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)(17), a Route Peg Order is a non-displayed limit order that posts to the EDGX Book, and thereafter is eligible for execution at the National Best Bid ("NBB") for buy orders and National Best Offer for sell orders ("NBO", and together with the NBB, the "NBBO") 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 EDGX 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 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 offering a rebate of $0.0015 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 rebate of $0.0015 per share is equal to the prevailing rebate of $0.0015 that the Exchange offers for Flag HA, which is a non-displayed order type that adds liquidity but less than the default rebate of $0.0023 per share for adding displayed liquidity on EDGX. By offering a proposed rebate of $0.0015 per share for Flag RP, the Exchange believes it will encourage use of the new order type, while maintaining consistency with the Exchange's overall pricing philosophy of encouraging displayed liquidity. In addition, the Exchange is setting the rebate 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. In addition, since Flag RP has lowest priority according to Rule 11.8(a)(2), it would otherwise be rebated more than Flag HA, which has a higher priority. However, the Exchange is offering the same rebate as Flag HA because of the Route Peg Order type's unique features which provides Members the ability to control interaction with certain types of contra-side liquidity (
Furthermore, as stated in SR-EDGX-2012-25, 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 EDGX because they would have a heightened expectation of the availability of liquidity at the NBBO. The increased liquidity also benefits all investors by deepening EDGX'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 believes that offering a proposed rebate of $0.0015 per share for orders that yield Flag RP is reasonable because the pricing is similar to analogous order types offered by other exchanges. On NASDAQ, customers earn a rebate of $0.0015 per share executed for MPIDs adding less than 1 million shares of Supplemental Orders and customers earn a rebate of $0.0018 per share executed for MPIDs adding greater than 1 million shares of Supplemental Orders.
The Exchange's proposal to amend the text of Footnotes 12 and 13 of the fee schedule to list Flag RP as one of the "added flags" where the volume associated with Flag RP will count toward the volume thresholds in Footnotes 12 and 13 is reasonable and equitable as the volume tiers in Footnotes 12 and 13 include "added" liquidity flags and Flag RP is an added liquidity flag. The Exchange notes that the liquidity ratio will now capture the RP "add flag" as one of several add flags in the calculation of the "add liquidity" ratio.
The Exchange believes that the above proposal is nondiscriminatory in that 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
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.