The Exchange proposes to implement these amendments to its fee schedule on September 1, 2012.2. Statutory Basis
The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,6
in general, and furthers the objectives of Section 6(b)(4)7
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.
In its original filing introducing the MEIP, the Exchange stated that it was establishing the MEIP in order to promote a more efficient marketplace, to encourage liquidity provision and to enhance the trading experience of Members on an ongoing basis.8
Having implemented the MEIP for the period since its launch, the Exchange has not seen these benefits, and thus believes that discontinuation of the MEIP is appropriate at this time. Specifically, the Exchange believes that, by not adequately isolating purely inefficient message flow, the MEIP may have unintentionally captured, and therefore disincentivized, order behavior that benefits market liquidity. For example, the MEIP potentially discourages market participants from posting multiple levels of liquidity in less actively traded securities. Thus, while the Exchange's intention was to encourage efficiency and consequently attract more liquidity, the MEIP appears to have resulted in the opposite effect.
The Exchange believes its proposal to discontinue the MEIP is equitable because it allows Members the freedom to manage their order and message flow consistently with their business models. In addition, the Exchange believes its proposal is reasonable because other exchanges,e.g.,BATS Exchange, Inc., maintain pricing models that are designed to incentivize customers to increase liquidity, without any restriction on order activity that applied under the MEIP. By discontinuing the MEIP, the Exchange believes that it will remain competitive with other exchanges that do not offer reductions in standard rebates and/or tier rebates based on customers' message efficiency. The Exchange believes that the proposal is equitable and non-discriminatory in that it applies uniformly to all Members.
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 encourage market participants to direct their order flow to the Exchange, or at least not to discourage the direction of order flow to the Exchange. The Exchange believes the fees and credits remain competitive with those charged by other venues andtherefore continue to be reasonable and equitably allocated to Members.B. Self-Regulatory Organization's Statement on Burden on Competition
This 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 Act9
and Rule 19b-4(f)(2)10
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:Electronic Comments
* Use the Commission's Internet comment form(http://www.sec.gov/rules/sro.shtml);or
* Send an email email@example.com.Please include File Number SR-EDGX-2012-40 on the subject line.Paper Comments
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.All submissions should refer to File Number SR-EDGX-2012-40. 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(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 10:00 a.m. and 3:00 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-2012-40 and should be submitted on or before October 5, 2012.
1117 CFR 200.30-3(a)(12).
Kevin M. O'Neill,