Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing of Proposed Rule Change Relating to the EDGX Exchange, Inc.'s Routing Broker Dealer, as Described in EDGX Rule 2.12(b), 31994-31996 [2013-12533]

Download as PDF 31994 Federal Register / Vol. 78, No. 102 / Tuesday, May 28, 2013 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES consistent with the requirements of the Act and the rules and regulations thereunder applicable to a national securities exchange 5 and, in particular, the requirements of Sections 6(b)(3) 6 and 6(b)(5) of the Act.7 The proposal will reduce from three to one the minimum number of Public Directors 8 that will be required to be included in the calculation of Non-Industry Directors 9 for the purpose of determining the number of NonIndustry Directors that may serve on the BX Board. The Exchange proposed this change in light of the cessation in 2012 by the Boston Options Exchange LLC (‘‘BOX’’) of its operations as an options trading facility of the Exchange 10 and the termination of the Regulatory Services Agreement (‘‘RSA’’) between BX and BOX.11 To accommodate BOX when BOX was a BX facility, three Public Directors were required to be included in the calculation of the number of Non-Industry Directors on the BX Board.12 The Commission notes that, although only one Public Director must be included in the composition of Non-Industry Directors as a result of the proposed rule change, the requirement in BX By-Law Article IV, Section 4.3 that the number of Non-Industry 5 In approving this proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 6 15 U.S.C. 78f(b)(3). 7 15 U.S.C. 78f(b)(5). 8 Pursuant to BX By-Law Article I(gg), a Public Director is a Director who has no material business relationship with a broker or dealer, the Corporation (i.e., the Exchange) or its affiliates, or FINRA. 9 Pursuant to BX By-Law Article I(bb), a NonIndustry Director is a Director (excluding Staff Directors) who is (i) a Public Director; (ii) an officer or employee of an issuer of securities listed on the Exchange; or (iii) any other individual who would not be an Industry Director. 10 BOX was a facility of the Exchange under Section 39(a)(2) of the Act. See Securities Exchange Act Release Nos. 49066 (January 13, 2004), 69 FR 2773 (January 20, 2004) (SR–BSE–2003–17); 49065 (January 13, 2004), 69 FR 2768 (January 20, 2004) (SR–BSE–2003–04) (‘‘BOXR Order’’); and 49068 (January 13, 2004), 69 FR 2775 (January 20, 2004) (SR–BSE–2002–15). See also Release No. 58324; 73 FR 46936 (August 7, 2008) (File Nos. SR–BSE– 2008–02; SR–BSE–2008–23; SR–BSE–2008–25; SR– BSECC–2008–01) (‘‘Order Approving the Acquisition of the Boston Stock Exchange, Incorporated by The NASDAQ OMX Group, Inc.’’). 11 The RSA specified, among other matters, that BX would terminate its responsibility for fulfilling certain obligations and cease performing certain regulatory functions as of the effective date of June 1, 2012, or sooner if BOX satisfied all of the conditions required for BOX to operate as a national securities exchange. 12 See Securities Exchange Act Release No. 34– 58324 (August 7, 2008), 73 FR 46936 (August 12, 2008) (File Nos. SR–BSE–2008–02; SR–BSE–2008– 23; SR–BSE–2008–25; SR–BSECC–2008–01); see also Securities Exchange Act Release No. 67009 (May 17, 2012), 77 FR 30566 (May 23, 2012) (SR– BX–2012–036). VerDate Mar<15>2010 17:46 May 24, 2013 Jkt 229001 Directors must equal or exceed the sum of Industry Directors 13 and Member Representative Directors 14 will continue to be met. Moreover, the Commission notes that, as a result of the proposed rule change, the BX Board composition requirement regarding Public Directors now will be similar to the board composition requirements of NASDAQ OMX PHLX LLC (‘‘Phlx’’) and The NASDAQ Stock Market LLC (‘‘NASDAQ’’), both of which require that the number of Non-Industry Directors must include at least one Public Director.15 In addition, the Commission notes that the BX Board will continue to have three Public Directors, because the BX Board still will need to have three Public Directors available to serve on its Regulatory Oversight Committee, as required by BX By-Law Article IV, Section 4.13. For the foregoing reasons, the Commission 13 Pursuant to BX By-Law Article I(t), an Industry Director is a Director (excluding any two officers of the Corporation, selected at the sole discretion of the Board, amongst those officers who may be serving as Directors (the ‘‘Staff Directors’’)), who (i) is or has served in the prior three years as an officer, director, or employee of a broker or dealer, excluding an outside director or a director not engaged in the day-to-day management of a broker or dealer; (ii) is an officer, director (excluding an outside director), or employee of an entity that owns more than ten percent of the equity of a broker or dealer, and the broker or dealer accounts for more than five percent of the gross revenues received by the consolidated entity; (iii) owns more than five percent of the equity securities of any broker or dealer, whose investments in brokers or dealers exceed ten percent of his or her net worth, or whose ownership interest otherwise permits him or her to be engaged in the day-to-day management of a broker or dealer; (iv) provides professional services to brokers or dealers, and such services constitute twenty percent or more of the professional revenues received by the Director or twenty percent or more of the gross revenues received by the Director’s firm or partnership; (v) provides professional services to a director, officer, or employee of a broker, dealer, or corporation that owns fifty percent or more of the voting stock of a broker or dealer, and such services relate to the director’s, officer’s, or employee’s professional capacity and constitute twenty percent or more of the professional revenues received by the Director or twenty percent or more of the gross revenues received by the Director’s firm or partnership; or (vi) has a consulting or employment relationship with or provides professional services to the Corporation or any affiliate thereof or to FINRA or has had any such relationship or provided any such services at any time within the prior three years. 14 Pursuant to BX By-Law Article I(x), a Member Representative Director is a Director who has been elected by the stockholders after having been nominated by the Member Nominating Committee or voted upon by Exchange Members pursuant to the BX By-Laws (or elected by the stockholders without such nomination or voting in the case of the Member Representative Directors elected pursuant to Article IV, Section 4.3(b)). A Member Representative Director may, but is not required to be, an officer, director, employee, or agent of an Exchange Member. 15 See Phlx By-Law Article III, Section 3–2(a) and NASDAQ By-Law Article III, Section 2(a). PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 believes that the proposed rule change is consistent with the Act. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,16 that the proposed rule change (SR–BX–2013– 029) be, and it hereby is, approved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.17 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–12486 Filed 5–24–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69614; File No. SR–EDGX– 2013–17] Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing of Proposed Rule Change Relating to the EDGX Exchange, Inc.’s Routing Broker Dealer, as Described in EDGX Rule 2.12(b) May 21, 2013. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on May 16, 2013, EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) filed with the Securities and Exchange Commission (the ‘‘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 make permanent the existing pilot program that permits the Exchange’s inbound router, as described in Rule 2.12(b), to receive inbound routes of equities orders through Direct Edge ECN LLC d/b/a DE Route (‘‘DE Route’’), the Exchange’s routing broker dealer, from EDGA Exchange, Inc. (‘‘EDGA’’). 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. 16 15 U.S.C. 78s(b)(2). CFR 200.30–3(a)(12). 1 15 U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 17 17 E:\FR\FM\28MYN1.SGM 28MYN1 Federal Register / Vol. 78, No. 102 / Tuesday, May 28, 2013 / Notices II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements. mstockstill on DSK4VPTVN1PROD with NOTICES A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose Currently, DE Route is the approved outbound order routing facility of EDGA.4 The Exchange has been authorized to receive inbound routes of equities orders by DE Route from EDGA. The Exchange’s authority to receive inbound routes of equities orders by DE Route from EDGA is currently subject to a pilot period of twelve months, ending June 30, 2013.5 The Exchange hereby seeks permanent approval to permit the Exchange to accept inbound orders that DE Route routes in its capacity as a facility of EDGA. This is reflected in the proposed amendment to EDGX Rule 2.12(b). Under the pilot, the Exchange is committed to the following obligations and conditions: • The Exchange shall: (a) Enter into a plan pursuant to Rule 17d–2 under the Exchange Act with a non-affiliated selfregulatory organization (‘‘SRO’’) to relieve the Exchange of regulatory responsibilities for DE Route with respect to rules that are common rules between the Exchange and the SRO, and (b) enter into a regulatory services contract (‘‘Regulatory Contract’’) with a non-affiliated SRO to perform regulatory responsibilities for DE Route for unique Exchange rules. • The regulatory services contract shall require the Exchange to provide the non-affiliated SRO with information, in an easily accessible manner, regarding all exception reports, alerts, complaints, trading errors, cancellations, investigations, and enforcement matters (collectively ‘‘Exceptions’’) in which DE Route is 4 See Securities Exchange Act Release No. 61698 (March 12, 2010), 75 FR 13151 (March 18, 2010). 5 See Securities Exchange Act Release No. 66644 (March 22, 2012), 77 FR 18877 (March 28, 2012) (SR–EDGX–2012–09). VerDate Mar<15>2010 17:46 May 24, 2013 Jkt 229001 identified as a participant that has potentially violated Exchange or SEC Rules, and shall require that the nonaffiliated SRO provide a report, at least quarterly, to the Exchange quantifying all Exceptions in which DE Route is identified as a participant that has potentially violated Exchange or SEC rules. • The Exchange, on behalf of Direct Edge Holdings LLC, shall establish and maintain procedures and internal controls reasonably designed to ensure that DE Route does not develop or implement changes to its system on the basis of non-public information obtained as a result of its affiliation with the Exchange until such information is available generally to similarly situated Members 6 in connection with the provision of inbound order routing to the Exchange. The Exchange has complied with the above-listed conditions during the pilot. In meeting them, the Exchange has set up mechanisms that protect the independence of the Exchange’s regulatory responsibility with respect to DE Route, as well as demonstrate that DE Route cannot use any information that it may have because of its affiliation with the Exchange to its advantage. Since the Exchange has met all the above-listed obligations and conditions, it now seeks permanent approval of the Exchange and DE Route’s inbound routing relationship. Upon approval of the proposed rule change, the Exchange will continue to comply with the obligations and conditions as set forth in proposed EDGX Rule 2.12. 2. Statutory Basis The Exchange believes that its proposal is consistent with the requirements of the Act and the rules and regulations thereunder that are applicable to a national securities exchange, and, in particular, with the requirements of Section 6(b) of the Act.7 Specifically, the proposal is consistent with Section 6(b)(5) of the Act,8 because it would promote just and equitable principles of trade, remove impediments to, and perfect the mechanism of, a free and open market and a national market system. Specifically, the proposed rule change will allow the Exchange to continue receiving inbound routes of equities orders from DE Route acting in its capacity as a facility of EDGA, in a manner consistent with prior approvals and established protections. The Exchange believes that meeting the 6 As defined in EDGX Rule 1.5(n). U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). 7 15 PO 00000 Frm 00112 Fmt 4703 Sfmt 4703 31995 commitments established during the pilot program demonstrates that the Exchange has mechanisms that protect the independence of the Exchange’s regulatory responsibility with respect to DE Route, as well as demonstrates that DE Route cannot use any information that it may have because of its affiliation with the Exchange to its advantage. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change does not impose any burden on intermarket or intramarket competition as it would allow the Exchange to have a permanent inbound router consistent with its competitors.9 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 written comments from its Members or other interested parties. 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 up to 90 days (i) as the Commission may designate 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. 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. 9 See Securities Exchange Act Release No. 65453 (September 30, 2011), 76 FR 62122 (October 6, 2011) (SR–NYSE–2011–45); Securities Exchange Act Release No. 64090 (March 17, 2011), 76 FR 16462 (March 23, 2011) (SR–BX–2011–007); Securities Exchange Act Release No. 66807 (April 13, 2012), 77 FR 23300 (April 18, 2012) (SR–BYX– 2012–006); Securities Exchange Act Release No. 66808 (April 13, 2012), 77 FR 23294 (April 18, 2012) (SR–BATS–2012–013). E:\FR\FM\28MYN1.SGM 28MYN1 31996 Federal Register / Vol. 78, No. 102 / Tuesday, May 28, 2013 / Notices Comments may be submitted by any of the following methods: SECURITIES AND EXCHANGE COMMISSION 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–2013–17 on the subject line. [Release No. 34–69613; File No. SR–EDGA– 2013–13] Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing of Proposed Rule Change Relating to the EDGA Exchange, Inc.’s Routing Broker Dealer, as Described in EDGA Rule 2.12(b) May 21, 2013. Paper Comments • Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. mstockstill on DSK4VPTVN1PROD with NOTICES All submissions should refer to File Number SR–EDGX–2013–17. 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 will also 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– 2013–17 and should be submitted on or before June 18, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.10 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–12533 Filed 5–24–13; 8:45 am] BILLING CODE 8011–01–P Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on May 16, 2013, EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) filed with the Securities and Exchange Commission (the ‘‘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 make permanent the existing pilot program that permits the Exchange’s inbound router, as described in Rule 2.12(b), to receive inbound routes of equities orders through Direct Edge ECN LLC d/b/a DE Route (‘‘DE Route’’), the Exchange’s routing broker dealer, from EDGX Exchange, Inc. (‘‘EDGX’’). All of the changes described herein are applicable to EDGA Members. The text of the proposed rule change is available on the Exchange’s Internet Web site at www.directedge.com, at the Exchange’s principal office, and at the Public Reference Room of the Commission. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 10 17 CFR 200.30–3(a)(12). VerDate Mar<15>2010 17:46 May 24, 2013 Jkt 229001 PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose Currently, DE Route is the approved outbound order routing facility of EDGX.4 The Exchange has been authorized to receive inbound routes of equities orders by DE Route from EDGX. The Exchange’s authority to receive inbound routes of equities orders by DE Route from EDGX is currently subject to a pilot period of twelve months, ending June 30, 2013.5 The Exchange hereby seeks permanent approval to permit the Exchange to accept inbound orders that DE Route routes in its capacity as a facility of EDGX. This is reflected in the proposed amendment to EDGA Rule 2.12(b). Under the pilot, the Exchange is committed to the following obligations and conditions: • The Exchange shall: (a) Enter into a plan pursuant to Rule 17d–2 under the Exchange Act with a non-affiliated selfregulatory organization (‘‘SRO’’) to relieve the Exchange of regulatory responsibilities for DE Route with respect to rules that are common rules between the Exchange and the SRO, and (b) enter into a regulatory services contract (‘‘Regulatory Contract’’) with a non-affiliated SRO to perform regulatory responsibilities for DE Route for unique Exchange rules. • The regulatory services contract shall require the Exchange to provide the non-affiliated SRO with information, in an easily accessible manner, regarding all exception reports, alerts, complaints, trading errors, cancellations, investigations, and enforcement matters (collectively ‘‘Exceptions’’) in which DE Route is identified as a participant that has potentially violated Exchange or SEC Rules, and shall require that the nonaffiliated SRO provide a report, at least quarterly, to the Exchange quantifying all Exceptions in which DE Route is identified as a participant that has potentially violated Exchange or SEC rules. • The Exchange, on behalf of Direct Edge Holdings LLC, shall establish and maintain procedures and internal controls reasonably designed to ensure that DE Route does not develop or implement changes to its system on the basis of non-public information obtained as a result of its affiliation with 4 See Securities Exchange Act Release No. 61698 (March 12, 2010), 75 FR 13151 (March 18, 2010). 5 See Securities Exchange Act Release No. 66643 (March 22, 2012), 77 FR 18876 (March 28, 2012) (SR–EDGA–2012–10). E:\FR\FM\28MYN1.SGM 28MYN1

Agencies

[Federal Register Volume 78, Number 102 (Tuesday, May 28, 2013)]
[Notices]
[Pages 31994-31996]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-12533]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69614; File No. SR-EDGX-2013-17]


Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing of Proposed Rule Change Relating to the EDGX Exchange, Inc.'s 
Routing Broker Dealer, as Described in EDGX Rule 2.12(b)

May 21, 2013.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on May 16, 2013, EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the self-regulatory 
organization. The Commission is publishing this notice to solicit 
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    The Exchange proposes to make permanent the existing pilot program 
that permits the Exchange's inbound router, as described in Rule 
2.12(b), to receive inbound routes of equities orders through Direct 
Edge ECN LLC d/b/a DE Route (``DE Route''), the Exchange's routing 
broker dealer, from EDGA Exchange, Inc. (``EDGA''). 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.

[[Page 31995]]

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
    Currently, DE Route is the approved outbound order routing facility 
of EDGA.\4\ The Exchange has been authorized to receive inbound routes 
of equities orders by DE Route from EDGA. The Exchange's authority to 
receive inbound routes of equities orders by DE Route from EDGA is 
currently subject to a pilot period of twelve months, ending June 30, 
2013.\5\ The Exchange hereby seeks permanent approval to permit the 
Exchange to accept inbound orders that DE Route routes in its capacity 
as a facility of EDGA. This is reflected in the proposed amendment to 
EDGX Rule 2.12(b).
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 61698 (March 12, 
2010), 75 FR 13151 (March 18, 2010).
    \5\ See Securities Exchange Act Release No. 66644 (March 22, 
2012), 77 FR 18877 (March 28, 2012) (SR-EDGX-2012-09).
---------------------------------------------------------------------------

    Under the pilot, the Exchange is committed to the following 
obligations and conditions:
     The Exchange shall: (a) Enter into a plan pursuant to Rule 
17d-2 under the Exchange Act with a non-affiliated self-regulatory 
organization (``SRO'') to relieve the Exchange of regulatory 
responsibilities for DE Route with respect to rules that are common 
rules between the Exchange and the SRO, and (b) enter into a regulatory 
services contract (``Regulatory Contract'') with a non-affiliated SRO 
to perform regulatory responsibilities for DE Route for unique Exchange 
rules.
     The regulatory services contract shall require the 
Exchange to provide the non-affiliated SRO with information, in an 
easily accessible manner, regarding all exception reports, alerts, 
complaints, trading errors, cancellations, investigations, and 
enforcement matters (collectively ``Exceptions'') in which DE Route is 
identified as a participant that has potentially violated Exchange or 
SEC Rules, and shall require that the non-affiliated SRO provide a 
report, at least quarterly, to the Exchange quantifying all Exceptions 
in which DE Route is identified as a participant that has potentially 
violated Exchange or SEC rules.
     The Exchange, on behalf of Direct Edge Holdings LLC, shall 
establish and maintain procedures and internal controls reasonably 
designed to ensure that DE Route does not develop or implement changes 
to its system on the basis of non-public information obtained as a 
result of its affiliation with the Exchange until such information is 
available generally to similarly situated Members \6\ in connection 
with the provision of inbound order routing to the Exchange.
---------------------------------------------------------------------------

    \6\ As defined in EDGX Rule 1.5(n).
---------------------------------------------------------------------------

    The Exchange has complied with the above-listed conditions during 
the pilot. In meeting them, the Exchange has set up mechanisms that 
protect the independence of the Exchange's regulatory responsibility 
with respect to DE Route, as well as demonstrate that DE Route cannot 
use any information that it may have because of its affiliation with 
the Exchange to its advantage. Since the Exchange has met all the 
above-listed obligations and conditions, it now seeks permanent 
approval of the Exchange and DE Route's inbound routing relationship. 
Upon approval of the proposed rule change, the Exchange will continue 
to comply with the obligations and conditions as set forth in proposed 
EDGX Rule 2.12.
2. Statutory Basis
    The Exchange believes that its proposal is consistent with the 
requirements of the Act and the rules and regulations thereunder that 
are applicable to a national securities exchange, and, in particular, 
with the requirements of Section 6(b) of the Act.\7\ Specifically, the 
proposal is consistent with Section 6(b)(5) of the Act,\8\ because it 
would promote just and equitable principles of trade, remove 
impediments to, and perfect the mechanism of, a free and open market 
and a national market system.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    Specifically, the proposed rule change will allow the Exchange to 
continue receiving inbound routes of equities orders from DE Route 
acting in its capacity as a facility of EDGA, in a manner consistent 
with prior approvals and established protections. The Exchange believes 
that meeting the commitments established during the pilot program 
demonstrates that the Exchange has mechanisms that protect the 
independence of the Exchange's regulatory responsibility with respect 
to DE Route, as well as demonstrates that DE Route cannot use any 
information that it may have because of its affiliation with the 
Exchange to its advantage.

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The proposed rule change does 
not impose any burden on intermarket or intramarket competition as it 
would allow the Exchange to have a permanent inbound router consistent 
with its competitors.\9\
---------------------------------------------------------------------------

    \9\ See Securities Exchange Act Release No. 65453 (September 30, 
2011), 76 FR 62122 (October 6, 2011) (SR-NYSE-2011-45); Securities 
Exchange Act Release No. 64090 (March 17, 2011), 76 FR 16462 (March 
23, 2011) (SR-BX-2011-007); Securities Exchange Act Release No. 
66807 (April 13, 2012), 77 FR 23300 (April 18, 2012) (SR-BYX-2012-
006); Securities Exchange Act Release No. 66808 (April 13, 2012), 77 
FR 23294 (April 18, 2012) (SR-BATS-2012-013).
---------------------------------------------------------------------------

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 written comments from its Members or other interested parties.

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 up to 90 days (i) as the 
Commission may designate 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.

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.

[[Page 31996]]

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-2013-17 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-2013-17. 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 will also 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-2013-17 and should be 
submitted on or before June 18, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\10\
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    \10\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-12533 Filed 5-24-13; 8:45 am]
BILLING CODE 8011-01-P
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