Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Clarify for Members and Non-Members the Use of Certain Data Feeds for Order Handling and Execution, Order Routing and Regulatory Compliance of EDGX Exchange, Inc., 44950-44953 [2014-18118]
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Federal Register / Vol. 79, No. 148 / Friday, August 1, 2014 / Notices
information is highly competitive and
continually evolves as products develop
and change.
In establishing the proposed fees, the
Exchange considered the
competitiveness of the market for
proprietary data and all of the
implications of that competition. The
Exchange believes that it has considered
all relevant factors and has not
considered irrelevant factors in order to
establish fair, reasonable, and not
unreasonably discriminatory fees and an
equitable allocation of fees among all
users. The existence of numerous
alternatives to the Exchange’s products,
including proprietary data from other
sources, ensures that the Exchange
cannot set unreasonable fees, or fees
that are unreasonably discriminatory,
because vendors and subscribers can
elect these alternatives or choose not to
purchase a specific proprietary data
product if its cost is not justified by the
returns that any particular vendor or
subscriber would achieve through the
purchase.
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.
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 of such date (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 Exchange
consents, the Commission shall:
(A) By order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
tkelley on DSK3SPTVN1PROD with NOTICES
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:
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BATS–2014–028 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BATS–2014–028. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of BATS.
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–BATS–2014–028 and
should be submitted on or before
August 22, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.48
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–18123 Filed 7–31–14; 8:45 am]
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Self-Regulatory Organizations; EDGX
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Clarify for Members
and Non-Members the Use of Certain
Data Feeds for Order Handling and
Execution, Order Routing and
Regulatory Compliance of EDGX
Exchange, Inc.
July 28, 2014.
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 July 15,
2014, EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. 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 clarify for
Members 3 and non-Members the
Exchange’s use of certain data feeds for
order handling and execution, order
routing, and regulatory compliance. 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
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The term ‘‘Member’’ is defined as ‘‘any
registered broker or dealer, or any person associated
with a registered broker or dealer, that has been
admitted to membership in the Exchange. A
Member will have the status of a ‘‘member’’ of the
Exchange as that term is defined in Section 3(a)(3)
of the Act.’’ See Exchange Rule 1.5(n).
2 17
48 17
PO 00000
[Release No. 34–72683; File No. SR–EDGX–
2014–20]
1 15
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
SECURITIES AND EXCHANGE
COMMISSION
CFR 200.30–3(a)(12).
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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
1. Purpose
The Exchange submits this filing to
clarify for Members and non-Members
the Exchange’s use of certain data feeds
for order handling and execution, order
routing, and regulatory compliance.
tkelley on DSK3SPTVN1PROD with NOTICES
Order Handling and Execution
The Exchange’s Matching Engine (the
‘‘ME’’) determines whether an order
should be displayed, executed
internally, or routed to another market
center. In making this determination,
the ME continually receives and
maintains quote data that is delivered
from an internal processor (the ‘‘Feed
Handler’’). The market data processed
by the Feed Handler is sourced directly
from the Securities Information
Processors (‘‘SIP’’) feeds.4 Specifically,
the Exchange’s ME uses the
Consolidated Tape Association (CTA)
market data operated by the Securities
Industry Automation Corp. in Tapes A
and B and Unlisted Trading Privileges
(UTP) market data operated by
NASDAQ OMX Group, Inc. in Tape C
securities.
These SIP feeds contain the best (topof-book) prices in round lot quotations
of each protected venue. The ME
utilizes the SIP feeds to obtain the topof-book quotes. On EDGX, this excludes
EDGX’s top-of-book quotes, but includes
the top-of-book quotes from the
Exchange’s affiliates, EDGA Exchange,
Inc. (‘‘EDGA’’), BATS Exchange, Inc.
(‘‘BZX’’), and BATS Y-Exchange, Inc.
(‘‘BYX’’). Based on the SIP feeds and the
EDGX Book,5 the ME constructs the
NBBO.
The ME will also update the NBBO
upon receipt of an Intermarket Sweep
Order (‘‘ISO’’) with a time-in-force of
Day (‘‘Day ISO’’). When a Day ISO is
posted on the EDGX Book, the ME uses
the receipt of a Day ISO as evidence that
the protected quotes have been cleared,
4 As part of the plan of integration pursuant to the
merger between Direct Edge Holdings LLC, the
holding company for the Exchange, and BATS
Global Markets, Inc., in January 2015, the Exchange
will transition to the use of quotes disseminated by
major protected market centers through proprietary
data feeds, and disseminated by the SIP for other
protected market centers, to calculate the National
Best Bid or Offer (‘‘NBBO’’). See www.bats.com/
edgeintegration. The Exchange will submit a filing
to the Commission prior to January 2015 to reflect
the transition.
5 The term ‘‘EDGX Book’’ is defined as ‘‘the
System’s electronic file of orders.’’ See Exchange
Rule 1.5(d).
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and the ME does not check away
markets for equal or better-priced
protected quotes.6 The ME will then
display and execute non-ISO orders at
the same price as the Day ISO.
The NBBO is utilized for order
handling and execution. The Exchange
looks to its calculation of the NBBO,
based on the SIP feeds and the EDGX
Book, when determining the mid-point
of the NBBO for purposes of a Mid-Point
Match Order 7 or the price at which a
Pegged Order 8 is to be pegged. The
Exchange also utilizes its calculation of
the NBBO when re-pricing orders
pursuant to Exchange Rule 11.5(c)(4)
and when handling NBBO Offset Peg
Orders 9 and Route Peg Orders.10 As
described below, the ME will include
quotes from market centers that declare
self-help in its calculation of the NBBO
for the purpose of re-pricing orders
whose price depends on the NBBO,
such as pegging, midpoint, etc.
Order Routing
When the Exchange has a marketable
order with instructions from the sender
that the order is eligible to be routed,
and the ME identifies that there is no
matching price available on the
Exchange, but there is a matching price
represented at another venue that
displays protected quotes, then the ME
will send the order to the Routing
Engine (‘‘RE’’) of Direct Edge ECN LLC
(d/b/a DE Route).
In determining whether to route an
order, the RE makes its own calculation
of the NBBO for a security using quotes
disseminated by market centers through
proprietary data feeds (‘‘Direct Feeds’’)
where available and the SIP feeds from
those venues where the Exchange does
not take the Direct Feeds.11
The RE utilizes a third-party market
data processor that consumes the Direct
Feeds and the SIP feeds, aggregates the
quantities of symbols by price level, and
redistributes them to an internal quote
processor (the ‘‘Quote Server’’). The RE
will request from the Quote Server a
market data snapshot which includes
the top-of-book and/or depth-of-book of
6 Pursuant to Regulation NMS, a broker-dealer
routing a Day ISO is required to simultaneously
route one or more additional ISOs, as necessary, to
execute against the full displayed size of any
protected quote priced equal to or better than the
Day ISO. See also Question 5.02 in the ‘‘Division
of Trading and Markets, Responses to Frequently
Asked Questions Concerning Rule 611 and Rule 610
of Regulation NMS’’ (last updated April 4, 2008)
available at https://www.sec.gov/divisions/
marketreg/nmsfaq610-11.htm.
7 See Exchange Rule 11.5(c)(7).
8 See Exchange Rule 11.5(c)(6).
9 See Exchange Rule 11.5(c)(15).
10 See Exchange Rule 11.5(c)(17).
11 EDGX consumes Direct Feeds from EDGA, BZX
and BYX.
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44951
each market center offering depth-ofbook feeds. Based on this snapshot, the
RE calculates the NBBO for a security
and routes the order, allocating the
shares to the venues at each price level
up to the limit price of the order,
starting with the best protected quotes
in accordance with Regulation NMS
subject to the Member’s instructions. If
there are any shares remaining after the
response to the initial route is received,
the RE will take another snapshot from
the Quote Server and send out orders
based on the same logic. If the full
quantity of the order is not executed
after multiple route attempts, the order
is returned to the ME.
In addition, the RE utilizes in-flight
order information in its routing
methodology. The RE tracks the details
of each in-flight order, including the
quantity routed and the corresponding
quote published by the routed venue.
After the RE requests a market data
snapshot from the Quote Server and the
RE has already targeted this quote
(identified by venue, symbol, price,
quantity and time stamp), then the RE
will subtract the routed quantity of inflight orders from the quote size
displayed in the market data snapshot.
The RE will route an order for the
remaining quantity to the venue. If there
are no residual shares, the RE will
bypass the quote.
The RE also utilizes responses from
other venues displaying protected
quotes in its routing methodology.
When the RE receives a response from
a venue that does not completely fill the
order targeting a quote, and no
subsequent quote update has been
received from that venue at the same
price level, the RE will mark that
venue’s quote as stale at that price
level.12 Absent additional quote updates
from that venue, the RE will bypass the
quote for one (1) second. After one
second, if the quote is still included in
the market data snapshot, the RE will
target the quote again.
Regulatory Compliance
Locked or Crossed Markets. The ME
determines whether the display of an
order would lock or cross the market. At
the time an order is entered into the ME,
the ME will establish, based upon the
prevailing top-of-book quotes of other
exchanges displaying protected quotes
received from the SIP feeds, whether the
order will lock or cross the prevailing
NBBO for a security. In the event that
12 Question 11 of the ‘‘Division of Market
Regulation: Responses to Frequently Asked
Questions Concerning Rule 611 and Rule 610 of
Regulation NMS’’ describes routing practices in the
context of stale quotes, available athttps://
www.sec.gov/divisions/marketreg/rule611faq.pdf.
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tkelley on DSK3SPTVN1PROD with NOTICES
the order would produce a locking or
crossing condition, the ME will cancel
the order, re-price 13 the order or route
the order based on the Member’s
instructions. Two exceptions to this
logic are Day ISOs and declarations of
self-help.
Pursuant to Regulation NMS, when an
Exchange receives a Day ISO, the sender
of the ISO retains the responsibility to
comply with applicable rules relating to
locked and crossed markets.14 In such
case, the Exchange is obligated only to
display a Day ISO order at the Member’s
price, even if such price would lock or
cross the market.15
Declarations of self-help occur when
the RE detects that an exchange
displaying protected quotes is slow or
non-responsive to the Exchange’s routed
orders. In this circumstance, according
to Rule 611(b) of Regulation NMS, the
Exchange may display a quotation that
may lock or cross quotations from the
market where the quotation that it may
lock or cross is displayed by the market
that the Exchange invoked self-help
against.16 The ME and RE, when they
take their market data snapshots,
maintain logic that will ignore the
quotes generated from the self-helped
market in their calculations of the
NBBO for execution and routing
determinations in compliance with
Regulation NMS. The Exchange will
also disable all routing to the selfhelped market. The ME and Quote
Server will continue to consume the
self-helped market center’s quotes;
however, in order to immediately
include the quote in the NBBO
calculation and enable routing once selfhelp is revoked. As described above, the
Exchange will include quotes from the
self-helped market for re-pricing
purposes such as pegged orders.
Trade-Through Rule. Pursuant to Rule
611 of Regulation NMS, the Exchange
shall establish, maintain, and enforce
written policies and procedures that are
reasonably designed to prevent tradethroughs on trading centers of protected
quotations in NMS stocks that do not
fall within a valid exception and, if
relying on such an exception, that are
reasonably designed to ensure
compliance with the terms of the
exception. The ME will not permit an
execution on the Exchange if there are
better-priced protected quotations
13 See
Exchange Rule 11.5(c)(4).
supra note 6 [sic].
15 See supra note 6.
16 See also Question 5.03 in the ‘‘Division of
Trading and Markets, Responses to Frequently
Asked Questions Concerning Rule 611 and Rule 610
of Regulation NMS’’ (last updated April 4, 2008)
available at https://www.sec.gov/divisions/
marketreg/nmsfaq610-11.htm.
14 See
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displayed in the market unless the order
is an ISO. At the time an order is
entered into the ME, the ME uses the
view of the NBBO as described above.
If the NBBO is priced better than what
is resident on the Exchange, the
Exchange will not match such order on
the EDGX Book, and based on the
Member’s instructions, the ME will
cancel the order, re-price the order or
route the order.
Regulation SHO. The Exchange
cannot execute a Short Sale Order 17
equal to or below the current National
Best Bid (‘‘NBB’’) when a short sale
price restriction is in effect pursuant to
Rule 201 of Regulation SHO (‘‘Short
Sale Circuit Breaker’’).18 When a Short
Sale Circuit Breaker is in effect, the
Exchange utilizes information received
from the SIP feeds and a view of the
EDGX Book to assess its compliance
with Rule 201 of Regulation SHO. The
NBBO used for compliance with Rule
201 of Regulation SHO includes quotes
from market centers against which the
Exchange has declared self-help.
Latent or Inaccurate Direct Feeds.
Where the Exchange’s systems detect
problems with one or more Direct
Feeds, the Quote Server can manually
fail over to the SIP feed to calculate the
NBBO for the market center(s) where the
applicable Direct Feed is experiencing
issues. In order to make this
determination, the Quote Server
continuously polls every Direct Feed
line and generates an email alert if the
difference between a quote’s sent time
(as stamped by the sending market) and
the time of receipt by the Exchange
exceeds one (1) second.
2. Statutory Basis
The Exchange believes that its
proposal is consistent with Section 6(b)
of the Act 19 in general, and furthers the
objectives of Section 6(b)(5) of the Act 20
Exchange Rule 11.15.
18 17 CFR 242.200(g); 17 CFR 242.201. On
February 26, 2010, the Commission adopted
amendments to Regulation SHO under the Act in
the form of Rule 201, pursuant to which, among
other things, short sale orders in covered securities
generally cannot be executed or displayed by a
trading center, such as the Exchange, at a price that
is at or below the current NBB when a Short Sale
Circuit Breaker is in effect for the covered security.
See Securities Exchange Act Release No. 61595
(February 26, 2010), 75 FR 11232 (March 10, 2010).
In connection with the adoption of Rule 201, Rule
200(g) of Regulation SHO was also amended to
include a ‘‘short exempt’’ marking requirement. See
also Securities Exchange Act Release No. 63247
(November 4, 2010), 75 FR 68702 (November 9,
2010) (extending the compliance date for Rules 201
and 200(g) to February 28, 2011). See also Division
of Trading & Markets: Responses to Frequently
Asked Questions Concerning Rule 201 of
Regulation SHO, www.sec.gov/divisions/marketreg/
rule201faq.htm.
19 15 U.S.C. 78f(b).
20 15 U.S.C. 78f(b)(5).
PO 00000
17 See
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in particular, in that it is designed to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system and, in
general, to protect investors and the
public interest. The Exchange does not
believe that this proposal will permit
unfair discrimination among customers,
brokers, or dealers because it will be
available to all Users.
The Exchange believes that its
proposal to describe the Exchange’s use
of data feeds removes impediments to
and perfects the mechanism of a free
and open market and protects investors
and the public interest because it
provides additional specificity and
transparency. The Exchange’s proposal
will enable investors to better assess the
quality of the Exchange’s execution and
routing services. The proposal does not
change the operation of the Exchange or
its use of data feeds; rather it describes
how, and for what purposes, the
Exchange uses the quotes disseminated
from data feeds to calculate the NBBO
for a security for purposes of Regulation
NMS, Regulation SHO and various order
types that update based on changes to
the applicable NBBO. The Exchange
believes the additional transparency
into the operation of the Exchange as
described in the proposal will remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, protect investors and the public
interest.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposal will impose any burden on
competition not necessary or
appropriate in furtherance of the
purposes of the Act. On the contrary,
the Exchange believes the proposal
would enhance competition because
describing the Exchange’s use of data
feeds enhances transparency and
enables investors to better assess the
quality of the Exchange’s execution and
routing services.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
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II. Date of Effectiveness of the Proposed
Rule Change and Timing for
Commission Action
Because the proposed rule change
does not (i) significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 21 and Rule 19b–4(f)(6)
thereunder.22
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or 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.
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–2014–20 on the subject line.
tkelley on DSK3SPTVN1PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–EDGX–2014–20. 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/
21 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
22 17
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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
a.m. and 3 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–
2014–20 and should be submitted on or
before August 22, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–18118 Filed 7–31–14; 8:45 am]
BILLING CODE 8011–01–P
44953
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 remove
building access and other restrictions on
traders conducting certain futures and
options trading on ICE Futures U.S., Inc.
(‘‘IFUS’’) 4 in space rented from the
Exchange (the ‘‘IFUS Trading Floor’’).
The text of the proposed rule change is
available on the Exchange’s Web site at
www.nyse.com, at the principal office of
the Exchange, 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, 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
SECURITIES AND EXCHANGE
COMMISSION
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–72680; File No. SR–
NYSEMKT–2014–63]
1. Purpose
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing of Proposed
Rule Change Removing Building
Access and Other Restrictions on
Traders Conducting Certain Futures
and Options Trading on ICE Futures
U.S., Inc. in Space Rented From the
Exchange
July 28, 2014.
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 July 15,
2014, NYSE MKT LLC (the ‘‘Exchange’’
or ‘‘NYSE MKT’’) 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
PO 00000
23 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
Frm 00216
Fmt 4703
Sfmt 4703
The Exchange proposes to remove the
building access and other restrictions on
the IFUS traders conducting certain
futures and options trading on the IFUS
Trading Floor, currently located in
Exchange facilities at 20 Broad Street
(the ‘‘IFUS Traders’’).5
4 IFUS is a Designated Contract Market pursuant
to the Commodity Exchange Act, as amended, and
is regulated by the U.S. Commodity Futures Trading
Commission (‘‘CFTC’’).
5 On November 13, 2013, pursuant to the
Amended and Restated Agreement and Plan of
Merger, dated as of March 19, 2013, by and among
IntercontinentalExchange, Inc. (‘‘ICE’’),
IntercontinentalExchange Group, Inc. (the
‘‘Company’’), NYSE Euronext, Braves Merger Sub,
Inc. (‘‘Braves Merger Sub’’) and NYSE Euronext
Holdings LLC (formerly known as Baseball Merger
Sub, LLC), Braves Merger Sub was merged with and
into ICE and NYSE Euronext was merged with and
into NYSE Euronext Holdings (the ‘‘Mergers’’). As
a result of the Mergers, NYSE Euronext and ICE are
wholly-owned subsidiaries of the Company. NYSE
Euronext owns 100% of the equity interest of NYSE
Group, Inc., a Delaware corporation (‘‘NYSE
Group’’), which in turn directly or indirectly owns,
Continued
E:\FR\FM\01AUN1.SGM
01AUN1
]]>Agencies
[Federal Register Volume 79, Number 148 (Friday, August 1, 2014)]
[Notices]
[Pages 44950-44953]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18118]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72683; File No. SR-EDGX-2014-20]
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Clarify
for Members and Non-Members the Use of Certain Data Feeds for Order
Handling and Execution, Order Routing and Regulatory Compliance of EDGX
Exchange, Inc.
July 28, 2014.
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 July 15, 2014, EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the Exchange. 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 clarify for Members \3\ and non-Members
the Exchange's use of certain data feeds for order handling and
execution, order routing, and regulatory compliance. 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\ The term ``Member'' is defined as ``any registered broker or
dealer, or any person associated with a registered broker or dealer,
that has been admitted to membership in the Exchange. A Member will
have the status of a ``member'' of the Exchange as that term is
defined in Section 3(a)(3) of the Act.'' See 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
[[Page 44951]]
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
1. Purpose
The Exchange submits this filing to clarify for Members and non-
Members the Exchange's use of certain data feeds for order handling and
execution, order routing, and regulatory compliance.
Order Handling and Execution
The Exchange's Matching Engine (the ``ME'') determines whether an
order should be displayed, executed internally, or routed to another
market center. In making this determination, the ME continually
receives and maintains quote data that is delivered from an internal
processor (the ``Feed Handler''). The market data processed by the Feed
Handler is sourced directly from the Securities Information Processors
(``SIP'') feeds.\4\ Specifically, the Exchange's ME uses the
Consolidated Tape Association (CTA) market data operated by the
Securities Industry Automation Corp. in Tapes A and B and Unlisted
Trading Privileges (UTP) market data operated by NASDAQ OMX Group, Inc.
in Tape C securities.
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\4\ As part of the plan of integration pursuant to the merger
between Direct Edge Holdings LLC, the holding company for the
Exchange, and BATS Global Markets, Inc., in January 2015, the
Exchange will transition to the use of quotes disseminated by major
protected market centers through proprietary data feeds, and
disseminated by the SIP for other protected market centers, to
calculate the National Best Bid or Offer (``NBBO''). See
www.bats.com/edgeintegration. The Exchange will submit a filing to
the Commission prior to January 2015 to reflect the transition.
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These SIP feeds contain the best (top-of-book) prices in round lot
quotations of each protected venue. The ME utilizes the SIP feeds to
obtain the top-of-book quotes. On EDGX, this excludes EDGX's top-of-
book quotes, but includes the top-of-book quotes from the Exchange's
affiliates, EDGA Exchange, Inc. (``EDGA''), BATS Exchange, Inc.
(``BZX''), and BATS Y-Exchange, Inc. (``BYX''). Based on the SIP feeds
and the EDGX Book,\5\ the ME constructs the NBBO.
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\5\ The term ``EDGX Book'' is defined as ``the System's
electronic file of orders.'' See Exchange Rule 1.5(d).
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The ME will also update the NBBO upon receipt of an Intermarket
Sweep Order (``ISO'') with a time-in-force of Day (``Day ISO''). When a
Day ISO is posted on the EDGX Book, the ME uses the receipt of a Day
ISO as evidence that the protected quotes have been cleared, and the ME
does not check away markets for equal or better-priced protected
quotes.\6\ The ME will then display and execute non-ISO orders at the
same price as the Day ISO.
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\6\ Pursuant to Regulation NMS, a broker-dealer routing a Day
ISO is required to simultaneously route one or more additional ISOs,
as necessary, to execute against the full displayed size of any
protected quote priced equal to or better than the Day ISO. See also
Question 5.02 in the ``Division of Trading and Markets, Responses to
Frequently Asked Questions Concerning Rule 611 and Rule 610 of
Regulation NMS'' (last updated April 4, 2008) available at https://www.sec.gov/divisions/marketreg/nmsfaq610-11.htm.
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The NBBO is utilized for order handling and execution. The Exchange
looks to its calculation of the NBBO, based on the SIP feeds and the
EDGX Book, when determining the mid-point of the NBBO for purposes of a
Mid-Point Match Order \7\ or the price at which a Pegged Order \8\ is
to be pegged. The Exchange also utilizes its calculation of the NBBO
when re-pricing orders pursuant to Exchange Rule 11.5(c)(4) and when
handling NBBO Offset Peg Orders \9\ and Route Peg Orders.\10\ As
described below, the ME will include quotes from market centers that
declare self-help in its calculation of the NBBO for the purpose of re-
pricing orders whose price depends on the NBBO, such as pegging,
midpoint, etc.
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\7\ See Exchange Rule 11.5(c)(7).
\8\ See Exchange Rule 11.5(c)(6).
\9\ See Exchange Rule 11.5(c)(15).
\10\ See Exchange Rule 11.5(c)(17).
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Order Routing
When the Exchange has a marketable order with instructions from the
sender that the order is eligible to be routed, and the ME identifies
that there is no matching price available on the Exchange, but there is
a matching price represented at another venue that displays protected
quotes, then the ME will send the order to the Routing Engine (``RE'')
of Direct Edge ECN LLC (d/b/a DE Route).
In determining whether to route an order, the RE makes its own
calculation of the NBBO for a security using quotes disseminated by
market centers through proprietary data feeds (``Direct Feeds'') where
available and the SIP feeds from those venues where the Exchange does
not take the Direct Feeds.\11\
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\11\ EDGX consumes Direct Feeds from EDGA, BZX and BYX.
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The RE utilizes a third-party market data processor that consumes
the Direct Feeds and the SIP feeds, aggregates the quantities of
symbols by price level, and redistributes them to an internal quote
processor (the ``Quote Server''). The RE will request from the Quote
Server a market data snapshot which includes the top-of-book and/or
depth-of-book of each market center offering depth-of-book feeds. Based
on this snapshot, the RE calculates the NBBO for a security and routes
the order, allocating the shares to the venues at each price level up
to the limit price of the order, starting with the best protected
quotes in accordance with Regulation NMS subject to the Member's
instructions. If there are any shares remaining after the response to
the initial route is received, the RE will take another snapshot from
the Quote Server and send out orders based on the same logic. If the
full quantity of the order is not executed after multiple route
attempts, the order is returned to the ME.
In addition, the RE utilizes in-flight order information in its
routing methodology. The RE tracks the details of each in-flight order,
including the quantity routed and the corresponding quote published by
the routed venue. After the RE requests a market data snapshot from the
Quote Server and the RE has already targeted this quote (identified by
venue, symbol, price, quantity and time stamp), then the RE will
subtract the routed quantity of in-flight orders from the quote size
displayed in the market data snapshot. The RE will route an order for
the remaining quantity to the venue. If there are no residual shares,
the RE will bypass the quote.
The RE also utilizes responses from other venues displaying
protected quotes in its routing methodology. When the RE receives a
response from a venue that does not completely fill the order targeting
a quote, and no subsequent quote update has been received from that
venue at the same price level, the RE will mark that venue's quote as
stale at that price level.\12\ Absent additional quote updates from
that venue, the RE will bypass the quote for one (1) second. After one
second, if the quote is still included in the market data snapshot, the
RE will target the quote again.
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\12\ Question 11 of the ``Division of Market Regulation:
Responses to Frequently Asked Questions Concerning Rule 611 and Rule
610 of Regulation NMS'' describes routing practices in the context
of stale quotes, available athttps://www.sec.gov/divisions/marketreg/rule611faq.pdf.
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Regulatory Compliance
Locked or Crossed Markets. The ME determines whether the display of
an order would lock or cross the market. At the time an order is
entered into the ME, the ME will establish, based upon the prevailing
top-of-book quotes of other exchanges displaying protected quotes
received from the SIP feeds, whether the order will lock or cross the
prevailing NBBO for a security. In the event that
[[Page 44952]]
the order would produce a locking or crossing condition, the ME will
cancel the order, re-price \13\ the order or route the order based on
the Member's instructions. Two exceptions to this logic are Day ISOs
and declarations of self-help.
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\13\ See Exchange Rule 11.5(c)(4).
---------------------------------------------------------------------------
Pursuant to Regulation NMS, when an Exchange receives a Day ISO,
the sender of the ISO retains the responsibility to comply with
applicable rules relating to locked and crossed markets.\14\ In such
case, the Exchange is obligated only to display a Day ISO order at the
Member's price, even if such price would lock or cross the market.\15\
---------------------------------------------------------------------------
\14\ See supra note 6 [sic].
\15\ See supra note 6.
---------------------------------------------------------------------------
Declarations of self-help occur when the RE detects that an
exchange displaying protected quotes is slow or non-responsive to the
Exchange's routed orders. In this circumstance, according to Rule
611(b) of Regulation NMS, the Exchange may display a quotation that may
lock or cross quotations from the market where the quotation that it
may lock or cross is displayed by the market that the Exchange invoked
self-help against.\16\ The ME and RE, when they take their market data
snapshots, maintain logic that will ignore the quotes generated from
the self-helped market in their calculations of the NBBO for execution
and routing determinations in compliance with Regulation NMS. The
Exchange will also disable all routing to the self-helped market. The
ME and Quote Server will continue to consume the self-helped market
center's quotes; however, in order to immediately include the quote in
the NBBO calculation and enable routing once self-help is revoked. As
described above, the Exchange will include quotes from the self-helped
market for re-pricing purposes such as pegged orders.
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\16\ See also Question 5.03 in the ``Division of Trading and
Markets, Responses to Frequently Asked Questions Concerning Rule 611
and Rule 610 of Regulation NMS'' (last updated April 4, 2008)
available at https://www.sec.gov/divisions/marketreg/nmsfaq610-11.htm.
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Trade-Through Rule. Pursuant to Rule 611 of Regulation NMS, the
Exchange shall establish, maintain, and enforce written policies and
procedures that are reasonably designed to prevent trade-throughs on
trading centers of protected quotations in NMS stocks that do not fall
within a valid exception and, if relying on such an exception, that are
reasonably designed to ensure compliance with the terms of the
exception. The ME will not permit an execution on the Exchange if there
are better-priced protected quotations displayed in the market unless
the order is an ISO. At the time an order is entered into the ME, the
ME uses the view of the NBBO as described above. If the NBBO is priced
better than what is resident on the Exchange, the Exchange will not
match such order on the EDGX Book, and based on the Member's
instructions, the ME will cancel the order, re-price the order or route
the order.
Regulation SHO. The Exchange cannot execute a Short Sale Order \17\
equal to or below the current National Best Bid (``NBB'') when a short
sale price restriction is in effect pursuant to Rule 201 of Regulation
SHO (``Short Sale Circuit Breaker'').\18\ When a Short Sale Circuit
Breaker is in effect, the Exchange utilizes information received from
the SIP feeds and a view of the EDGX Book to assess its compliance with
Rule 201 of Regulation SHO. The NBBO used for compliance with Rule 201
of Regulation SHO includes quotes from market centers against which the
Exchange has declared self-help.
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\17\ See Exchange Rule 11.15.
\18\ 17 CFR 242.200(g); 17 CFR 242.201. On February 26, 2010,
the Commission adopted amendments to Regulation SHO under the Act in
the form of Rule 201, pursuant to which, among other things, short
sale orders in covered securities generally cannot be executed or
displayed by a trading center, such as the Exchange, at a price that
is at or below the current NBB when a Short Sale Circuit Breaker is
in effect for the covered security. See Securities Exchange Act
Release No. 61595 (February 26, 2010), 75 FR 11232 (March 10, 2010).
In connection with the adoption of Rule 201, Rule 200(g) of
Regulation SHO was also amended to include a ``short exempt''
marking requirement. See also Securities Exchange Act Release No.
63247 (November 4, 2010), 75 FR 68702 (November 9, 2010) (extending
the compliance date for Rules 201 and 200(g) to February 28, 2011).
See also Division of Trading & Markets: Responses to Frequently
Asked Questions Concerning Rule 201 of Regulation SHO, www.sec.gov/divisions/marketreg/rule201faq.htm.
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Latent or Inaccurate Direct Feeds. Where the Exchange's systems
detect problems with one or more Direct Feeds, the Quote Server can
manually fail over to the SIP feed to calculate the NBBO for the market
center(s) where the applicable Direct Feed is experiencing issues. In
order to make this determination, the Quote Server continuously polls
every Direct Feed line and generates an email alert if the difference
between a quote's sent time (as stamped by the sending market) and the
time of receipt by the Exchange exceeds one (1) second.
2. Statutory Basis
The Exchange believes that its proposal is consistent with Section
6(b) of the Act \19\ in general, and furthers the objectives of Section
6(b)(5) of the Act \20\ in particular, in that it is designed to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system and, in general, to
protect investors and the public interest. The Exchange does not
believe that this proposal will permit unfair discrimination among
customers, brokers, or dealers because it will be available to all
Users.
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\19\ 15 U.S.C. 78f(b).
\20\ 15 U.S.C. 78f(b)(5).
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The Exchange believes that its proposal to describe the Exchange's
use of data feeds removes impediments to and perfects the mechanism of
a free and open market and protects investors and the public interest
because it provides additional specificity and transparency. The
Exchange's proposal will enable investors to better assess the quality
of the Exchange's execution and routing services. The proposal does not
change the operation of the Exchange or its use of data feeds; rather
it describes how, and for what purposes, the Exchange uses the quotes
disseminated from data feeds to calculate the NBBO for a security for
purposes of Regulation NMS, Regulation SHO and various order types that
update based on changes to the applicable NBBO. The Exchange believes
the additional transparency into the operation of the Exchange as
described in the proposal will remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, protect investors and the public interest.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposal will impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act. On the contrary, the Exchange believes the
proposal would enhance competition because describing the Exchange's
use of data feeds enhances transparency and enables investors to better
assess the quality of the Exchange's execution and routing services.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
[[Page 44953]]
II. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the proposed rule change does not (i) significantly affect
the protection of investors or the public interest; (ii) impose any
significant burden on competition; and (iii) become operative for 30
days from the date on which it was filed, or such shorter time as the
Commission may designate, the proposed rule change has become effective
pursuant to Section 19(b)(3)(A) of the Act \21\ and Rule 19b-4(f)(6)
thereunder.\22\
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\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the text of the proposed rule change, at least
five business days prior to the date of filing of the proposed rule
change, or such shorter time as designated by the Commission.
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or 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. 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-2014-20 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-EDGX-2014-20. 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
a.m. and 3 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-2014-20 and should be
submitted on or before August 22, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18118 Filed 7-31-14; 8:45 am]
BILLING CODE 8011-01-P
