation common to all
options exchanges. To the extent that
market participants disagree with the
particular approach taken by the
Exchange herein, market participants
can easily and readily operate on
competing venues. The Exchange
believes this proposal will not impose a
burden on competition and will help
provide liquidity during periods of
extraordinary volatility in an NMS
stock.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period (i)
as the Commission may designate up to
90 days of such date if it finds such
longer period to be appropriate and
publishes its reasons for so finding or
(ii) as to which the self-regulatory
organization consents, the Commission
will:
(A) By order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
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 such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File No. SR–Phlx–2013–
21 and should be submitted on or before
March 28, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–05743 Filed 3–12–13; 8:45 am]
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
No. SR–Phlx–2013–21 on the subject
line.
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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:
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
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 No.
SR–Phlx–2013–21. This file number
should be included on the subject line
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BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69067; File No. SR–EDGX–
2013–11]
March 7, 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 March 1,
2013, EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
18 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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(‘‘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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange currently offers
Members a rebate of $0.0005 per share
for Members’ orders that route to
Nasdaq OMX BX, Inc. (‘‘BX’’) and
remove liquidity, yielding Flag C, in
securities priced at or above $1.00. The
Exchange proposes to decrease the
rebate from $0.0005 per share to $0.0004
per share in response to BX’s fee filing
that was effective February 1, 2013.4
Direct Edge ECN LLC (d/b/a DE Route)
(‘‘DE Route’’), the Exchange’s affiliated
routing broker-dealer, does not qualify
for any of BX’s volume tiered rebates.5
DE Route passes through BX’s default
rebate to the Exchange and the
Exchange, in turn, passes through the
3 As
defined in Exchange Rule 1.5(n).
Securities Exchange Act Release No. 68909
(February 12, 2013), 78 FR 11935 (February 20,
2013) (SR–BX–2013–011).
5 The Exchange notes that to the extent DE Route
does achieve any volume tiered rebates on BX, its
rates for Flag C will not change.
4 See
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rebate to its Members. The Exchange
notes that its proposal does not modify
the current rate of 0.10% of the dollar
value of the transaction that it charges
Members for Flag C in securities priced
below $1.00 that route to BX and
remove liquidity.
In SR–EDGX–2012–47,6 the Exchange
introduced new Flags ZA and ZR for
Members that utilize Retail Orders. Flag
ZA is yielded for those Members that
use Retail Orders that add liquidity to
EDGX and is assigned a rebate of
$0.0032 per share. Flag ZR is yielded for
those Members that use Retail Orders
that remove liquidity from EDGX and is
assigned a charge of $0.0030 per share.
Footnote 4 on the Exchange’s current fee
schedule defines a ‘‘Retail Order’’ as an
(i) 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.
In this filing, the Exchange proposes
to introduce a new ‘‘Retail Order Tier’’
that would provide that Members that
add an average daily volume (‘‘ADV’’) of
Retail Orders (Flag ZA) that is 0.25% or
more of the Total Consolidated Volume
(‘‘TCV’’) on a daily basis, measured
monthly would receive a rebate on Flag
ZA that is $0.0034 per share instead of
the rate of $0.0032 per share currently
assigned to Flag ZA. The Exchange
notes that the rebate for Flag ZA in
securities priced below $1.00 is not
impacted by this proposal.
The Exchange also currently specifies,
in part, in Footnote 4 that to the extent
Members qualify for a rebate higher than
$0.0032 per share through other volume
tiers, such as the Mega Tier ($0.0035 per
share) or Market Depth Tier ($0.0033
per share), Members will earn the higher
rebate on Flag ZA instead of its assigned
rate. The Exchange proposes to make a
conforming amendment to this language
to include the $0.0034 per share rebate.
Therefore, the amended language would
now read: ‘‘The Exchange notes that to
the extent Members qualify for a rebate
higher than $0.0032 per share (for Flag
ZA executions that do not qualify for
the above tier) or $0.0034 per share (for
Flag ZA executions qualifying for the
above tier) through other volume tiers,
such as the Mega Tier or Market Depth
Tier, they will earn the higher rebate on
Flag ZA instead of its assigned rate.’’
The Exchange proposes to implement
these amendments to its fee schedule on
March 1, 2013.
6 See Securities Exchange Act Release No. 68310
(November 28, 2012), 77 FR 71860 (December 4,
2012) (SR–EDGX–2012–47).
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,7
in general, and furthers the objectives of
Section 6(b)(4),8 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 the
proposed rule change is reasonable,
equitable and not unfairly
discriminatory because it would
encourage Members to send additional
Retail Orders that add liquidity to the
Exchange for execution in order to
qualify for an incrementally higher
rebate for such executions that add
liquidity on the Exchange if Members
satisfy the conditions of the Retail Order
Tier. In this regard, the Exchange
believes that maintaining or increasing
the proportion of Retail Orders in
exchange-listed securities that are
executed on a registered national
securities exchange (rather than relying
on certain available off-exchange
execution methods) would contribute to
investors’ confidence in the fairness of
their transactions and would benefit all
investors by deepening the Exchange’s
liquidity pool, supporting the quality of
price discovery, promoting market
transparency and improving investor
protection.
The potential for increased volume
from Retail Orders increases potential
revenue to the Exchange, and allows the
Exchange to spread its administrative
and infrastructure costs over a greater
number of shares, leading to lower per
share costs. These lower per share costs
in turn would allow the Exchange to
pass on the savings to Members in the
form of lower fees. The increased
liquidity benefits all investors by
deepening EDGX’s liquidity pool,
offering additional flexibility for all
investors to enjoy cost savings,
supporting the quality of price
discovery, promoting market
transparency and improving investor
protection. Volume-based rebates such
as the one proposed herein have been
widely adopted in the cash equities
markets, and are equitable because they
are open to all Members on an equal
basis and provide discounts that are
reasonably related to the value to an
exchange’s market quality associated
with higher levels of market activity,
such as higher levels of liquidity
provision and introduction of higher
7 15
8 15
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U.S.C. 78f(b)(4).
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volumes of orders into the price and
volume discovery processes.
The Exchange believes the $0.0034
rebate proposed for the Retail Order Tier
is reasonable because it is directly
related to a Member’s level of Retail
Order executions during the month. The
Exchange also believes the proposed
rebate of $0.0034 per share is reasonable
because it is consistent with certain
other rebates, such as the those found in
tiers in Footnote 1 of its fee schedule
(i.e., Market Depth Tier, Mega Tier
rebate of $0.0032 per share, Ultra Tier),
that is available to Members that satisfy
certain criteria that is related to the
Member’s level of trading activity on the
Exchange.
The Exchange believes that requiring
a Member to submit an ADV of Retail
Orders during a month of 0.25% or
more of TCV is reasonable, equitable
and not unfairly discriminatory because
this percentage is within a range that the
Exchange believes would incentivize
Members to submit Retail Orders to the
Exchange in order to qualify for the
applicable rebate of $0.0034 per share.
The Exchange notes that certain other
existing pricing tiers within its fee
schedule make rebates available to
Members that are also based on the
Member’s level of activity as a
percentage of TCV. These existing
percentage thresholds, depending on
other related factors and the level of the
corresponding rebates, are both higher
and lower than the 0.25% proposed
herein.9 Moreover, like existing pricing
on the Exchange that is tied to Member’s
volume levels as a percentage of TCV,
the proposed Retail Order is equitable
and not unfairly discriminatory because
it is available to all Members on an
equal and non-discriminatory basis.
The Exchange notes that a significant
percentage of the orders of individual
investors are executed over-thecounter.10 The Exchange believes that it
is thus appropriate to create a financial
incentive to bring more retail order flow
9 See for example, the Market Depth Tier Rebate
($0.0033 per share rebate), Mega Tier rebate
($0.0032 per share), Ultra Tier rebate ($0.0031 per
share rebate), and Super Tier rebate ($0.0031 per
share rebate) that are all tied to a percentage of TCV.
10 See Concept Release on Equity Market
Structure, Securities Exchange Act Release No.
61358 (January 14, 2010), 75 FR 3594 (January 21,
2010) (noting that dark pools and internalizing
broker-dealers executed approximately 25.4% of
share volume in September 2009). See also Mary L.
Schapiro, Strengthening Our Equity Market
Structure (Speech at the Economic Club of New
York, Sept. 7, 2010) (available on the Commission’s
Web site). In her speech, Chairman Schapiro noted
that nearly 30 percent of volume in U.S.-listed
equities was executed in venues that do not display
their liquidity or make it generally available to the
public and the percentage was increasing nearly
every month.
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to a public market, such as the Exchange
over off-exchange venues. The Exchange
believes that investor protection and
transparency is promoted by rewarding
displayed liquidity on exchanges over
off-exchange executions. By offering a
proposed rebate of $0.0034 per share for
the Retail Order Tier, the Exchange
believes it will encourage use of Retail
Orders, while maintaining consistency
with the Exchange’s overall pricing
philosophy of encouraging displayed
liquidity. The Exchange places a higher
value on displayed liquidity because the
Exchange believes that displayed
liquidity is a public good that benefits
investors and traders generally by
providing greater price transparency
and enhancing public price discovery,
which ultimately lead to substantial
reductions in transaction costs.
The Exchange also notes that the
Retail Order Tier is reasonable in that
NYSE Arca offers a comparable Retail
Order Tier (with an analogous Retail
Order definition) that provides a rebate
of $0.0032 per share for the NYSE
Arca’s ETP Holders that execute an
average daily volume of Retail Orders
that is 0.40% or more of the TCV.11
The Exchange believes that its
proposal to pass through BX’s rebate of
$0.0004 per share for orders that route
to BX and remove liquidity (Flag C)
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 BX through DE Route.
Currently, BX offers a rebate to DE
Route for orders that route to BX and
remove liquidity, and DE Route passes
through that rebate to the Exchange and
the Exchange passes through that rebate
to its Members. Effective February 1,
2012, BX rebates DE Route $0.0004 per
share for orders that route to BX and
remove liquidity. The Exchange’s
proposal will enable DE Route to pass
through the $0.0004 per share rebate to
the Exchange and the Exchange, in turn,
to pass it through to its Members. The
Exchange believes its proposal is
equitable and reasonable because it
allows the Exchange to continue to pass
through BX’s rebate to its Members. The
Exchange notes that routing through DE
Route is voluntary. Lastly, the Exchange
also believes that this proposed
amendment is non-discriminatory
because it applies uniformly to all
Members.
11 See Securities Exchange Act Release No. 67540
(July 30, 2012), 77 FR 46539 (August 3, 2012) (SR–
NYSEArca–2012–77). See also, https://
usequities.nyx.com/sites/usequities.nyx.com/files/
nyse_arca_marketplace_fees_2_26_13.pdf.
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The Exchange also notes that it
operates in a highly-competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive. The
proposed rule change reflects a
competitive pricing structure designed
to incent market participants to direct
their order flow to the Exchange. The
Exchange believes that the proposed
rates are equitable and nondiscriminatory in that they apply
uniformly to all Members. The
Exchange believes the fees and credits
remain competitive with those charged
by other venues and therefore continue
to be reasonable and equitably allocated
to Members.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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 these
changes represent a significant
departure from previous pricing offered
by the Exchange or pricing offered by
the Exchange’s competitors.
Additionally, Members may opt to
disfavor EDGX’s pricing if they believe
that alternatives offer them better value.
Accordingly, EDGX does not believe
that the proposed changes will impair
the ability of Members or competing
venues to maintain their competitive
standing in the financial markets.
Regarding the Retail Order Tier, the
Exchange believes that its proposal to
offer a rebate of $0.0034 per share
provided the Member satisfies the Retail
Order Tier’s conditions will increase
competition for Retail Orders because it
is comparable to the rates charged by
NYSE Arca for its retail order tier. The
Exchange believes its proposal will not
burden intramarket competition given
that the Exchange’s rates apply
uniformly to all Members that place
orders.
Regarding Flag C’s proposed
reduction in rebate, the Exchange
believes that its proposal to pass
through BX’s lower rebate of $0.0004
per share for securities priced at or
above $1.00 that route to BX and remove
liquidity will increase competition
because it is comparable to the rates
charged by BX for removing liquidity.
The Exchange believes its proposal will
not burden intramarket competition
given that the Exchange’s rates apply
uniformly to all Members that place
orders. The Exchange believes that its
proposal will increase competition for
routing services because the market for
order execution is competitive and the
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Exchange’s proposal provides customers
with another alternative to route their
orders. The Exchange notes that routing
through DE Route is voluntary.
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 12 and Rule 19b–4(f)(2) 13
thereunder. At any time within 60 days
of the filing of such proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–EDGX–2013–11 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–2013–11. 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
12 15
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U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
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submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–EDGX–
2013–11 and should be submitted on or
before April 3, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–05742 Filed 3–12–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; the
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change, as
Modified by Amendment No. 2 Thereto,
Relating to the Listing and Trading of
the Shares of the First Trust Senior
Loan Fund of First Trust ExchangeTraded Fund IV
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March 7, 2013.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (‘‘Act’’
or ‘‘Exchange Act’’),1 and Rule 19b–4
thereunder,2 notice is hereby given that
on February 21, 2013, The NASDAQ
Stock Market LLC (‘‘Nasdaq’’ or the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change, which filing was amended and
replaced in its entirety by Amendment
No. 2 thereto on March 7, 2013, as
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Nasdaq proposes to list and trade the
shares of the First Trust Senior Loan
Fund (the ‘‘Fund’’) of First Trust
Exchange-Traded Fund IV (the ‘‘Trust’’)
under Nasdaq Rule 5735 (‘‘Managed
Fund Shares’’).4 The shares of the Fund
are collectively referred to herein as the
‘‘Shares.’’
The text of the proposed rule change
is available at https://
nasdaq.cchwallstreet.com/, at Nasdaq’s
principal office, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission,
Nasdaq included statements concerning
the purpose of, and basis for, the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below.
Nasdaq has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–69072; File No. SR–
NASDAQ–2013–036]
14 17
described in Items I, II, and III below,
which Items have been prepared by
Nasdaq.3 The Commission is publishing
this notice to solicit comments on the
proposed rule change from interested
persons.
1. Purpose
The Exchange proposes to list and
trade the Shares of the Fund under
Nasdaq Rule 5735, which governs the
listing and trading of Managed Fund
3 Amendment No. 1 was filed on March 4, 2013
and withdrawn on March 5, 2013 to make a
correction to a footnote.
4 The Commission approved Nasdaq Rule 5735 in
Securities Exchange Act Release No. 57962 (June
13, 2008), 73 FR 35175 (June 20, 2008) (SR–
NASDAQ–2008–039). The Fund would not be the
first actively-managed fund listed on the Exchange;
see Securities Exchange Act Release No. 66175
(February 29, 2012), 77 FR 13379 (March 6, 2012)
(SR–NASDAQ–2012–004) (order approving listing
and trading of WisdomTree Emerging Markets
Corporate Bond Fund). Additionally, the
Commission has previously approved the listing
and trading of a number of actively managed
WisdomTree funds on NYSE Arca, Inc. pursuant to
Rule 8.600 of that exchange. See, e.g., Securities
Exchange Act Release No. 64643 (June 10, 2011), 76
FR 35062 (June 15, 2011) (SR–NYSE Arca-2011–21)
(order approving listing and trading of WisdomTree
Global Real Return Fund). The Exchange believes
the proposed rule change raises no significant
issues not previously addressed in those prior
Commission orders.
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Shares 5 on the Exchange. The Fund will
be an actively managed exchange-traded
fund (‘‘ETF’’). The Shares will be
offered by the Trust, which was
established as a Massachusetts business
trust on September 15, 2010. The Trust
is registered with the Commission as an
investment company and has filed a
registration statement on Form N–1A
(‘‘Registration Statement’’) with the
Commission.6 The Fund is a series of
the Trust.
Description of the Shares and the Fund
First Trust Advisors L.P. is the
investment adviser (‘‘Adviser’’) to the
Fund. First Trust Portfolios L.P. (the
‘‘Distributor’’) is the principal
underwriter and distributor of the
Fund’s Shares.7 The Bank of New York
Mellon Corporation (‘‘BNY’’) will act as
the administrator, accounting agent,
custodian and transfer agent to the
Fund.8
Paragraph (g) of Rule 5735 provides
that if the investment adviser to the
investment company issuing Managed
Fund Shares is affiliated with a brokerdealer, such investment adviser shall
erect a ‘‘fire wall’’ between the
investment adviser and the brokerdealer with respect to access to
5 A Managed Fund Share is a security that
represents an interest in an investment company
registered under the Investment Company Act of
1940 (15 U.S.C. 80a-1) (the ‘‘1940 Act’’) organized
as an open-end investment company or similar
entity that invests in a portfolio of securities
selected by its investment adviser consistent with
its investment objectives and policies. In contrast,
an open-end investment company that issues Index
Fund Shares, listed and traded on the Exchange
under Nasdaq Rule 5705, seeks to provide
investment results that correspond generally to the
price and yield performance of a specific foreign or
domestic stock index, fixed income securities index
or combination thereof.
6 See Post-Effective Amendment No. 15 to
Registration Statement on Form N–1A for the Trust,
dated December 14, 2012 (File Nos. 333–174332
and 811–22559). The descriptions of the Fund and
the Shares contained herein are based, in part, on
information in the Registration Statement.
7 The Commission has issued an order granting
certain exemptive relief to the Trust under the 1940
Act (the ‘‘Exemptive Order’’). See Investment
Company Act Release No. 30029 (April 10, 2012)
(File No. 812–13795). In compliance with Nasdaq
Rule 5735(b)(5), which applies to Managed Fund
Shares based on a fixed income portfolio (including
without limitation exchange-traded notes and
senior loans) or a portfolio invested in a
combination of equity securities and fixed income
securities, the Trust’s application for exemptive
relief under the 1940 Act states that the Fund will
comply with the federal securities laws in accepting
securities for deposits and satisfying redemptions
with redemption securities, including that the
securities accepted for deposits and the securities
used to satisfy redemption requests are sold in
transactions that would be exempt from registration
under the Securities Act of 1933 (15 U.S.C. § 77a).
8 The investment banking and custodial services
departments at BNY are segregated and
independent departments. BNY will not exercise
any investment discretion with respect to the Fund.
E:\FR\FM\13MRN1.SGM
13MRN1
]]>Agencies
[Federal Register Volume 78, Number 49 (Wednesday, March 13, 2013)]
[Notices]
[Pages 16003-16006]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-05742]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69067; File No. SR-EDGX-2013-11]
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
March 7, 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 March 1, 2013, 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 currently offers Members a rebate of $0.0005 per share
for Members' orders that route to Nasdaq OMX BX, Inc. (``BX'') and
remove liquidity, yielding Flag C, in securities priced at or above
$1.00. The Exchange proposes to decrease the rebate from $0.0005 per
share to $0.0004 per share in response to BX's fee filing that was
effective February 1, 2013.\4\ Direct Edge ECN LLC (d/b/a DE Route)
(``DE Route''), the Exchange's affiliated routing broker-dealer, does
not qualify for any of BX's volume tiered rebates.\5\ DE Route passes
through BX's default rebate to the Exchange and the Exchange, in turn,
passes through the
[[Page 16004]]
rebate to its Members. The Exchange notes that its proposal does not
modify the current rate of 0.10% of the dollar value of the transaction
that it charges Members for Flag C in securities priced below $1.00
that route to BX and remove liquidity.
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\4\ See Securities Exchange Act Release No. 68909 (February 12,
2013), 78 FR 11935 (February 20, 2013) (SR-BX-2013-011).
\5\ The Exchange notes that to the extent DE Route does achieve
any volume tiered rebates on BX, its rates for Flag C will not
change.
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In SR-EDGX-2012-47,\6\ the Exchange introduced new Flags ZA and ZR
for Members that utilize Retail Orders. Flag ZA is yielded for those
Members that use Retail Orders that add liquidity to EDGX and is
assigned a rebate of $0.0032 per share. Flag ZR is yielded for those
Members that use Retail Orders that remove liquidity from EDGX and is
assigned a charge of $0.0030 per share. Footnote 4 on the Exchange's
current fee schedule defines a ``Retail Order'' as an (i) 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.
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\6\ See Securities Exchange Act Release No. 68310 (November 28,
2012), 77 FR 71860 (December 4, 2012) (SR-EDGX-2012-47).
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In this filing, the Exchange proposes to introduce a new ``Retail
Order Tier'' that would provide that Members that add an average daily
volume (``ADV'') of Retail Orders (Flag ZA) that is 0.25% or more of
the Total Consolidated Volume (``TCV'') on a daily basis, measured
monthly would receive a rebate on Flag ZA that is $0.0034 per share
instead of the rate of $0.0032 per share currently assigned to Flag ZA.
The Exchange notes that the rebate for Flag ZA in securities priced
below $1.00 is not impacted by this proposal.
The Exchange also currently specifies, in part, in Footnote 4 that
to the extent Members qualify for a rebate higher than $0.0032 per
share through other volume tiers, such as the Mega Tier ($0.0035 per
share) or Market Depth Tier ($0.0033 per share), Members will earn the
higher rebate on Flag ZA instead of its assigned rate. The Exchange
proposes to make a conforming amendment to this language to include the
$0.0034 per share rebate. Therefore, the amended language would now
read: ``The Exchange notes that to the extent Members qualify for a
rebate higher than $0.0032 per share (for Flag ZA executions that do
not qualify for the above tier) or $0.0034 per share (for Flag ZA
executions qualifying for the above tier) through other volume tiers,
such as the Mega Tier or Market Depth Tier, they will earn the higher
rebate on Flag ZA instead of its assigned rate.''
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,\7\ in general, and
furthers the objectives of Section 6(b)(4),\8\ 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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\7\ 15 U.S.C. 78f.
\8\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed rule change is reasonable,
equitable and not unfairly discriminatory because it would encourage
Members to send additional Retail Orders that add liquidity to the
Exchange for execution in order to qualify for an incrementally higher
rebate for such executions that add liquidity on the Exchange if
Members satisfy the conditions of the Retail Order Tier. In this
regard, the Exchange believes that maintaining or increasing the
proportion of Retail Orders in exchange-listed securities that are
executed on a registered national securities exchange (rather than
relying on certain available off-exchange execution methods) would
contribute to investors' confidence in the fairness of their
transactions and would benefit all investors by deepening the
Exchange's liquidity pool, supporting the quality of price discovery,
promoting market transparency and improving investor protection.
The potential for increased volume from Retail Orders increases
potential revenue to the Exchange, and allows the Exchange to spread
its administrative and infrastructure costs over a greater number of
shares, leading to lower per share costs. These lower per share costs
in turn would allow the Exchange to pass on the savings to Members in
the form of lower fees. The increased liquidity benefits all investors
by deepening EDGX's liquidity pool, offering additional flexibility for
all investors to enjoy cost savings, supporting the quality of price
discovery, promoting market transparency and improving investor
protection. Volume-based rebates such as the one proposed herein have
been widely adopted in the cash equities markets, and are equitable
because they are open to all Members on an equal basis and provide
discounts that are reasonably related to the value to an exchange's
market quality associated with higher levels of market activity, such
as higher levels of liquidity provision and introduction of higher
volumes of orders into the price and volume discovery processes.
The Exchange believes the $0.0034 rebate proposed for the Retail
Order Tier is reasonable because it is directly related to a Member's
level of Retail Order executions during the month. The Exchange also
believes the proposed rebate of $0.0034 per share is reasonable because
it is consistent with certain other rebates, such as the those found in
tiers in Footnote 1 of its fee schedule (i.e., Market Depth Tier, Mega
Tier rebate of $0.0032 per share, Ultra Tier), that is available to
Members that satisfy certain criteria that is related to the Member's
level of trading activity on the Exchange.
The Exchange believes that requiring a Member to submit an ADV of
Retail Orders during a month of 0.25% or more of TCV is reasonable,
equitable and not unfairly discriminatory because this percentage is
within a range that the Exchange believes would incentivize Members to
submit Retail Orders to the Exchange in order to qualify for the
applicable rebate of $0.0034 per share. The Exchange notes that certain
other existing pricing tiers within its fee schedule make rebates
available to Members that are also based on the Member's level of
activity as a percentage of TCV. These existing percentage thresholds,
depending on other related factors and the level of the corresponding
rebates, are both higher and lower than the 0.25% proposed herein.\9\
Moreover, like existing pricing on the Exchange that is tied to
Member's volume levels as a percentage of TCV, the proposed Retail
Order is equitable and not unfairly discriminatory because it is
available to all Members on an equal and non-discriminatory basis.
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\9\ See for example, the Market Depth Tier Rebate ($0.0033 per
share rebate), Mega Tier rebate ($0.0032 per share), Ultra Tier
rebate ($0.0031 per share rebate), and Super Tier rebate ($0.0031
per share rebate) that are all tied to a percentage of TCV.
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The Exchange notes that a significant percentage of the orders of
individual investors are executed over-the-counter.\10\ The Exchange
believes that it is thus appropriate to create a financial incentive to
bring more retail order flow
[[Page 16005]]
to a public market, such as the Exchange over off-exchange venues. The
Exchange believes that investor protection and transparency is promoted
by rewarding displayed liquidity on exchanges over off-exchange
executions. By offering a proposed rebate of $0.0034 per share for the
Retail Order Tier, the Exchange believes it will encourage use of
Retail Orders, while maintaining consistency with the Exchange's
overall pricing philosophy of encouraging displayed liquidity. The
Exchange places a higher value on displayed liquidity because the
Exchange believes that displayed liquidity is a public good that
benefits investors and traders generally by providing greater price
transparency and enhancing public price discovery, which ultimately
lead to substantial reductions in transaction costs.
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\10\ See Concept Release on Equity Market Structure, Securities
Exchange Act Release No. 61358 (January 14, 2010), 75 FR 3594
(January 21, 2010) (noting that dark pools and internalizing broker-
dealers executed approximately 25.4% of share volume in September
2009). See also Mary L. Schapiro, Strengthening Our Equity Market
Structure (Speech at the Economic Club of New York, Sept. 7, 2010)
(available on the Commission's Web site). In her speech, Chairman
Schapiro noted that nearly 30 percent of volume in U.S.-listed
equities was executed in venues that do not display their liquidity
or make it generally available to the public and the percentage was
increasing nearly every month.
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The Exchange also notes that the Retail Order Tier is reasonable in
that NYSE Arca offers a comparable Retail Order Tier (with an analogous
Retail Order definition) that provides a rebate of $0.0032 per share
for the NYSE Arca's ETP Holders that execute an average daily volume of
Retail Orders that is 0.40% or more of the TCV.\11\
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\11\ See Securities Exchange Act Release No. 67540 (July 30,
2012), 77 FR 46539 (August 3, 2012) (SR-NYSEArca-2012-77). See also,
https://usequities.nyx.com/sites/usequities.nyx.com/files/nyse_arca_marketplace_fees_2_26_13.pdf.
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The Exchange believes that its proposal to pass through BX's rebate
of $0.0004 per share for orders that route to BX and remove liquidity
(Flag C) 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 BX through DE Route.
Currently, BX offers a rebate to DE Route for orders that route to BX
and remove liquidity, and DE Route passes through that rebate to the
Exchange and the Exchange passes through that rebate to its Members.
Effective February 1, 2012, BX rebates DE Route $0.0004 per share for
orders that route to BX and remove liquidity. The Exchange's proposal
will enable DE Route to pass through the $0.0004 per share rebate to
the Exchange and the Exchange, in turn, to pass it through to its
Members. The Exchange believes its proposal is equitable and reasonable
because it allows the Exchange to continue to pass through BX's rebate
to its Members. The Exchange notes that routing through DE Route is
voluntary. Lastly, the Exchange also believes that this proposed
amendment is non-discriminatory because it applies uniformly to all
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 these changes represent a
significant departure from previous pricing offered by the Exchange or
pricing offered by the Exchange's competitors. Additionally, Members
may opt to disfavor EDGX's pricing if they believe that alternatives
offer them better value. Accordingly, EDGX does not believe that the
proposed changes will impair the ability of Members or competing venues
to maintain their competitive standing in the financial markets.
Regarding the Retail Order Tier, the Exchange believes that its
proposal to offer a rebate of $0.0034 per share provided the Member
satisfies the Retail Order Tier's conditions will increase competition
for Retail Orders because it is comparable to the rates charged by NYSE
Arca for its retail order tier. The Exchange believes its proposal will
not burden intramarket competition given that the Exchange's rates
apply uniformly to all Members that place orders.
Regarding Flag C's proposed reduction in rebate, the Exchange
believes that its proposal to pass through BX's lower rebate of $0.0004
per share for securities priced at or above $1.00 that route to BX and
remove liquidity will increase competition because it is comparable to
the rates charged by BX for removing liquidity. The Exchange believes
its proposal will not burden intramarket competition given that the
Exchange's rates apply uniformly to all Members that place orders. 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.
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 \12\ and Rule 19b-4(f)(2) \13\ thereunder. At
any time within 60 days of the filing of such proposed rule change, the
Commission summarily may temporarily suspend such rule change if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or otherwise
in furtherance of the purposes of the Act.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(2).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-EDGX-2013-11 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-2013-11. 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
[[Page 16006]]
submission, all subsequent amendments, all written statements with
respect to the proposed rule change that are filed with the Commission,
and all written communications relating to the proposed rule change
between the Commission and any person, other than those that may be
withheld from the public in accordance with the provisions of 5 U.S.C.
552, will be available for Web site viewing and printing in the
Commission's Public Reference Room, 100 F Street NE., Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-EDGX-2013-11 and should be
submitted on or before April 3, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-05742 Filed 3-12-13; 8:45 am]
BILLING CODE 8011-01-P
