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 Exchange proposes to add Flag RP to the Exchange's fee schedule for Non-Displayed Orders that add liquidity using the Route Peg Order type.
As defined in Exchange Rule 11.5(c)(14), a Route Peg Order is a non-displayed limit order that posts to the EDGA Book, and thereafter is eligible for execution at the National Best Bid ("NBB") for buy orders and National Best Offer ("NBO", and together with the NBB, the "NBBO") for sell orders against the original size of the routable orders that are equal to or less than the original size of the Route Peg Orders. Route Peg Orders are passive, resting orders on the EDGA Book and do not take liquidity. Route Peg Orders may be entered, cancelled, and cancelled/replaced prior to and during Regular Trading Hours.
The Exchange also proposes to amend the text of Footnote 2 of the fee schedule to list Flag RP as one of the non-displayed order types where the volume associated with Flag RP will count toward the volume threshold in Footnote 2.
The Exchange proposes to implement these amendments to its fee schedule on September 7, 2012.
The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,
The Exchange proposes to add Flag RP to the Exchange's fee schedule for Non-Displayed Orders that add liquidity using the Route Peg Order type. The Exchange believes that assessing a charge of $0.0005 per share for orders that yield Flag RP represents an equitable allocation of reasonable dues, fees and other charges among its Members and other persons using its facilities because a rate of $0.0005 per share is equal or less than the prevailing rates for other forms of non-displayed order types that add liquidity, (e.g., the Exchange assesses a charge of $0.0005 per share for Flag DM and $0.0010 per share for Flag HA). Within the non-displayed category of liquidity, Flag RP is similar to Flag DM in that both have lower order book priority in Rule 11.8(a)(2) compared to Flag HA (Non-Displayed Orders). Lower order book priority correlates to a lower chance of execution on EDGA, which justifies a lower price. Therefore, the Exchange is offering comparable pricing to Flag DM.
Furthermore, the Route Peg Order type gives the Member a valuable ability to control the interaction with certain types of contra-side liquidity (i.e., routable orders of equal or lesser size). The Mid-Point Discretionary Order ("MDO") (Flag DM) has a displayed component
Similarly, the Exchange is assigning a lower charge for Flag RP when compared to the standard displayed charge of $0.0006 because of its lower priority ranking in Rule 11.8(a)(2). The Exchange recently implemented a taker/maker model
By assessing a proposed rate of $0.0005 per share for Flag RP, the Exchange believes it will encourage use of the new order type. In addition, the Exchange is setting the fee at such level in order to incentivize liquidity by encouraging Members to use Route Peg Orders (Flag RP) since these orders provide Members that enter them and other Members an additional way to offer/access liquidity at the NBBO, respectively. This contributes to additional depth of book at the NBBO. Furthermore, as stated in SR-EDGA-2012-28, the Exchange believes that by encouraging the use of the Route Peg Order, Members seeking to access liquidity at the NBBO would be more motivated to direct their orders to EDGA because they would have a heightened expectation of the availability of liquidity at the NBBO. The increased liquidity also benefits all investors by deepening EDGA's liquidity pool, offering additional flexibility for all investors to enjoy cost savings, supporting the quality of price discovery, and improving investor protection. In addition, a User
The Exchange's proposal to amend the text of Footnote 2
Lastly, the Exchange also believes that the proposed amendment is non-discriminatory because it applies uniformly to all Members.
The Exchange also 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 and non-discriminatory 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 email to
* Send paper comments in triplicate to Elizabeth M. Murphy, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.