Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rules 1.5 and 11.3 of EDGX Exchange, Inc., 74147-74150 [2014-29243]
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Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Notices
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The proposed rule change would not
impose any burden on competition. The
Exchange believes that the proposed
rule changes will not burden
intramarket competition because all
Sponsoring Members and Sponsored
Participants would be subject to the
same requirements for sponsored access.
The proposed rule change is not
designed to address any competitive
issues but rather is designed to provide
greater harmonization among the
Exchange, EDGX, BATS and BYX rules
of similar purpose, resulting in less
burdensome and more efficient
regulatory compliance for common
members of the BGM Affiliated
Exchanges.
(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.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule
filing as non-controversial under
Section 19(b)(3)(A) of the Act 23 and
paragraph (f)(6) of Rule 19b–4
thereunder.24
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: (1) Necessary or appropriate in
the public interest; (2) for the protection
of investors; or (3) 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
emcdonald on DSK67QTVN1PROD with NOTICES
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposal 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 No. SR–
EDGA–2014–32 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File No.
SR–EDGA–2014–32. 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 such
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 No. SR–EDGA–
2014–32 and should be submitted on or
before January 5, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–29244 Filed 12–12–14; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
23 15
24 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4.
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73796; File No. SR–EDGX–
2014–33]
Self-Regulatory Organizations; EDGX
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change to Rules 1.5 and 11.3 of
EDGX Exchange, Inc.
December 9, 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 November
28, 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 Exchange has
designated this proposal as a ‘‘noncontroversial’’ proposed rule change
pursuant to Section 19(b)(3)(A) of the
Act 3 and Rule 19b–4(f)(6)(iii)
thereunder,4 which renders it effective
upon filing with the Commission. 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 filed a proposal to
amend Rules 1.5(z), the definition of
Sponsored Participant,5 and 11.3, titled
Access, to harmonize its sponsored
access rules and definitions with those
set forth under BATS Exchange, Inc.
(‘‘BATS’’) Rules 1.5(x) and 11.3 as well
as BATS Y-Exchange, Inc. (‘‘BYX’’)
Rules 1.5(x) and 11.3.6
The text of the proposed rule change
is available at the Exchange’s Web site
at https://www.directedge.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
Exchange 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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
4 17 CFR 240.19b–4(f)(6)(iii).
5 As defined below.
6 See BATS Rules 1.5(x) and 11.3; BYX Rules
1.5(x) and 11.3.
2 17
25 17
PO 00000
CFR 200.30–3(a)(12).
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Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Notices
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.
(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend
Rules 1.5(z) and 11.3 to harmonize its
sponsored access rules with those set
forth under BATS Rules 1.5(x) and 11.3
and BYX Rules 1.5(x) and 11.3.7 Earlier
this year, the Exchange and its affiliate
EDGA Exchange, Inc. (‘‘EDGA’’)
received approval to effect a merger (the
‘‘Merger’’) of the Exchange’s parent
company, Direct Edge Holdings LLC,
with BATS Global Markets, Inc., the
parent of BATS and BYX (together with
BATS, BYX, EDGA and EDGX, the
‘‘BGM Affiliated Exchanges’’).8 In the
context of the Merger, the BGM
Affiliated Exchanges are working to
align certain rules, retaining only
intended differences between the BGM
Affiliated Exchanges. As part of this
effort, the proposal set forth below
harmonizes Exchange Rules 1.5(z) and
11.3 with BATS and BYX Rules 1.5(x)
and 11.3 by aligning the rules around
sponsored access for all sponsored
participants and sponsoring members of
the BGM Affiliated Exchanges.9
Rule 11.3 currently provides that the
System 10 shall be available for entry
and execution of orders by Users with
authorized access. In order to obtain
authorized access to the System, each
Member must enter into an agreement
with the Exchange in such form as the
Exchange may provide. A Sponsored
Participant 11 may obtain authorized
access to the System only if such access
is authorized in advance by one or more
Sponsoring Members 12 as follows: (i)
Sponsored Participants must enter into
and maintain sponsored or direct access
arrangements with one or more
Sponsoring Members establishing
proper relationship(s) and account(s)
through which the Sponsored
Participant may trade on the System; (ii)
7 See
supra note 5.
Securities Exchange Act Release No. 71449
(January 30, 2014), 79 FR 6961 (February 5, 2014)
(SR–EDGX–2013–43; SR–EDGA–2013–34).
9 The Exchange understands that EDGA is to file
a proposed rule change with the Commission to
adopt similar requirements.
10 System is defined in EDGX Rule 1.5(cc).
11 Sponsored Participant is defined in EDGX Rule
1.5(z).
12 Sponsoring Members is defined in EDGX Rule
1.5(aa).
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8 See
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Sponsoring Member shall maintain a list
of Sponsored Participants who
Sponsoring Member has authorized to
obtain access to the System pursuant to
this Rule, shall update the list of
Sponsored Participants as necessary,
and provide the list of Sponsored
Participants to the Exchange upon
request; and (iii) Sponsoring Members
shall comply with Rule 15c3–5 under
the Exchange Act (the ‘‘Market Access
Rule’’) 13 with regard to market access
arrangements with Sponsored
Participants.
The Exchange is proposing to delete
Rules 11.3(b)(2) and (3), which are
described in items (ii) and (iii) above.
The Exchange is proposing to delete
11.3(b)(2) in order to add more thorough
requirements for a Member to provide
sponsored access to a Sponsored
Participant, as described below. The
Exchange is proposing to delete Rule
11.3(b)(3) in order to align the
Exchange’s rules with those of BATS
and BYX. The Exchange notes that,
while Rule 11.3(b)(3) requires a
Sponsoring Member to comply with the
Market Access Rule, such obligation
applies to all brokers or dealers with
market access 14 and thus exists whether
or not the Exchange has a rule requiring
compliance. As such, deleting current
Rule 11.3(b)(3) does not alter a
Member’s or a Sponsored Participant’s
obligation to comply with the Market
Access Rule.
The Exchange is also proposing to
amend Rule 11.3(b)(1) in order to
replace ‘‘sponsored or direct access
arrangements’’ with ‘‘customer
agreements.’’ In coordination with this
change, the Exchange is also proposing
to add the following sentence to the end
of Rule 11.3(b)(1): ‘‘Such customer
agreement(s) must incorporate the
sponsorship provisions set forth in
paragraph (2) below.’’
The Exchange is also proposing to add
a new Rule 11.3(b)(2), which contains
the requirements for the customer
agreements referenced in proposed Rule
11.3(b)(1). As proposed, in order for a
Sponsored Participant to obtain and
maintain authorized access to the
System, a Sponsored Participant and its
Sponsoring Member must agree in
writing to the following sponsorship
provisions: (i) The Sponsored
Participant and its Sponsoring Member
must have entered into and maintained
a User Agreement with the Exchange;
(ii) the Sponsoring Member must
acknowledge and agree that all orders
entered by the Sponsored Participant
and any person acting on behalf of or in
13 17
14 17
PO 00000
CFR 240.15c3–5.
CFR 240.15c3–5(b).
Frm 00086
Fmt 4703
the name of such Sponsored Participant
and any executions occurring as a result
of such orders are binding in all respects
on the Sponsoring Member, and the
Sponsoring Member is responsible for
any and all actions taken by such
Sponsored Participant and any person
acting on behalf of or in the name of
such Sponsored Participant; (iii) the
Sponsoring Member shall comply with
the Exchange’s Certificate of
Incorporation, By-Laws, Rules and
procedures, and the Sponsored
Participant shall comply with the
Exchange’s Certificate of Incorporation,
By-Laws, Rules and procedures, as if
such Sponsored Participant were a
Member; (iv) the Sponsored Participant
shall maintain, keep current and
provide to the Sponsoring Member, and
to the Exchange upon request, a list of
Authorized Traders who may obtain
access to the System on behalf of the
Sponsored Participant. Sponsored
Participant shall be subject to the
obligations of Rule 11.4 with respect to
such Authorized Traders; 15 (v) the
Sponsored Participant shall familiarize
its Authorized Traders with all of the
Sponsored Participant’s obligations
under this Rule and will assure that
they receive appropriate training prior
to any use or access to the System; (vi)
the Sponsored Participant may not
permit anyone other than Authorized
Traders to use or obtain access to the
System; (vii) the Sponsored Participant
shall take reasonable security
precautions to prevent unauthorized use
or access to the System, including
unauthorized entry of information into
the System, or the information and data
made available therein. The Sponsored
Participant understands and agrees that
the Sponsored Participant is responsible
for any and all orders, trades and other
messages and instructions entered,
transmitted or received under
identifiers, passwords and security
codes of Authorized Traders, and for the
trading and other consequences thereof;
(viii) the Sponsored Participant
acknowledges its responsibility to
establish adequate procedures and
controls that permit it to effectively
monitor its employees’, agents’ and
customers’ use and access to the System
for compliance with the terms of this
agreement; and (ix) the Sponsored
Participant shall pay when due all
amounts, if any, payable to Sponsoring
Member, the Exchange or any other
third parties that arise from the
Sponsored Participant’s access to and
use of the System. Such amounts
15 See
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EDGX Rule 11.4.
15DEN1
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include, but are not limited to
applicable exchange and regulatory fees.
The Exchange is also proposing to
replace Rule 11.3(b)(3) to state that the
Sponsoring Member must provide the
Exchange with a written statement in
form and substance acceptable to the
Exchange identifying each Sponsored
Participant by name and acknowledging
its responsibility for the orders,
executions and actions of such
Sponsored Participant. Such written
statement in form and substance
acceptable to the Exchange will be
available as the ‘‘Sponsored Application
and Agreements’’ form on the
Exchange’s Web site.16
Finally, the Exchange is proposing to
amend Rule 1.5(z) to align the definition
of Sponsored Participant with the
definition on BATS and BYX 17 and to
align the definition with the
relationship between a Sponsoring
Member, Sponsored Participant, and the
Exchange, as proposed above.
Specifically, the Exchange is proposing
that the term Sponsored Participant
mean a person which has entered into
a sponsorship arrangement with a
Sponsoring Member pursuant to Rule
11.3.
The Exchange notes that this proposal
would in effect restore Exchange Rules
1.5(z) and 11.3 to their state prior to
filing SR–EDGX–2012–24 (the
‘‘Filing’’).18 In the Filing, the Exchange
described the rationale for the proposed
changes as being rendered superfluous
and unnecessary by the adoption of
Market Access Rule. Such changes, in
contrast to the rules on BATS and BYX,
however, created a situation in which
the Exchange still had Sponsored
Participants that were entering orders
through Sponsoring Members, but the
Exchange had no direct relationship
with Sponsored Participants. In certain
circumstances, this arrangement led to
employees of the Exchange being unable
to discuss certain order and/or trade
details with Sponsored Participants.
Based on these experiences, the
Exchange no longer views the proposed
rule text as superfluous, but, rather,
such proposed rule text outlines a
reasonable set of standards for a
sponsored access relationship between
the Exchange, the Sponsoring Member,
and the Sponsored Participant. The
Exchange believes that the proposed
changes will enhance its rules and, as
discussed above, harmonize the
Exchange’s rules with those of BATS
16 The Exchange’s Web site is accessible at
www.directedge.com.
17 See supra note 5.
18 See Securities Exchange Act Release No. 67711
(August 22, 2012), 77 FR 52096 (August 28, 2012)
(SR–EDGX–2012–24).
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and BYX. The Exchange does note that
the proposal is not intended to
supersede or supplement the Market
Access Rule in any way, but rather to
establish a more thorough set of rules
under which the Exchange, Sponsored
Participants, and Sponsoring Members
will interact. As such, the Exchange also
notes that compliance with the
proposed rules has no bearing on
whether any particular Member,
Sponsoring Member, or Sponsored
Participant is in compliance with the
Market Access Rule.
Implementation Date
The Exchange intends to implement
the proposed rule change on or about
January 12, 2015. The Exchange will
announce the implementation of the
proposed rule change via a trading
notice to be posted on the Exchange’s
Web site.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6(b) of the Act 19 and furthers
the objectives of Section 6(b)(5) of the
Act,20 in that it is designed 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, and, in
general, protect investors and the public
interest. The proposal would effectively
allow a Sponsoring Member(s) to
provide a Sponsored Participant(s) with
access to the Exchange and the ability
to interact directly with Exchange
employees. More specifically, the
Exchange believes that the proposal is
designed to 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, and, in
general protect investors and the public
interest because it would allow the
Exchange to directly recognize the
trading activity of Sponsored
Participants and to communicate
directly with Sponsored Participants
regarding any potential issues that may
arise.
The Exchange believes that the
proposed rule change is not designed to
permit unfair discrimination between
customers, issuers, brokers or dealers.
The proposed rule change is identical to
the existing rules of BATS and BYX.21
The proposed rule change is intended to
align the Exchange’s requirements for
Sponsoring Members to provide
sponsored access to Sponsored
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
21 See supra note 5.
Participants with that of BATS, BYX,
and EDGA 22 in order to provide
consistent rules across the BGM
Affiliated Exchanges. Consistent rules,
in turn, will simplify the regulatory
requirements for Members of the
Exchange that are also participants on
the other BGM Affiliated Exchanges.
The proposed rule change would
provide greater harmonization between
the rules of the BGM Affiliated
Exchanges of similar purpose, resulting
in greater uniformity and less
burdensome and more efficient
regulatory compliance. As such, the
proposed rule change would foster
cooperation and coordination with
persons engaged in facilitating
transactions in securities and would
remove impediments to and perfect the
mechanism of a free and open market
and a national market system.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The proposed rule change would not
impose any burden on competition. The
Exchange believes that the proposed
rule changes will not burden
intramarket competition because all
Sponsoring Members and Sponsored
Participants would be subject to the
same requirements for sponsored access.
The proposed rule change is not
designed to address any competitive
issues but rather is designed to provide
greater harmonization among the
Exchange, EDGA, BATS and BYX rules
of similar purpose, resulting in less
burdensome and more efficient
regulatory compliance for common
members of the BGM Affiliated
Exchanges.
(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.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule
filing as non-controversial under
Section 19(b)(3)(A) of the Act 23 and
paragraph (f)(6) of Rule 19b–4
thereunder.24
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
19 15
22 See
20 15
23 15
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supra note 9.
U.S.C. 78s(b)(3)(A).
24 17 CFR 240.19b–4.
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Federal Register / Vol. 79, No. 240 / Monday, December 15, 2014 / Notices
action is: (1) Necessary or appropriate in
the public interest; (2) for the protection
of investors; or (3) 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
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 No. SR–
EDGX–2014–33 on the subject line.
emcdonald on DSK67QTVN1PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
No. SR–EDGX–2014–33. 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 such
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 No. SR–EDGX–
02:54 Dec 13, 2014
Jkt 235001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–29243 Filed 12–12–14; 8:45 am]
BILLING CODE 8011–01–P
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposal is
consistent with the Act. Comments may
be submitted by any of the following
methods:
VerDate Sep<11>2014
2014–33 and should be submitted on or
before January 5, 2015.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73789; File No. SR–
NASDAQ–2014–120]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Modify
NASDAQ Rule 7049 Fees
December 8, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
3, 2014, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I, II and III 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 the Substance
of the Proposed Rule Change
NASDAQ is proposing to modify fees
assessed under NASDAQ Rule 7049 for
the NASDAQ InterACT surveillance
tool. While the changes proposed herein
are effective upon filing, the Exchange
has designated that the amendments be
operative on January 2, 2015.
The text of the proposed rule change
is available at 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 and discussed
any comments it received on the
proposed rule change. The text of those
25 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
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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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
NASDAQ is proposing to amend Rule
7049 to increase the fee and related fee
cap for subscription to the NASDAQ
InterACT service. InterACT is a realtime compliance tool accessed through
an existing Nasdaq Workstation or
Weblink ACT 3.0 user account, which
assists a member firm with supervision
of its trade activity reported to the
FINRA/NASDAQ Trade Reporting
Facility, and with its supervision of
trade throughs to help in complying
with Rule 611 of Regulation NMS.3 The
Exchange currently assesses a fee of
$300 per month, per user, for the first
three users, and $100 per month, per
user, for each additional user, with a
maximum fee of $1,500 per month, per
member firm. The Exchange began
offering the service in 2009 4 and has not
increased fees since its adoption,
notwithstanding that the Exchange’s
costs in offering and supporting the
service have increased. Accordingly,
NASDAQ is proposing to increase the
fee assessed for the service to $400 per
month, per user, with an increased fee
cap of $2,400 per month, per member
firm. The Exchange is also proposing to
eliminate the reduced fee rate of $100
per user, per month assessed for the
fourth through ninth subscriptions.5
The Exchange notes that offering the
discounted fee for the fourth through
ninth user subscriptions was designed
to encourage member firms to purchase
more subscriptions, thus ensuring broad
use of the service and, ultimately,
NASDAQ’s ability to offer the service
long-term. NASDAQ believes that the
reduced fee has had the desired effect
and, accordingly, is assessing the same
fee for all subscriptions through the
sixth, at which point member firms will
have reached the new fee cap. Lastly,
upon launch of InterACT in May 2009,
NASDAQ offered the service at no cost
for sixty days. Accordingly, NASDAQ is
3 17
CFR 242.611.
Exchange Act Release No. 59786
(April 17, 2009), 74 FR 18769 (April 24, 2009) (SR–
NASDAQ–2009–033).
5 Subscriptions beyond the ninth are provided at
no cost because the subscribing member firm has
met the $1,500 monthly fee cap.
4 Securities
E:\FR\FM\15DEN1.SGM
15DEN1
]]>Agencies
[Federal Register Volume 79, Number 240 (Monday, December 15, 2014)]
[Notices]
[Pages 74147-74150]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-29243]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73796; File No. SR-EDGX-2014-33]
Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to Rules
1.5 and 11.3 of EDGX Exchange, Inc.
December 9, 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 November 28, 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 Exchange
has designated this proposal as a ``non-controversial'' proposed rule
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with
the Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange filed a proposal to amend Rules 1.5(z), the definition
of Sponsored Participant,\5\ and 11.3, titled Access, to harmonize its
sponsored access rules and definitions with those set forth under BATS
Exchange, Inc. (``BATS'') Rules 1.5(x) and 11.3 as well as BATS Y-
Exchange, Inc. (``BYX'') Rules 1.5(x) and 11.3.\6\
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\5\ As defined below.
\6\ See BATS Rules 1.5(x) and 11.3; BYX Rules 1.5(x) and 11.3.
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The text of the proposed rule change is available at the Exchange's
Web site at https://www.directedge.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 Exchange 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
[[Page 74148]]
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.
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend Rules 1.5(z) and 11.3 to harmonize
its sponsored access rules with those set forth under BATS Rules 1.5(x)
and 11.3 and BYX Rules 1.5(x) and 11.3.\7\ Earlier this year, the
Exchange and its affiliate EDGA Exchange, Inc. (``EDGA'') received
approval to effect a merger (the ``Merger'') of the Exchange's parent
company, Direct Edge Holdings LLC, with BATS Global Markets, Inc., the
parent of BATS and BYX (together with BATS, BYX, EDGA and EDGX, the
``BGM Affiliated Exchanges'').\8\ In the context of the Merger, the BGM
Affiliated Exchanges are working to align certain rules, retaining only
intended differences between the BGM Affiliated Exchanges. As part of
this effort, the proposal set forth below harmonizes Exchange Rules
1.5(z) and 11.3 with BATS and BYX Rules 1.5(x) and 11.3 by aligning the
rules around sponsored access for all sponsored participants and
sponsoring members of the BGM Affiliated Exchanges.\9\
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\7\ See supra note 5.
\8\ See Securities Exchange Act Release No. 71449 (January 30,
2014), 79 FR 6961 (February 5, 2014) (SR-EDGX-2013-43; SR-EDGA-2013-
34).
\9\ The Exchange understands that EDGA is to file a proposed
rule change with the Commission to adopt similar requirements.
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Rule 11.3 currently provides that the System \10\ shall be
available for entry and execution of orders by Users with authorized
access. In order to obtain authorized access to the System, each Member
must enter into an agreement with the Exchange in such form as the
Exchange may provide. A Sponsored Participant \11\ may obtain
authorized access to the System only if such access is authorized in
advance by one or more Sponsoring Members \12\ as follows: (i)
Sponsored Participants must enter into and maintain sponsored or direct
access arrangements with one or more Sponsoring Members establishing
proper relationship(s) and account(s) through which the Sponsored
Participant may trade on the System; (ii) Sponsoring Member shall
maintain a list of Sponsored Participants who Sponsoring Member has
authorized to obtain access to the System pursuant to this Rule, shall
update the list of Sponsored Participants as necessary, and provide the
list of Sponsored Participants to the Exchange upon request; and (iii)
Sponsoring Members shall comply with Rule 15c3-5 under the Exchange Act
(the ``Market Access Rule'') \13\ with regard to market access
arrangements with Sponsored Participants.
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\10\ System is defined in EDGX Rule 1.5(cc).
\11\ Sponsored Participant is defined in EDGX Rule 1.5(z).
\12\ Sponsoring Members is defined in EDGX Rule 1.5(aa).
\13\ 17 CFR 240.15c3-5.
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The Exchange is proposing to delete Rules 11.3(b)(2) and (3), which
are described in items (ii) and (iii) above. The Exchange is proposing
to delete 11.3(b)(2) in order to add more thorough requirements for a
Member to provide sponsored access to a Sponsored Participant, as
described below. The Exchange is proposing to delete Rule 11.3(b)(3) in
order to align the Exchange's rules with those of BATS and BYX. The
Exchange notes that, while Rule 11.3(b)(3) requires a Sponsoring Member
to comply with the Market Access Rule, such obligation applies to all
brokers or dealers with market access \14\ and thus exists whether or
not the Exchange has a rule requiring compliance. As such, deleting
current Rule 11.3(b)(3) does not alter a Member's or a Sponsored
Participant's obligation to comply with the Market Access Rule.
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\14\ 17 CFR 240.15c3-5(b).
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The Exchange is also proposing to amend Rule 11.3(b)(1) in order to
replace ``sponsored or direct access arrangements'' with ``customer
agreements.'' In coordination with this change, the Exchange is also
proposing to add the following sentence to the end of Rule 11.3(b)(1):
``Such customer agreement(s) must incorporate the sponsorship
provisions set forth in paragraph (2) below.''
The Exchange is also proposing to add a new Rule 11.3(b)(2), which
contains the requirements for the customer agreements referenced in
proposed Rule 11.3(b)(1). As proposed, in order for a Sponsored
Participant to obtain and maintain authorized access to the System, a
Sponsored Participant and its Sponsoring Member must agree in writing
to the following sponsorship provisions: (i) The Sponsored Participant
and its Sponsoring Member must have entered into and maintained a User
Agreement with the Exchange; (ii) the Sponsoring Member must
acknowledge and agree that all orders entered by the Sponsored
Participant and any person acting on behalf of or in the name of such
Sponsored Participant and any executions occurring as a result of such
orders are binding in all respects on the Sponsoring Member, and the
Sponsoring Member is responsible for any and all actions taken by such
Sponsored Participant and any person acting on behalf of or in the name
of such Sponsored Participant; (iii) the Sponsoring Member shall comply
with the Exchange's Certificate of Incorporation, By-Laws, Rules and
procedures, and the Sponsored Participant shall comply with the
Exchange's Certificate of Incorporation, By-Laws, Rules and procedures,
as if such Sponsored Participant were a Member; (iv) the Sponsored
Participant shall maintain, keep current and provide to the Sponsoring
Member, and to the Exchange upon request, a list of Authorized Traders
who may obtain access to the System on behalf of the Sponsored
Participant. Sponsored Participant shall be subject to the obligations
of Rule 11.4 with respect to such Authorized Traders; \15\ (v) the
Sponsored Participant shall familiarize its Authorized Traders with all
of the Sponsored Participant's obligations under this Rule and will
assure that they receive appropriate training prior to any use or
access to the System; (vi) the Sponsored Participant may not permit
anyone other than Authorized Traders to use or obtain access to the
System; (vii) the Sponsored Participant shall take reasonable security
precautions to prevent unauthorized use or access to the System,
including unauthorized entry of information into the System, or the
information and data made available therein. The Sponsored Participant
understands and agrees that the Sponsored Participant is responsible
for any and all orders, trades and other messages and instructions
entered, transmitted or received under identifiers, passwords and
security codes of Authorized Traders, and for the trading and other
consequences thereof; (viii) the Sponsored Participant acknowledges its
responsibility to establish adequate procedures and controls that
permit it to effectively monitor its employees', agents' and customers'
use and access to the System for compliance with the terms of this
agreement; and (ix) the Sponsored Participant shall pay when due all
amounts, if any, payable to Sponsoring Member, the Exchange or any
other third parties that arise from the Sponsored Participant's access
to and use of the System. Such amounts
[[Page 74149]]
include, but are not limited to applicable exchange and regulatory
fees.
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\15\ See EDGX Rule 11.4.
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The Exchange is also proposing to replace Rule 11.3(b)(3) to state
that the Sponsoring Member must provide the Exchange with a written
statement in form and substance acceptable to the Exchange identifying
each Sponsored Participant by name and acknowledging its responsibility
for the orders, executions and actions of such Sponsored Participant.
Such written statement in form and substance acceptable to the Exchange
will be available as the ``Sponsored Application and Agreements'' form
on the Exchange's Web site.\16\
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\16\ The Exchange's Web site is accessible at
www.directedge.com.
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Finally, the Exchange is proposing to amend Rule 1.5(z) to align
the definition of Sponsored Participant with the definition on BATS and
BYX \17\ and to align the definition with the relationship between a
Sponsoring Member, Sponsored Participant, and the Exchange, as proposed
above. Specifically, the Exchange is proposing that the term Sponsored
Participant mean a person which has entered into a sponsorship
arrangement with a Sponsoring Member pursuant to Rule 11.3.
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\17\ See supra note 5.
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The Exchange notes that this proposal would in effect restore
Exchange Rules 1.5(z) and 11.3 to their state prior to filing SR-EDGX-
2012-24 (the ``Filing'').\18\ In the Filing, the Exchange described the
rationale for the proposed changes as being rendered superfluous and
unnecessary by the adoption of Market Access Rule. Such changes, in
contrast to the rules on BATS and BYX, however, created a situation in
which the Exchange still had Sponsored Participants that were entering
orders through Sponsoring Members, but the Exchange had no direct
relationship with Sponsored Participants. In certain circumstances,
this arrangement led to employees of the Exchange being unable to
discuss certain order and/or trade details with Sponsored Participants.
Based on these experiences, the Exchange no longer views the proposed
rule text as superfluous, but, rather, such proposed rule text outlines
a reasonable set of standards for a sponsored access relationship
between the Exchange, the Sponsoring Member, and the Sponsored
Participant. The Exchange believes that the proposed changes will
enhance its rules and, as discussed above, harmonize the Exchange's
rules with those of BATS and BYX. The Exchange does note that the
proposal is not intended to supersede or supplement the Market Access
Rule in any way, but rather to establish a more thorough set of rules
under which the Exchange, Sponsored Participants, and Sponsoring
Members will interact. As such, the Exchange also notes that compliance
with the proposed rules has no bearing on whether any particular
Member, Sponsoring Member, or Sponsored Participant is in compliance
with the Market Access Rule.
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\18\ See Securities Exchange Act Release No. 67711 (August 22,
2012), 77 FR 52096 (August 28, 2012) (SR-EDGX-2012-24).
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Implementation Date
The Exchange intends to implement the proposed rule change on or
about January 12, 2015. The Exchange will announce the implementation
of the proposed rule change via a trading notice to be posted on the
Exchange's Web site.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6(b) of the Act \19\ and furthers the objectives of
Section 6(b)(5) of the Act,\20\ in that it is designed 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, and,
in general, protect investors and the public interest. The proposal
would effectively allow a Sponsoring Member(s) to provide a Sponsored
Participant(s) with access to the Exchange and the ability to interact
directly with Exchange employees. More specifically, the Exchange
believes that the proposal is designed to 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, and, in
general protect investors and the public interest because it would
allow the Exchange to directly recognize the trading activity of
Sponsored Participants and to communicate directly with Sponsored
Participants regarding any potential issues that may arise.
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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 the proposed rule change is not designed
to permit unfair discrimination between customers, issuers, brokers or
dealers. The proposed rule change is identical to the existing rules of
BATS and BYX.\21\ The proposed rule change is intended to align the
Exchange's requirements for Sponsoring Members to provide sponsored
access to Sponsored Participants with that of BATS, BYX, and EDGA \22\
in order to provide consistent rules across the BGM Affiliated
Exchanges. Consistent rules, in turn, will simplify the regulatory
requirements for Members of the Exchange that are also participants on
the other BGM Affiliated Exchanges. The proposed rule change would
provide greater harmonization between the rules of the BGM Affiliated
Exchanges of similar purpose, resulting in greater uniformity and less
burdensome and more efficient regulatory compliance. As such, the
proposed rule change would foster cooperation and coordination with
persons engaged in facilitating transactions in securities and would
remove impediments to and perfect the mechanism of a free and open
market and a national market system.
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\21\ See supra note 5.
\22\ See supra note 9.
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(B) Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change would not impose any burden on
competition. The Exchange believes that the proposed rule changes will
not burden intramarket competition because all Sponsoring Members and
Sponsored Participants would be subject to the same requirements for
sponsored access. The proposed rule change is not designed to address
any competitive issues but rather is designed to provide greater
harmonization among the Exchange, EDGA, BATS and BYX rules of similar
purpose, resulting in less burdensome and more efficient regulatory
compliance for common members of the BGM Affiliated Exchanges.
(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.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The Exchange has designated this rule filing as non-controversial
under Section 19(b)(3)(A) of the Act \23\ and paragraph (f)(6) of Rule
19b-4 thereunder.\24\
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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 17 CFR 240.19b-4.
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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
[[Page 74150]]
action is: (1) Necessary or appropriate in the public interest; (2) for
the protection of investors; or (3) 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 proposal 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 No. SR-EDGX-2014-33 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File No. SR-EDGX-2014-33. 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 such 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 No. SR-EDGX-2014-33 and should be
submitted on or before January 5, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-29243 Filed 12-12-14; 8:45 am]
BILLING CODE 8011-01-P
