Daily Rules, Proposed Rules, and Notices of the Federal Government
The Exchange proposes to amend its fees and rebates applicable to Members
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.
The fee for adding liquidity on EDGA is currently $0.00025 per share for securities at or above $1.00. The Exchange proposes to create a tier (indicated in footnote 11) to state that if members, on a daily basis, measured monthly, post 0.9% of the Total Consolidated Volume ("TCV") in average daily volume to EDGA, they will be charged $0.00005 per share. TCV is defined (in proposed footnote 11) as volume reported by all exchanges and trade reporting facilities to the consolidated transaction reporting plans for Tapes A, B, and C securities for the month prior to the month in which the fees are calculated. So, when the calculation of TCV is done for March 2011 billing for February 2011 trading activity, the appropriate TCV is based on February 2011 figures.
Currently, the BY flag is yielded when an order is routed to BATS BYX Exchange and removes liquidity using order types ROUC and ROBY, as defined in Exchange Rules 11.9(b)(3)(a) and (g). The Exchange proposes to add footnote 12 to the fee schedule to describe that stocks priced below $1.00 will be charged $0.0010 per share. In addition, the Exchange proposes to increase the rebate from $0.0003 to $0.0004 when an order is routed to BATS BYX Exchange and removes liquidity.
EDGA Exchange proposes to implement these amendments to the Exchange fee schedule on March 1, 2011.
The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,
The Exchange believes that the fee associated with the BY flag ($0.0010 per share) for stocks priced below $1 represents an equitable allocation of reasonable dues, fees, and other charges since it reflects a pass through of the BATS fee for removing liquidity. EDGA believes that it is reasonable and equitable to pass on these fees to its members.
The proposed increased rebate when an order is routed to BATS BYX Exchange and removes liquidity (from $0.0003 to $0.0004 per share) is designed to incentivize Members to use this routing strategy to increase volume on EDGA. Such increased volume increases potential revenue to the Exchange, and would allow the Exchange to spread its administrative and infrastructure costs over a greater number of shares, leading to lower per share costs. These lower per share costs would allow the Exchange to pass on the savings to Members in the form an increased rebate. The increased liquidity also benefits all investors by deepening EDGA's liquidity pool, supporting the quality of price discovery, promoting market transparency and improving investor protection.
This proposed rate represents a discount over the pass through rate of $0.0003 per share currently provided. The Exchange also believes that this fee structure is an equitable allocation of reasonable dues, fees, and other charges in that it applies uniformly to all Members and the increased rebate for removing liquidity from BATS is consistent with the processing of similar routing strategies by EDGA's competitors.
The Exchange believes that the new tier rate of $0.00005 per share for Members who on a daily basis, measured monthly, post 0.9% of the Total Consolidated Volume ("TCV") in average daily volume to EDGA represents a fair and equitable allocation of reasonable dues, fees, and other charges as it is aimed at incentivizing liquidity for high volume providers, which results in increased volume on EDGA. Such increased volume increases potential revenue to the Exchange, and would allow the Exchange to spread its administrative and infrastructure costs over a greater number of shares, leading to lower per share costs. The decreased per share costs allows the Exchange to share its savings with its Members in
In addition, the new tier rate is equitable in that higher fees on the Exchange are directly correlated with less stringent criteria. For example, the INET tiered fee, as indicated in footnote 7/flag 2, of $0.0030 per share has less stringent criteria, and is a higher fee than the new proposed fee. For example, based on average TCV for January 2011 (8.0 billion), in order for a Member to qualify for the INET fee of $0.0030, the Member would have to route to Nasdaq less than 5,000,000 shares of average daily volume. In order to qualify for the proposed lower fee of $0.00005 per share, which has more stringent criteria than the INET fee, the Member would have to post 72 million shares on EDGA (0.9% of TCV in average daily volume).
The Exchange notes that it operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive. The proposed rule change reflects a competitive pricing structure designed to incent market participants to direct their order flow to the Exchange. The Exchange believes that the proposed rates are equitable in that they apply uniformly to all Members. The Exchange believes the fees and credits remain competitive with those charged by other venues and therefore continue to be reasonable and equitably allocated to Members.
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.
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.
The foregoing rule change has become effective pursuant to Section 19(b)(3) of the Act
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 (
* Send an e-mail to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street, NE., Washington, DC 20549-1090.