Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the “Act”), and Rule 19b-4 thereunder, notice is hereby given that on September 30, 2010, the EDGX Exchange, Inc. (the “Exchange” or the “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 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
EDGX Exchange, Inc. (“Exchange” or “EDGX”) proposes to amend its fees and rebates applicable to Members  of the Exchange pursuant to EDGX Rule 15.1(a) and (c).
All of the changes described herein are applicable to EDGX Members. The text of the proposed rule change is available on the Exchange's Internet Web site at http://www.directedge.com.
II. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The self-regulatory organization has prepared summaries, set forth in sections A, B and C below, of the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change
The Exchange proposes to make several amendments to its fee schedule. First, it proposes to increase the fee for removing liquidity from $0.0029 per share to $0.0030 per share. Conforming amendments have been made to the B, V, Y, 3, and 4 Flags (“add liquidity” flags) to reflect this change. Secondly, it proposes to decrease the rebate for adding liquidity from $0.0029 per share to $0.0026 per share. Conforming amendments have been made to the N, W, and 6 flags (“remove liquidity” flags) to reflect this change. The Exchange believes that these rate changes will enable it to maintain a competitive position with regards to other away market centers.
Secondly, the Exchange proposes to incorporate a three tier rebate structure. The Exchange proposes to introduce the Mega Tier, which modifies the rebate incorporated in footnote 1 of the fee schedule. There are two alternative ways a Member can qualify for the Mega Tier rebate. First, footnote 1 of the fee schedule currently provides that Members can qualify for a rebate of $0.0032 per share for all liquidity posted on EDGX if they add or route at least 5,000,000 shares of average daily volume prior to 9:30 AM or after 4:00 PM (includes all flags except 6) AND add a minimum of 50,000,000 shares of average daily volume on EDGX in total. The Exchange proposes to amend the 50,000,000 share minimum to 25,000,000 shares. Secondly, footnote 1 further provides that Members will be provided a $0.0031 rebate per share for liquidity added on EDGX if the Member on a daily basis, measured monthly, posts 0.75% of the Total Consolidated Volume (“TCV”) in average daily volume. TCV is defined as volume reported by all exchanges and trade reporting facilities to the consolidated transaction reporting plans for Tapes A, B and C securities. The Exchange proposes to increase this rebate to $0.0032 per share.
Next, the Exchange proposes to introduce the Ultra Tier, in which a Member will be provided a $0.0031 rebate per share for liquidity added on EDGX if the Member posts 0.50% of TCV in average daily volume to EDGX, as measured on a monthly basis.
Finally, the Exchange propose to introduce the Super Tier, in which a Member will be provided a $0.0030 rebate per share for liquidity added on EDGX if the Member posts 10,000,000 shares or more of average daily volume to EDGX, as measured on a monthly basis.
The Exchange believes that the above pricing is appropriate since higher rebates are directly correlated with more stringent criteria. The Mega Tier rebate ($0.0032 per share) has the most stringent criteria, and is $0.0001 greater than the Ultra Tier rebate ($0.0031 per share) and $0.0002 greater than the Super Tier rebate ($0.0030 per share). For example, based on average TCV for August 2010 (7.2 billion), in order for a Member to qualify for the Mega Tier, the Member would have to post 54 million shares on EDGX. In order to qualify for the Ultra Tier, which has less stringent criteria than the Mega Tier, the Member would have to post 36 million shares on EDGX. Finally, the Super Tier has the least stringent criteria. In order for a Member to qualify for this rebate, the Member would have to post 10 million shares on EDGX. In addition, these rebates also result, in part, from lower administrative costs associated with higher volume.
Finally, the Exchange proposes to make a clarifying amendment to the price guarantee language found in footnote 1 of the schedule to clarify that the share amounts are based upon average daily volume.
EDGX Exchange proposes to implement these amendments to the Exchange fee schedule on October 1, 2010.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act, in general, and furthers the objectives of Section 6(b)(4), in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its members and other persons using its facilities. The Start Printed Page 63228Exchange notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive. The proposed rule change reflects a competitive pricing structure designed to incent market participants to direct their order flow to the Exchange. Finally, the Exchange believes that the proposed rates are equitable in that they apply uniformly to all Members. In addition, the rebates provided result, in part, from lower administrative costs associated with higher volume. The Exchange believes the fees and credits remain competitive with those charged by other venues and therefore continue to be reasonable and equitably allocated to those members that opt to direct orders to the Exchange rather than competing venues.
B. Self-Regulatory Organization's Statement on Burden on Competition
The proposed rule change does not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act.
C. Self-Regulatory Organization's Statement on Comments on the Proposed Rule Change Received From Members, Participants or Others
The Exchange has not solicited, and does not intend to solicit, comments on this proposed rule change. The Exchange has not received any unsolicited written comments from members or other interested parties.
III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action
The foregoing rule change has become effective pursuant to Section 19(b)(3) of the Act  and Rule 19b-4(f)(2)  thereunder. At any time within 60 days of the filing of such proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods:
- Use the Commission's Internet comment form (http://www.sec.gov/rules/sro.shtml); or
- Send an e-mail to email@example.com. Please include File Number SR-EDGX-2010-13 on the subject line.
- Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-EDGX-2010-13. This file number should be included on the subject line if e-mail 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 (http://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-2010-13 and should be submitted on or before November 4, 2010.Start Signature
For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.
Florence E. Harmon,
3. A Member is any registered broker or dealer, or any person associated with a registered broker or dealer, that has been admitted to membership in the Exchange.Back to Citation
8. The text of the proposed rule change is available on Exchange's Web site at http://www.directedge.com, on the Commission's Web site at http://www.sec.gov, at EDGX, and at the Commission's Public Reference Room.Back to Citation
[FR Doc. 2010-25744 Filed 10-13-10; 8:45 am]
BILLING CODE 8011-01-P