80 FR 12655 - Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To Amend Rules 11.6, 11.8, 11.9, 11.10 and 11.11 of EDGA Exchange, Inc.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 46 (March 10, 2015)

Page Range		12655-12660
FR Document		2015-05482
Federal Register, Volume 80 Issue 46 (Tuesday, March 10, 2015)
[Federal Register Volume 80, Number 46 (Tuesday, March 10, 2015)]
[Notices]
[Pages 12655-12660]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-05482]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-74435; File No. SR-EDGA-2015-10]


Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of 
Filing of a Proposed Rule Change, as Modified by Amendment No. 1, To 
Amend Rules 11.6, 11.8, 11.9, 11.10 and 11.11 of EDGA Exchange, Inc.

March 4, 2015.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on February 20, 2015, EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which items have been prepared by the self-regulatory 
organization. On February 27, 2015, the Exchange filed Amendment No. 1 
to the proposal.\3\ The Commission is publishing this notice, as 
modified by Amendment No. 1, to solicit comments on the proposed rule 
change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Amendment No. 1 replaces SR-EDGA-2015-10 and supersedes such 
filing in its entirety.
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I. Self-Regulatory Organization's Statement of the Terms of the 
Substance of the Proposed Rule Change

    The Exchange filed a proposal to amend Rules 11.6, 11.8, 11.9, 
11.10 and 11.11 to clarify and to include additional specificity 
regarding the current functionality of the Exchange's System,\4\ 
including the operation of its order types and order instructions, as 
further described below.
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    \4\ The term ``System'' is defined as ``the electronic 
communications and trading facility designated by the Board through 
which securities orders of Users are consolidated for ranking, 
execution and, when applicable, routing away.'' See Exchange Rule 
1.5(cc).
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    The text of the proposed rule change is available at the Exchange's 
Web site at www.batstrading.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange 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 Exchange has prepared summaries, set forth in 
Sections A, B and C below, of the most significant parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    On June 5, 2014, Chair Mary Jo White asked all national securities 
exchanges to conduct a comprehensive review of each order type offered 
to members and how it operates.\5\ The Exchange notes that a 
comprehensive rule filing clarifying and updating Exchange rules was 
recently approved.\6\ However, based on the request from Chair White, 
the Exchange did indeed conduct further review of each order types and 
its operation. The proposals set forth below are based on this 
comprehensive review and are intended to clarify and to include 
additional specificity regarding the current functionality of the 
Exchange's System, including the operation of its order types and order 
instructions. The proposals set forth below are intended to supplement 
the recently approved filing based on further review conducted by the 
Exchange and are intended to clarify and enhance the understandability 
of

[[Page 12656]]

the Exchange's rules related to the ranking and execution of orders. 
The proposal is also intended to add additional detail with respect to 
the handling of orders with a Discretionary Range \7\ instruction. The 
Exchange is not proposing any substantive modifications to the System.
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    \5\ See Mary Jo White, Chair, Commission, Speech at the Sandler 
O'Neill & Partners, L.P. Global Exchange and Brokerage Conference, 
(June 5, 2014) (available at http://www.sec.gov/News/Speech/Detail/Speech/1370542004312#.VD2HW610w6Y).
    \6\ Securities Exchange Act Release No. 73592 (November 13, 
2014), 79 FR 68937 (November 19, 2014) (SR-EDGA-2014-20).
    \7\ See Exchange Rule 11.6(d).
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Orders With a Discretionary Range
    Pursuant to current Rule 11.6(d), the Exchange defines a 
Discretionary Range as an instruction the User \8\ may attach to an 
order to buy (sell) a stated amount of a security at a specified, 
displayed price with discretion to execute up (down) to a specified, 
non-displayed price. For purposes of this proposal, the Exchange will 
use the term ``Discretionary Range'' to describe the amount between the 
displayed price to and including the highest price at which a buyer is 
willing to buy or lowest price at which a seller is willing to sell. 
The Exchange proposes to make clear that although an order with a 
Discretionary Range instruction may be accompanied by a Displayed \9\ 
instruction, an order with a Discretionary Range instruction may also 
be accompanied by a Non-Displayed instruction, and if so, will have a 
non-displayed ranked price as well as a discretionary price. The 
Exchange further proposes to specifically state that resting orders 
with a Discretionary Range instruction will be executed at a price that 
uses the minimum amount of discretion necessary to execute the order 
against an incoming order. In addition, the Exchange proposes to make 
clear certain circumstances where the Discretionary Range of an order 
is temporarily reduced due to contra-side interest resting on the EDGA 
Book.\10\
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    \8\ The term ``User'' is defined as ``any Member or Sponsored 
Participant who is authorized to obtain access to the System 
pursuant to Rule 11.3.'' See Exchange Rule 1.5(ee).
    \9\ See Exchange Rule 11.6(e)(1).
    \10\ The term ``EDGA Book'' is defined as ``the System's 
electronic file of orders.'' See Exchange Rule 1.5(d).
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    The Exchange also proposes to specify certain situations where the 
Discretionary Range of an order could be temporarily reduced based on 
contra-side interest resting on the Exchange. The Exchange notes that 
an order with a Post Only instruction \11\ will, in all cases, remove 
contra-side liquidity from the EDGA Book because under its current 
taker-maker pricing structure, the remover of liquidity is provided a 
rebate while the provider of liquidity is charged a fee. Therefore, in 
all cases, the value of the execution to remove liquidity will equal or 
exceed the value of such execution once posted to the EDGA Book, 
including the applicable fees charged or rebates received. However, the 
Exchange proposes to adopt language to reflect the operation of the 
System in the event the Exchange's fee structure is modified and an 
order with a Post Only instruction is able to be posted to the EDGA 
Book without removing liquidity. The Exchange notes that if this were 
the case, it would be possible for an order with a Discretionary Range 
instruction to have its Discretionary Range temporarily reduced based 
on contra-side interest resting on the Exchange because an incoming 
order with a Post Only instruction would be posted to the EDGA Book 
rather than executing against the Discretionary Range of a resting 
order.
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    \11\ See Exchange Rule 11.6(n)(4).
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    With respect to displayed contra-side liquidity, the Exchange 
proposes to make clear that if an order posted to the EDGA Book has a 
Discretionary Range and there is a contra-side order that is displayed 
by the System on the EDGA Book within such Discretionary Range, the 
order with a Discretionary Range will not be permitted to execute at 
the price of or at a price more aggressive than such contra-side 
displayed order unless and until there is no contra-side displayed 
order on the EDGA Book within the Discretionary Range. In such case, 
the order with a Discretionary Range will have discretion to one 
Minimum Price Variation \12\ below (above) the contra-side offer (bid) 
that is displayed by the System on the EDGA Book.
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    \12\ See Exchange Rule 11.6(i).
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    With respect to non-displayed contra-side liquidity, the Exchange 
proposes to make clear that if an order posted to the EDGA Book has a 
Discretionary Range and there is a contra-side order with a Non-
Displayed instruction,\13\ the order with a Discretionary Range will 
not be permitted to execute at a price more aggressive than the ranked 
price of such contra-side order unless and until there is no contra-
side order on the EDGA Book within the Discretionary Range. In such 
case, the order with a Discretionary Range will have discretion to the 
ranked price of the contra-side offer (bid) with a Non-Displayed 
instruction that is maintained by the System on the EDGA Book.
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    \13\ The Exchange notes that the reference to orders with a Non-
Displayed instruction is intended to apply to all orders that are 
not displayed on the Exchange, such as MidPoint Peg Orders as 
defined in Rule 11.8(d).
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    The Exchange notes that the language proposed with respect to the 
temporary reduction of the Discretionary Range of an order is 
consistent with the Exchange's recently amended rules.\14\ 
Specifically, the Exchange suspends the discretion of an order subject 
to the Displayed Price Sliding \15\ instruction for so long as a 
contra-side order that equals the Locking Price \16\ is displayed by 
the System on the EDGA Book. The Exchange suspends this discretion to 
avoid an apparent priority issue. In particular, in such a situation 
the Exchange believes a User representing an order that is displayed on 
the Exchange might believe that an incoming order was received by the 
Exchange and then bypassed such displayed order, removing some other 
non-displayed liquidity on the same side of the market as such 
displayed order. For the same reason, the Exchange believes it is 
appropriate to prevent an order with a Discretionary Range instruction 
to execute at the same price or at a price more aggressive than a 
contra-side order that is displayed on the EDGA Book. Similarly, 
although the Exchange believes it is appropriate to permit an order 
with a Discretionary Range instruction to execute at the same price as 
a contra-side order with a Non-Displayed instruction, the Exchange 
suspends such discretion at any more aggressive prices in order to 
avoid trading through orders that have been ranked on and are resting 
on the EDGA Book.
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    \14\ See supra note 6.
    \15\ See Exchange Rule 11.6(l)(1)(B).
    \16\ See Exchange Rule 11.6(f).
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    Below are examples of the operation of orders with a Discretionary 
Range.
Example No. 1: Modification and Reinstatement of Discretionary Range 
With a Displayed Contra-Side Order
    Assume the NBBO is $10.00 by $10.10, that the best-priced order to 
buy in the System is a displayed bid at $9.99, and that the best-priced 
order to sell in the System is a displayed offer at $10.11. Also assume 
that orders with a Post Only instruction do not remove liquidity from 
the EDGA Book because the value of an execution would not equal or 
exceed the value of an execution if posted at its limit price, 
including the applicable fees charged or rebates provided under 
proposed Rule 11.6(n)(4).\17\ A Limit Order \18\ to buy 100 shares at 
$10.00 with a Discretionary Range of $0.05 is entered into the System. 
The order will be displayed on the EDGA Book at $10.00 with discretion 
to execute up to $10.05. If a

[[Page 12657]]

Limit Order to sell 100 shares at $10.05 with a Displayed instruction 
and a Post Only instruction \19\ is entered into the System such order 
will be posted and displayed by the System on the EDGA Book as an order 
to sell 100 shares at $10.05. The buy order with the Discretionary 
Range instruction will have its discretion to execute at $10.05 
temporarily suspended but such order will continue to have discretion 
to execute up to $10.04. The following examples demonstrate various 
potential outcomes following the temporary suspension of the buy 
order's discretion to execute at $10.05.
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    \17\ As described elsewhere in the proposal, under the 
Exchange's current pricing structure a Limit Order with a Post Only 
instruction will remove contra-side liquidity in all cases.
    \18\ See Exchange Rule 11.8(b).
    \19\ See Exchange Rule 11.6(n)(4).
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     If a non-routable Limit Order to sell 100 shares at $10.05 
is entered into the System, depending on applicable User instructions, 
such order will either be posted and displayed by the System on the 
EDGA Book as an order to sell 100 shares (i.e., with priority behind 
the order to sell that is already displayed on the EDGA Book at $10.05) 
or will be cancelled back to the entering User.
     If, instead, a Limit Order to sell 100 shares at $10.04 is 
entered into the System, such order will execute at $10.04 against the 
resting buy order with a Discretionary Range instruction.
     If, instead, a Limit Order to sell 100 shares at $10.02 is 
entered into the System, such order will execute at $10.02 against the 
resting buy order with a Discretionary Range instruction.
     If, instead, a Limit Order to sell 100 shares at $10.00 or 
lower or a Market Order to sell 100 shares is entered into the System, 
such order will execute at $10.00 against the resting buy order with a 
Discretionary Range instruction.
     If, instead, the sell order at $10.05 with a Post Only 
instruction is then canceled, the buy order with a Discretionary Range 
instruction with have its discretion to execute up to $10.05 
reinstated.
     If, instead, a Limit Order to buy 100 shares at $10.05 or 
higher or a Market Order to buy 100 shares is then entered into the 
System, such order will execute at $10.05 against the displayed order 
to sell with a Post Only instruction and the buy order with a 
Discretionary Range instruction will have its discretion to execute up 
to $10.05 reinstated.
Example No. 2: Modification and Reinstatement of Discretionary Range 
With a Non-Displayed Contra-Side Order
    Assume the NBBO is $10.00 by $10.10, that the best-priced order to 
buy in the System is a displayed bid at $9.99, and that the best-priced 
order to sell in the System is a displayed offer at $10.11. Also assume 
that orders with a Post Only instruction do not remove liquidity from 
the EDGA Book because the value of an execution would not equal or 
exceed the value of an execution if posted at its limit price, 
including the applicable fees charged or rebates provided under 
proposed Rule 11.6(n)(4).\20\ A Limit Order with to buy 100 shares at 
$10.00 with a Discretionary Range of $0.07 is entered into the System. 
The order will be ranked and displayed on the EDGA Book at $10.00 with 
discretion to execute up to $10.07. If a Limit Order to sell 100 shares 
at $10.06 with a Non-Displayed instruction and a Post Only instruction 
is entered into the System such order will be posted by the System on 
the EDGA Book as an order to sell 100 shares at $10.06. The buy order's 
discretion to execute at $10.07 will be temporarily suspended but such 
order will continue to have discretion to execute up to $10.06. The 
following examples demonstrate various potential outcomes following the 
temporary suspension of the buy order's discretion to execute at 
$10.07.
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    \20\ As described elsewhere in the proposal, under the 
Exchange's current pricing structure a Limit Order with a Post Only 
instruction will remove contra-side liquidity in all cases.
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     If a non-routable Limit Order to sell 100 shares at $10.07 
with a Displayed instruction is entered into the System, depending on 
applicable User instructions, such order will be posted and displayed 
by the System on the EDGA Book as an order to sell 100 shares at $10.07 
or will be cancelled back to the entering User.
     If, instead, a Limit Order to sell 100 shares at $10.06 is 
entered into the System, such order will execute at $10.06 against the 
resting buy order with a Discretionary Range instruction.
     If, instead, a Limit Order to sell 100 shares at $10.02 is 
entered into the System, such order will execute at $10.02 against the 
resting buy order with a Discretionary Range instruction.
     If, instead, a Limit Order to sell 100 shares at $10.00 or 
lower or a Market Order to sell 100 shares is entered into the System, 
such order will execute at $10.00 against the resting buy order with a 
Discretionary Range instruction.
     If, instead, the sell order with a Non-Displayed 
instruction of 100 shares that is ranked at $10.06 is then canceled, 
the buy order with a Discretionary Range instruction will have its 
discretion to execute up to $10.07 reinstated.
    The Exchange's handling of orders with a Discretionary Range 
instruction is intended to reflect the relatively passive nature of 
orders with a Discretionary Range. In all cases, although the Users 
submitting such orders have indicated a willingness to execute at a 
more aggressive price, such orders are ranked at a lower price to buy 
or a higher price to sell. In turn, if an order is executed at its 
ranked price, rather than at a price within the Discretionary Range, 
then the User that submitted the order receives a better result in each 
case (i.e., buys for less or sells for more). With this background, the 
Exchange believes it is reasonable that an order with a Discretionary 
Range instruction might temporarily become not executable at certain 
prices because such prices are more aggressive than their ranked price 
(i.e., higher prices for orders to buy or lower prices for orders to 
sell). Further, to the extent a User would prefer an execution at more 
aggressive price levels, such User could simply choose other order type 
instructions that would increase the likelihood of execution at these 
prices (e.g., a routable order rather than a non-routable order or an 
order that is ranked at its full price rather than an order ranked at a 
less aggressive price with a Discretionary Range).
    In addition to the changes described above, the Exchange proposes 
to re-locate within Rule 11.8(b) and re-word the statement regarding 
the inclusion of a Discretionary Range on a Limit Order. Current Rule 
11.8(b)(8) currently states that a ``User may include a Discretionary 
Range instruction.'' This ability to include a Discretionary Range 
instruction on a Limit Order is currently grouped with other 
functionality that can be elected for Limit Orders that also include a 
Post Only or Book Only instruction as well as specified time-in-force 
instructions for orders that can be entered into the System and post to 
the EDGA Book. However, the System does not allow the combination of a 
Discretionary Range and a Post Only instruction. Accordingly, the 
Exchange proposes to re-locate the reference to the Discretionary Range 
instruction within Rule 11.8(b) so that it is no longer grouped with 
other orders that can be combined with a Post Only instruction. The 
Exchange also proposes to state in Rule 11.8(b) that: (i) A Limit Order 
with a Discretionary Range instruction may also include a Book Only 
instruction; and (ii) a Limit Order with a Discretionary Range 
instruction and a Post Only instruction will be rejected. Further, the 
Exchange proposes to refer to the ability of a Limit Order to include a 
Discretionary Range instruction, rather than a ``User'' that may 
include a Discretionary Range instruction.

[[Page 12658]]

Priority and Execution Algorithm
    With respect to the Exchange's priority and execution algorithm, 
the Exchange is proposing various minor and structural to changes that 
are intended to emphasize the processes by which orders are accepted, 
priced, ranked, displayed and executed, as well as a new provision 
related to the ability of orders to rest at locking prices that is 
consistent with the changes to provisions related to the operation of 
orders with a Discretionary Range instruction described above. First, 
the Exchange has proposed modifications to Rule 11.9, Priority of 
Orders, to make clear that the ranking of orders described in such rule 
is in turn dependent on Exchange rules related to the execution of 
orders, primarily Rule 11.10. The Exchange believes that this has 
always been the case under Exchange rules but there was not previously 
a description of the cross-reference to Rule 11.10 within such rules. 
Accordingly, the Exchange proposes to add reference to the execution 
process in addition to the numeric cross-reference to Rule 11.10. The 
Exchange also proposes to change certain references within Rule 11.9 to 
refer to ranking rather than executing equally priced trading interest, 
as the Rule as a whole is intended to describe the manner in which 
resting orders are ranked and maintained, specifically in price and 
time priority, while awaiting execution against incoming orders. The 
Exchange does not believe that the proposed modifications substantively 
modify the operation of the rules but the Exchange believes that it is 
important to make clear that the ranking of orders is a separate 
process from the execution of orders. The Exchange also proposes 
changes to Rule 11.9(a)(4) and (a)(5) to specify that orders retain and 
lose ``time'' priority under certain circumstances as opposed to 
priority generally because retaining or losing price priority does not 
require the same descriptions, as price priority will always be 
retained unless the price of an order changes.
    Next, the Exchange proposes to move language contained within sub-
paragraph (a)(2) of Rule 11.10 to the main paragraph, paragraph (a), 
such that the language is more generally applicable to the rules. 
Although sub-paragraph (a)(2) contains information relevant to 
executability, in that it describes orders that are executable in 
compliance with Regulation NMS or otherwise do not trade through 
quotations of other markets, there are other provisions set forth in 
paragraph (a) that relate to executability. Accordingly, the Exchange 
proposes to relocate language stating that any order falling within the 
parameters of this paragraph shall be referred to as ``executable'' and 
that an order will be cancelled back to the User, if based on market 
conditions, User instructions, applicable Exchange Rules and/or the Act 
and the rules and regulations thereunder, such order is not executable, 
cannot be routed to another Trading Center pursuant to Rule 11.11 or 
cannot be posted to the EDGA Book.
    The Exchange proposes to adopt paragraph (C) of Rule 11.10(a)(4) to 
provide further clarity regarding the situations where orders are not 
executable, which although covered in other existing rules, would focus 
on the incoming order on the same side of an order displayed on the 
EDGA Book rather than the resting order that is rendered not executable 
because it is opposite such order displayed on the EDGA Book. Proposed 
paragraph (C) would further state that if an incoming order is on the 
same side of the market as an order displayed on the EDGA Book and upon 
entry would execute against contra-side interest at the same price as 
such displayed order, such incoming order will be cancelled or posted 
to the EDGA Book and ranked in accordance with Rule 11.9. As described 
above, the Exchange suspends the ability of an order subject to the 
Displayed Price Sliding instruction to execute at the Locking Price for 
so long as a contra-side order that equals the Locking Price is 
displayed by the System on the EDGA Book. Similarly, as proposed to be 
added to EDGA Rules, the Exchange temporarily suspends the ability of 
an order to execute at the same price as a contra-side displayed order 
for any order with a Discretionary Range instruction. The Exchange 
temporarily suspends this discretion to avoid an apparent priority 
issue where a User representing an order that is displayed on the 
Exchange either believes such order has time priority among displayed 
orders at that price or that the displayed order is the only order at 
such price level and then sees an execution published by the Exchange 
at that price.
    To demonstrate the functionality in place on the Exchange described 
above, assume the NBBO is $10.00 by $10.01. Also assume that orders 
with a Post Only instruction do not remove liquidity from the EDGA Book 
because the value of an execution would not equal or exceed the value 
of an execution if posted at its limit price, including the applicable 
fees charged or rebates provided under proposed Rule 11.6(n)(4).\21\ A 
non-routable Limit Order to buy 100 shares at $10.01 with a Displayed 
Price Sliding instruction is entered into the System. The order will be 
displayed on the EDGA Book at $10.00 and ranked at $10.01. If a Limit 
Order to sell 100 shares at $10.01 with a Displayed instruction and a 
Post Only instruction is entered into the System such order will be 
posted and displayed by the System on the EDGA Book as an order to sell 
100 shares at $10.01. The buy order with the Displayed Price Sliding 
instruction will no longer be executable at $10.01 but will continue to 
be displayed and executable at $10.00. The following examples 
demonstrate various potential outcomes following the temporary 
suspension of the buy order's ability to execute at $10.01.
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    \21\ As described elsewhere in the proposal, under the 
Exchange's current pricing structure a Limit Order with a Post Only 
instruction will remove contra-side liquidity in all cases.
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     If a non-routable Limit Order to sell 100 shares at $10.01 
is entered into the System, depending on applicable User instructions, 
such order will either be posted and displayed by the System on the 
EDGA Book as an order to sell 100 shares (i.e., with priority behind 
the order to sell that is already displayed on the EDGA Book at $10.01) 
or will be cancelled back to the entering User.
     If, instead, a Limit Order to sell 100 shares at $10.00 is 
entered into the System, such order will execute at $10.00 against the 
resting buy order with a Displayed Price Sliding instruction.
     If, instead, a Limit Order to buy 100 shares at $10.01 or 
higher or a Market Order to buy 100 shares is entered into the 
System,\22\ such order will execute at $10.01 against the resting sell 
order displayed on the EDGA Book, as such

[[Page 12659]]

resting order is fully executable and displayed as an offer on the EDGA 
Book.
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    \22\ The Exchange notes that an incoming order for purposes of 
comparison to a resting order can be any incoming order unless the 
terms of that incoming order itself preclude execution. In this 
example, a Limit Order to buy 100 shares at $10.01 that executes 
against the order to sell displayed at $10.01 on the EDGA Book could 
be a Limit Order with a Displayed instruction, a Limit Order with a 
Non-Displayed instruction, a Limit Order with a Displayed Price 
Sliding instruction, a Limit Order with a Price Adjust instruction, 
a routable Limit Order, a non-routable Limit Order, an order with a 
Limit Price of $10.00 and a Discretionary Range of $0.01, or any 
other type of incoming Limit Order to buy that is executable at 
$10.01. Thus, this example demonstrates that on entry the incoming 
order is compared to contra-side orders on the EDGA Book regardless 
of the modifiers that will determine how it will be displayed, 
ranked or otherwise handled by the System and that unless the 
ability of an order to execute has been suspended based on the 
Exchange's rules, the resting contra-side order with priority at 
that price will be executed against the incoming order.
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    The Exchange notes that it is proposing to add descriptive titles 
to paragraphs (A) and (B) of Rule 11.10(a)(4), which describe the 
process by which executable orders are matched within the System. 
Specifically, so long as it is otherwise executable, an incoming order 
to buy will be automatically executed to the extent that it is priced 
at an amount that equals or exceeds any order to sell in the EDGA Book 
and an incoming order to sell will be automatically executed to the 
extent that it is priced at an amount that equals or is less than any 
other order to buy in the EDGA Book. These rules further state that an 
order to buy shall be executed at the price(s) of the lowest order(s) 
to sell having priority in the EDGA Book and an order to sell shall be 
executed at the price(s) of the highest order(s) to buy having priority 
in the EDGA Book. The Exchange emphasizes these current rules only 
insofar as to highlight the interconnected nature of the priority rule.
    The Exchange also proposes to modify paragraph (h) of Rule 11.11 to 
clarify the Exchange's rule regarding the priority of routed orders. 
Paragraph (h) currently sets forth the proposition that a routed order 
does not retain priority on the Exchange while it is being routed to 
other markets. The Exchange believes that its proposed clarification to 
paragraph (h) is appropriate because it more clearly states that a 
routed order is not ranked and maintained in the EDGA Book pursuant to 
Rule 11.9(a), and therefore is not available to execute against 
incoming orders pursuant to Rule 11.10.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with Section 6(b) of the Securities Exchange Act of 1934 (the ``Act'') 
\23\ and further the objectives of Section 6(b)(5) of the Act \24\ 
because they are designed to promote just and equitable principles of 
trade, to remove impediments to and perfect the mechanism of a free and 
open market and a national market system, to foster cooperation and 
coordination with persons engaged in facilitating transactions in 
securities, and, in general, to protect investors and the public 
interest. The proposed rule changes are also designed to support the 
principles of Section 11A(a)(1) \25\ of the Act in that they seek to 
assure fair competition among brokers and dealers and among exchange 
markets.
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    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(5).
    \25\ 15 U.S.C. 78k-1(a)(1).
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    Specifically, the Exchange also believes that the changes to 
provide additional clarity and specificity regarding the functionality 
of the System with respect to an order with a Discretionary Range 
instruction would promote just and equitable principles of trade and 
remove impediments to a free and open market by providing greater 
transparency concerning the operation of the System. The Exchange also 
believes that the proposed amendments to clarify and re-structure the 
Exchange's priority, execution and routing rules will contribute to the 
protection of investors and the public interest by making the 
Exchange's rules easier to understand. As described above, the Exchange 
has proposed to adopt rules that describe functionality in the System 
that will only be implicated to the extent an order with a Post Only 
instruction does not remove liquidity on entry and is posted to the 
EDGA Book. As also described above, under the Exchange's current 
pricing structure, an order with a Post Only instruction will, in all 
cases, remove contra-side liquidity from the EDGA Book. However, the 
Exchange proposes to adopt language to reflect the operation of the 
System in the event the Exchange's fee structure is modified and an 
order with a Post Only instruction is able to be posted to the EDGA 
Book without removing liquidity.
    The Exchange believes that it is consistent with the Act to 
temporarily reduce the Discretionary Range of an order that has been 
posted to the EDGA Book for so long as there is contra-side liquidity 
on the EDGA Book because this functionality prevents an apparent 
priority issue on the EDGA Book as described above as well as the 
ability of an order to execute at a price that trades through the 
ranked price of an order resting on the EDGA Book. The Exchange 
reiterates that such behavior, as described above, is temporary in 
nature; an order's full Discretionary Range will be returned as soon as 
the contra-side liquidity that caused the reduction in the first place 
is no longer maintained on the EDGA Book. The Exchange believes that 
its overall handling of orders, including the temporary suspension of 
the ability of an order with a Discretionary Range to execute at one or 
more prices is consistent with the Act because it removes impediments 
to and perfects the mechanism of a free and open market and a national 
market system by reflecting the relatively passive nature of an order 
with a Discretionary Range instruction while honoring the instructions 
of a User submitting a contra-side order that does not remove liquidity 
on entry. As explained above, the Exchange's handling of orders with a 
Discretionary Range instruction is intended to reflect the relatively 
passive nature of orders with a Discretionary Range. The Exchange 
believes it is reasonable that an order with a Discretionary Range 
instruction might temporarily become not executable at certain prices 
because such prices are more aggressive than their ranked price (i.e., 
higher prices for orders to buy or lower prices for orders to sell). 
Further, to the extent a User would prefer an execution at more 
aggressive price levels, such User could simply choose other order type 
instructions that would increase the likelihood of execution at these 
prices. Finally, the Exchange believes that its proposal to re-locate 
and re-word the Discretionary Range instruction reference within Rule 
11.8(b), related to Limit Orders, is consistent with the Act because 
the change will correct an error within the Exchange's rules and 
prevent potential confusion regarding the ability to combine a 
Discretionary Range instruction with a Post Only instruction.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The proposed 
rule changes are not designed to address any competitive issue but 
rather to add specificity and clarity to Exchange rules, thus providing 
greater transparency regarding the operation of the System.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule changes.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    Within 45 days of the date of publication of this notice in the 
Federal Register or within such longer period (i) as the Commission may 
designate up to 90 days of such date if it finds such longer period to 
be appropriate and publishes its reasons for so finding or (ii) as to 
which the Exchange consents, the Commission will: (a) By order approve 
or disapprove such proposed rule change, or (b) institute proceedings

[[Page 12660]]

to determine whether the proposed rule change should be disapproved.

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change, as modified by Amendment No. 1, 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 to rule-comments@sec.gov. Please 
include File Number SR-EDGA-2015-10 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE., 
Washington, DC 20549-1090.
All submissions should refer to File Number SR-EDGA-2015-10. 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 
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-EDGA-2015-10 and should be 
submitted on or before March 31, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
---------------------------------------------------------------------------

    \26\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-05482 Filed 3-9-15; 8:45 am]
 BILLING CODE 8011-01-P
Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices 12655

III. Date of Effectiveness of the inspection and copying at the principal System,4 including the operation of its
Proposed Rule Change and Timing for office of OCC and on OCC’s Web site at order types and order instructions, as
Commission Action http://www.theocc.com/components/ further described below.
docs/legal/rules_and_bylaws/sr_occ_15_ The text of the proposed rule change
Within 45 days of the date of
03.pdf. is available at the Exchange’s Web site
publication of this notice in the Federal
All comments received will be posted at www.batstrading.com, at the
Register or within such longer period
without change; the Commission does principal office of the Exchange, and at
up to 90 days (i) as the Commission may
not edit personal identifying the Commission’s Public Reference
designate if it finds such longer period
information from submissions. You Room.
to be appropriate and publishes its
should submit only information that II. Self-Regulatory Organization’s
reasons for so finding or (ii) as to which
you wish to make available publicly. All Statement of the Purpose of, and the
the self-regulatory organization
submissions should refer to File Statutory Basis for, the Proposed Rule
consents, the Commission will:
(A) By order approve or disapprove Number SR–OCC–2015–03 and should Change
such proposed rule change, or be submitted on or before March 31,
2015. In its filing with the Commission, the
(B) institute proceedings to determine Exchange included statements
whether the proposed rule change For the Commission, by the Division of concerning the purpose of, and basis for,
should be disapproved. Trading and Markets, pursuant to delegated
authority.11 the proposed rule change and discussed
IV. Solicitation of Comments any comments it received on the
Brent J. Fields,
proposed rule change. The text of these
Interested persons are invited to Secretary. statements may be examined at the
submit written data, views and [FR Doc. 2015–05479 Filed 3–9–15; 08:45 am] places specified in Item IV below. The
arguments concerning the foregoing, BILLING CODE 8011–01–P Exchange has prepared summaries, set
including whether the proposed rule forth in Sections A, B and C below, of
change is consistent with the Act. the most significant parts of such
Comments may be submitted by any of SECURITIES AND EXCHANGE statements.
the following methods: COMMISSION
A. Self-Regulatory Organization’s
Electronic Comments [Release No. 34–74435; File No. SR–EDGA– Statement of the Purpose of, and the
2015–10]
• Use the Commission’s Internet Statutory Basis for, the Proposed Rule
comment form (http://www.sec.gov/ Self-Regulatory Organizations; EDGA Change
rules/sro.shtml); or Exchange, Inc.; Notice of Filing of a 1. Purpose
• Send an email to rule-comments@ Proposed Rule Change, as Modified by
sec.gov. Please include File Number SR– On June 5, 2014, Chair Mary Jo White
Amendment No. 1, To Amend Rules asked all national securities exchanges
OCC–2015–03 on the subject line. 11.6, 11.8, 11.9, 11.10 and 11.11 of to conduct a comprehensive review of
Paper Comments EDGA Exchange, Inc. each order type offered to members and
• Send paper comments in triplicate March 4, 2015. how it operates.5 The Exchange notes
to Secretary, Securities and Exchange Pursuant to Section 19(b)(1) of the that a comprehensive rule filing
Commission, 100 F Street NE., Securities Exchange Act of 1934 (the clarifying and updating Exchange rules
Washington, DC 20549–1090. ‘‘Act’’),1 and Rule 19b–4 thereunder,2 was recently approved.6 However, based
notice is hereby given that on February on the request from Chair White, the
All submissions should refer to File
20, 2015, EDGA Exchange, Inc. (the Exchange did indeed conduct further
Number SR–OCC–2015–03. This file
‘‘Exchange’’ or ‘‘EDGA’’) filed with the review of each order types and its
number should be included on the
Securities and Exchange Commission operation. The proposals set forth below
subject line if email is used. To help the
(‘‘Commission’’) the proposed rule are based on this comprehensive review
Commission process and review your
change as described in Items I, II and III and are intended to clarify and to
comments more efficiently, please use
below, which items have been prepared include additional specificity regarding
only one method. The Commission will
by the self-regulatory organization. On the current functionality of the
post all comments on the Commission’s
February 27, 2015, the Exchange filed Exchange’s System, including the
Internet Web site (http://www.sec.gov/
Amendment No. 1 to the proposal.3 The operation of its order types and order
rules/sro.shtml). Copies of the
Commission is publishing this notice, as instructions. The proposals set forth
submission, all subsequent
modified by Amendment No. 1, to below are intended to supplement the
amendments, all written statements
solicit comments on the proposed rule recently approved filing based on
with respect to the proposed rule
change from interested persons. further review conducted by the
change that are filed with the
Exchange and are intended to clarify
Commission, and all written I. Self-Regulatory Organization’s and enhance the understandability of
communications relating to the Statement of the Terms of the Substance
proposed rule change between the of the Proposed Rule Change 4 The term ‘‘System’’ is defined as ‘‘the electronic
Commission and any person, other than communications and trading facility designated by
those that may be withheld from the The Exchange filed a proposal to the Board through which securities orders of Users
public in accordance with the amend Rules 11.6, 11.8, 11.9, 11.10 and are consolidated for ranking, execution and, when
11.11 to clarify and to include applicable, routing away.’’ See Exchange Rule
mstockstill on DSK4VPTVN1PROD with NOTICES

provisions of 5 U.S.C. 552, will be 1.5(cc).
available for Web site viewing and additional specificity regarding the
5 See Mary Jo White, Chair, Commission, Speech
printing in the Commission’s Public current functionality of the Exchange’s
at the Sandler O’Neill & Partners, L.P. Global
Reference Room, 100 F Street NE., 11 17
Exchange and Brokerage Conference, (June 5, 2014)
CFR 200.30–3(a)(12). (available at http://www.sec.gov/News/Speech/
Washington, DC 20549 on official 1 15 U.S.C. 78s(b)(1). Detail/Speech/1370542004312#.VD2HW610w6Y).
business days between the hours of 2 17 CFR 240.19b–4. 6 Securities Exchange Act Release No. 73592
10:00 a.m. and 3:00 p.m. Copies of the 3 Amendment No. 1 replaces SR–EDGA–2015–10 (November 13, 2014), 79 FR 68937 (November 19,
filing also will be available for and supersedes such filing in its entirety. 2014) (SR–EDGA–2014–20).

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the Exchange’s rules related to the liquidity will equal or exceed the value an order is consistent with the
ranking and execution of orders. The of such execution once posted to the Exchange’s recently amended rules.14
proposal is also intended to add EDGA Book, including the applicable Specifically, the Exchange suspends the
additional detail with respect to the fees charged or rebates received. discretion of an order subject to the
handling of orders with a Discretionary However, the Exchange proposes to Displayed Price Sliding 15 instruction
Range 7 instruction. The Exchange is not adopt language to reflect the operation for so long as a contra-side order that
proposing any substantive modifications of the System in the event the equals the Locking Price 16 is displayed
to the System. Exchange’s fee structure is modified and by the System on the EDGA Book. The
an order with a Post Only instruction is Exchange suspends this discretion to
Orders With a Discretionary Range
able to be posted to the EDGA Book avoid an apparent priority issue. In
Pursuant to current Rule 11.6(d), the without removing liquidity. The particular, in such a situation the
Exchange defines a Discretionary Range Exchange notes that if this were the Exchange believes a User representing
as an instruction the User 8 may attach case, it would be possible for an order an order that is displayed on the
to an order to buy (sell) a stated amount with a Discretionary Range instruction Exchange might believe that an
of a security at a specified, displayed to have its Discretionary Range incoming order was received by the
price with discretion to execute up temporarily reduced based on contra- Exchange and then bypassed such
(down) to a specified, non-displayed side interest resting on the Exchange displayed order, removing some other
price. For purposes of this proposal, the because an incoming order with a Post non-displayed liquidity on the same
Exchange will use the term Only instruction would be posted to the side of the market as such displayed
‘‘Discretionary Range’’ to describe the EDGA Book rather than executing order. For the same reason, the
amount between the displayed price to against the Discretionary Range of a Exchange believes it is appropriate to
and including the highest price at which resting order. prevent an order with a Discretionary
a buyer is willing to buy or lowest price With respect to displayed contra-side Range instruction to execute at the same
at which a seller is willing to sell. The liquidity, the Exchange proposes to price or at a price more aggressive than
Exchange proposes to make clear that make clear that if an order posted to the a contra-side order that is displayed on
although an order with a Discretionary EDGA Book has a Discretionary Range the EDGA Book. Similarly, although the
Range instruction may be accompanied and there is a contra-side order that is Exchange believes it is appropriate to
by a Displayed 9 instruction, an order displayed by the System on the EDGA permit an order with a Discretionary
with a Discretionary Range instruction Book within such Discretionary Range, Range instruction to execute at the same
may also be accompanied by a Non- the order with a Discretionary Range price as a contra-side order with a Non-
Displayed instruction, and if so, will will not be permitted to execute at the Displayed instruction, the Exchange
have a non-displayed ranked price as price of or at a price more aggressive suspends such discretion at any more
well as a discretionary price. The than such contra-side displayed order aggressive prices in order to avoid
Exchange further proposes to unless and until there is no contra-side trading through orders that have been
specifically state that resting orders with displayed order on the EDGA Book ranked on and are resting on the EDGA
a Discretionary Range instruction will within the Discretionary Range. In such Book.
be executed at a price that uses the case, the order with a Discretionary Below are examples of the operation
minimum amount of discretion Range will have discretion to one of orders with a Discretionary Range.
necessary to execute the order against Minimum Price Variation 12 below
Example No. 1: Modification and
an incoming order. In addition, the (above) the contra-side offer (bid) that is
Reinstatement of Discretionary Range
Exchange proposes to make clear certain displayed by the System on the EDGA
With a Displayed Contra-Side Order
circumstances where the Discretionary Book.
Range of an order is temporarily With respect to non-displayed contra- Assume the NBBO is $10.00 by
reduced due to contra-side interest side liquidity, the Exchange proposes to $10.10, that the best-priced order to buy
resting on the EDGA Book.10 make clear that if an order posted to the in the System is a displayed bid at
The Exchange also proposes to specify EDGA Book has a Discretionary Range $9.99, and that the best-priced order to
certain situations where the and there is a contra-side order with a sell in the System is a displayed offer at
Discretionary Range of an order could Non-Displayed instruction,13 the order $10.11. Also assume that orders with a
be temporarily reduced based on contra- with a Discretionary Range will not be Post Only instruction do not remove
side interest resting on the Exchange. permitted to execute at a price more liquidity from the EDGA Book because
The Exchange notes that an order with aggressive than the ranked price of such the value of an execution would not
a Post Only instruction 11 will, in all contra-side order unless and until there equal or exceed the value of an
cases, remove contra-side liquidity from is no contra-side order on the EDGA execution if posted at its limit price,
the EDGA Book because under its Book within the Discretionary Range. In including the applicable fees charged or
current taker-maker pricing structure, such case, the order with a rebates provided under proposed Rule
the remover of liquidity is provided a Discretionary Range will have discretion 11.6(n)(4).17 A Limit Order 18 to buy 100
rebate while the provider of liquidity is to the ranked price of the contra-side shares at $10.00 with a Discretionary
charged a fee. Therefore, in all cases, the offer (bid) with a Non-Displayed Range of $0.05 is entered into the
value of the execution to remove instruction that is maintained by the System. The order will be displayed on
System on the EDGA Book. the EDGA Book at $10.00 with
7 See Exchange Rule 11.6(d).
The Exchange notes that the language discretion to execute up to $10.05. If a
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8 The term ‘‘User’’ is defined as ‘‘any Member or proposed with respect to the temporary
Sponsored Participant who is authorized to obtain reduction of the Discretionary Range of 14 See supra note 6.
access to the System pursuant to Rule 11.3.’’ See 15 See Exchange Rule 11.6(l)(1)(B).
Exchange Rule 1.5(ee). 12 See Exchange Rule 11.6(i). 16 See Exchange Rule 11.6(f).
9 See Exchange Rule 11.6(e)(1). 13 The 17 As described elsewhere in the proposal, under
Exchange notes that the reference to orders
10 The term ‘‘EDGA Book’’ is defined as ‘‘the the Exchange’s current pricing structure a Limit
with a Non-Displayed instruction is intended to
System’s electronic file of orders.’’ See Exchange apply to all orders that are not displayed on the Order with a Post Only instruction will remove
Rule 1.5(d). Exchange, such as MidPoint Peg Orders as defined contra-side liquidity in all cases.
11 See Exchange Rule 11.6(n)(4). in Rule 11.8(d). 18 See Exchange Rule 11.8(b).

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Limit Order to sell 100 shares at $10.05 $10.11. Also assume that orders with a passive nature of orders with a
with a Displayed instruction and a Post Post Only instruction do not remove Discretionary Range. In all cases,
Only instruction 19 is entered into the liquidity from the EDGA Book because although the Users submitting such
System such order will be posted and the value of an execution would not orders have indicated a willingness to
displayed by the System on the EDGA equal or exceed the value of an execute at a more aggressive price, such
Book as an order to sell 100 shares at execution if posted at its limit price, orders are ranked at a lower price to buy
$10.05. The buy order with the including the applicable fees charged or or a higher price to sell. In turn, if an
Discretionary Range instruction will rebates provided under proposed Rule order is executed at its ranked price,
have its discretion to execute at $10.05 11.6(n)(4).20 A Limit Order with to buy rather than at a price within the
temporarily suspended but such order 100 shares at $10.00 with a Discretionary Range, then the User that
will continue to have discretion to Discretionary Range of $0.07 is entered submitted the order receives a better
execute up to $10.04. The following into the System. The order will be result in each case (i.e., buys for less or
examples demonstrate various potential ranked and displayed on the EDGA sells for more). With this background,
outcomes following the temporary Book at $10.00 with discretion to the Exchange believes it is reasonable
suspension of the buy order’s discretion execute up to $10.07. If a Limit Order that an order with a Discretionary Range
to execute at $10.05. to sell 100 shares at $10.06 with a Non- instruction might temporarily become
• If a non-routable Limit Order to sell Displayed instruction and a Post Only not executable at certain prices because
100 shares at $10.05 is entered into the instruction is entered into the System such prices are more aggressive than
System, depending on applicable User such order will be posted by the System their ranked price (i.e., higher prices for
instructions, such order will either be on the EDGA Book as an order to sell orders to buy or lower prices for orders
posted and displayed by the System on 100 shares at $10.06. The buy order’s to sell). Further, to the extent a User
the EDGA Book as an order to sell 100 discretion to execute at $10.07 will be would prefer an execution at more
shares (i.e., with priority behind the temporarily suspended but such order aggressive price levels, such User could
order to sell that is already displayed on will continue to have discretion to simply choose other order type
the EDGA Book at $10.05) or will be execute up to $10.06. The following instructions that would increase the
cancelled back to the entering User. examples demonstrate various potential likelihood of execution at these prices
• If, instead, a Limit Order to sell 100 outcomes following the temporary (e.g., a routable order rather than a non-
shares at $10.04 is entered into the suspension of the buy order’s discretion routable order or an order that is ranked
System, such order will execute at to execute at $10.07. at its full price rather than an order
$10.04 against the resting buy order • If a non-routable Limit Order to sell ranked at a less aggressive price with a
with a Discretionary Range instruction. 100 shares at $10.07 with a Displayed Discretionary Range).
• If, instead, a Limit Order to sell 100 instruction is entered into the System, In addition to the changes described
shares at $10.02 is entered into the depending on applicable User above, the Exchange proposes to re-
System, such order will execute at instructions, such order will be posted locate within Rule 11.8(b) and re-word
$10.02 against the resting buy order and displayed by the System on the the statement regarding the inclusion of
with a Discretionary Range instruction. EDGA Book as an order to sell 100
• If, instead, a Limit Order to sell 100 a Discretionary Range on a Limit Order.
shares at $10.07 or will be cancelled Current Rule 11.8(b)(8) currently states
shares at $10.00 or lower or a Market back to the entering User.
Order to sell 100 shares is entered into that a ‘‘User may include a
• If, instead, a Limit Order to sell 100 Discretionary Range instruction.’’ This
the System, such order will execute at shares at $10.06 is entered into the
$10.00 against the resting buy order ability to include a Discretionary Range
System, such order will execute at instruction on a Limit Order is currently
with a Discretionary Range instruction. $10.06 against the resting buy order
• If, instead, the sell order at $10.05 grouped with other functionality that
with a Discretionary Range instruction. can be elected for Limit Orders that also
with a Post Only instruction is then • If, instead, a Limit Order to sell 100
canceled, the buy order with a include a Post Only or Book Only
shares at $10.02 is entered into the instruction as well as specified time-in-
Discretionary Range instruction with System, such order will execute at
have its discretion to execute up to force instructions for orders that can be
$10.02 against the resting buy order entered into the System and post to the
$10.05 reinstated. with a Discretionary Range instruction.
• If, instead, a Limit Order to buy 100 EDGA Book. However, the System does
• If, instead, a Limit Order to sell 100 not allow the combination of a
shares at $10.05 or higher or a Market shares at $10.00 or lower or a Market
Order to buy 100 shares is then entered Discretionary Range and a Post Only
Order to sell 100 shares is entered into instruction. Accordingly, the Exchange
into the System, such order will execute the System, such order will execute at
at $10.05 against the displayed order to proposes to re-locate the reference to the
$10.00 against the resting buy order Discretionary Range instruction within
sell with a Post Only instruction and the with a Discretionary Range instruction.
buy order with a Discretionary Range Rule 11.8(b) so that it is no longer
• If, instead, the sell order with a grouped with other orders that can be
instruction will have its discretion to Non-Displayed instruction of 100 shares
execute up to $10.05 reinstated. combined with a Post Only instruction.
that is ranked at $10.06 is then The Exchange also proposes to state in
Example No. 2: Modification and canceled, the buy order with a Rule 11.8(b) that: (i) A Limit Order with
Reinstatement of Discretionary Range Discretionary Range instruction will a Discretionary Range instruction may
With a Non-Displayed Contra-Side have its discretion to execute up to also include a Book Only instruction;
Order $10.07 reinstated.
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and (ii) a Limit Order with a
Assume the NBBO is $10.00 by The Exchange’s handling of orders Discretionary Range instruction and a
$10.10, that the best-priced order to buy with a Discretionary Range instruction Post Only instruction will be rejected.
in the System is a displayed bid at is intended to reflect the relatively Further, the Exchange proposes to refer
$9.99, and that the best-priced order to 20 As described elsewhere in the proposal, under
to the ability of a Limit Order to include
sell in the System is a displayed offer at the Exchange’s current pricing structure a Limit
a Discretionary Range instruction, rather
Order with a Post Only instruction will remove than a ‘‘User’’ that may include a
19 See Exchange Rule 11.6(n)(4). contra-side liquidity in all cases. Discretionary Range instruction.

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Priority and Execution Algorithm Accordingly, the Exchange proposes to 11.6(n)(4).21 A non-routable Limit Order
With respect to the Exchange’s relocate language stating that any order to buy 100 shares at $10.01 with a
priority and execution algorithm, the falling within the parameters of this Displayed Price Sliding instruction is
Exchange is proposing various minor paragraph shall be referred to as entered into the System. The order will
and structural to changes that are ‘‘executable’’ and that an order will be be displayed on the EDGA Book at
intended to emphasize the processes by cancelled back to the User, if based on $10.00 and ranked at $10.01. If a Limit
which orders are accepted, priced, market conditions, User instructions, Order to sell 100 shares at $10.01 with
ranked, displayed and executed, as well applicable Exchange Rules and/or the a Displayed instruction and a Post Only
as a new provision related to the ability Act and the rules and regulations instruction is entered into the System
of orders to rest at locking prices that is thereunder, such order is not such order will be posted and displayed
consistent with the changes to executable, cannot be routed to another by the System on the EDGA Book as an
provisions related to the operation of Trading Center pursuant to Rule 11.11 order to sell 100 shares at $10.01. The
orders with a Discretionary Range or cannot be posted to the EDGA Book. buy order with the Displayed Price
instruction described above. First, the The Exchange proposes to adopt Sliding instruction will no longer be
Exchange has proposed modifications to paragraph (C) of Rule 11.10(a)(4) to executable at $10.01 but will continue
Rule 11.9, Priority of Orders, to make provide further clarity regarding the to be displayed and executable at
clear that the ranking of orders situations where orders are not $10.00. The following examples
described in such rule is in turn executable, which although covered in demonstrate various potential outcomes
dependent on Exchange rules related to other existing rules, would focus on the following the temporary suspension of
the execution of orders, primarily Rule incoming order on the same side of an the buy order’s ability to execute at
11.10. The Exchange believes that this order displayed on the EDGA Book $10.01.
has always been the case under rather than the resting order that is • If a non-routable Limit Order to sell
Exchange rules but there was not rendered not executable because it is 100 shares at $10.01 is entered into the
previously a description of the cross- opposite such order displayed on the System, depending on applicable User
reference to Rule 11.10 within such EDGA Book. Proposed paragraph (C) instructions, such order will either be
rules. Accordingly, the Exchange would further state that if an incoming posted and displayed by the System on
proposes to add reference to the order is on the same side of the market the EDGA Book as an order to sell 100
execution process in addition to the as an order displayed on the EDGA shares (i.e., with priority behind the
numeric cross-reference to Rule 11.10. Book and upon entry would execute order to sell that is already displayed on
The Exchange also proposes to change against contra-side interest at the same the EDGA Book at $10.01) or will be
certain references within Rule 11.9 to price as such displayed order, such cancelled back to the entering User.
refer to ranking rather than executing incoming order will be cancelled or
equally priced trading interest, as the • If, instead, a Limit Order to sell 100
posted to the EDGA Book and ranked in shares at $10.00 is entered into the
Rule as a whole is intended to describe accordance with Rule 11.9. As described
the manner in which resting orders are System, such order will execute at
above, the Exchange suspends the $10.00 against the resting buy order
ranked and maintained, specifically in ability of an order subject to the
price and time priority, while awaiting with a Displayed Price Sliding
Displayed Price Sliding instruction to instruction.
execution against incoming orders. The execute at the Locking Price for so long
Exchange does not believe that the as a contra-side order that equals the • If, instead, a Limit Order to buy 100
proposed modifications substantively Locking Price is displayed by the shares at $10.01 or higher or a Market
modify the operation of the rules but the System on the EDGA Book. Similarly, as Order to buy 100 shares is entered into
Exchange believes that it is important to proposed to be added to EDGA Rules, the System,22 such order will execute at
make clear that the ranking of orders is the Exchange temporarily suspends the $10.01 against the resting sell order
a separate process from the execution of ability of an order to execute at the same displayed on the EDGA Book, as such
orders. The Exchange also proposes price as a contra-side displayed order
changes to Rule 11.9(a)(4) and (a)(5) to for any order with a Discretionary Range 21 As described elsewhere in the proposal, under

specify that orders retain and lose instruction. The Exchange temporarily the Exchange’s current pricing structure a Limit
‘‘time’’ priority under certain Order with a Post Only instruction will remove
suspends this discretion to avoid an contra-side liquidity in all cases.
circumstances as opposed to priority apparent priority issue where a User 22 The Exchange notes that an incoming order for
generally because retaining or losing representing an order that is displayed purposes of comparison to a resting order can be
price priority does not require the same on the Exchange either believes such any incoming order unless the terms of that
descriptions, as price priority will order has time priority among displayed
incoming order itself preclude execution. In this
always be retained unless the price of an example, a Limit Order to buy 100 shares at $10.01
orders at that price or that the displayed that executes against the order to sell displayed at
order changes. order is the only order at such price $10.01 on the EDGA Book could be a Limit Order
Next, the Exchange proposes to move with a Displayed instruction, a Limit Order with a
level and then sees an execution
language contained within sub- Non-Displayed instruction, a Limit Order with a
published by the Exchange at that price. Displayed Price Sliding instruction, a Limit Order
paragraph (a)(2) of Rule 11.10 to the
To demonstrate the functionality in with a Price Adjust instruction, a routable Limit
main paragraph, paragraph (a), such that Order, a non-routable Limit Order, an order with a
the language is more generally place on the Exchange described above, Limit Price of $10.00 and a Discretionary Range of
applicable to the rules. Although sub- assume the NBBO is $10.00 by $10.01. $0.01, or any other type of incoming Limit Order
Also assume that orders with a Post to buy that is executable at $10.01. Thus, this
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paragraph (a)(2) contains information
Only instruction do not remove example demonstrates that on entry the incoming
relevant to executability, in that it order is compared to contra-side orders on the
describes orders that are executable in liquidity from the EDGA Book because EDGA Book regardless of the modifiers that will
compliance with Regulation NMS or the value of an execution would not determine how it will be displayed, ranked or
otherwise do not trade through equal or exceed the value of an otherwise handled by the System and that unless
execution if posted at its limit price, the ability of an order to execute has been
quotations of other markets, there are suspended based on the Exchange’s rules, the
other provisions set forth in paragraph including the applicable fees charged or resting contra-side order with priority at that price
(a) that relate to executability. rebates provided under proposed Rule will be executed against the incoming order.

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Federal Register / Vol. 80, No. 46 / Tuesday, March 10, 2015 / Notices 12659

resting order is fully executable and competition among brokers and dealers instructions of a User submitting a
displayed as an offer on the EDGA Book. and among exchange markets. contra-side order that does not remove
The Exchange notes that it is Specifically, the Exchange also liquidity on entry. As explained above,
proposing to add descriptive titles to believes that the changes to provide the Exchange’s handling of orders with
paragraphs (A) and (B) of Rule additional clarity and specificity a Discretionary Range instruction is
11.10(a)(4), which describe the process regarding the functionality of the intended to reflect the relatively passive
by which executable orders are matched System with respect to an order with a nature of orders with a Discretionary
within the System. Specifically, so long Discretionary Range instruction would Range. The Exchange believes it is
as it is otherwise executable, an promote just and equitable principles of reasonable that an order with a
incoming order to buy will be trade and remove impediments to a free Discretionary Range instruction might
automatically executed to the extent and open market by providing greater temporarily become not executable at
that it is priced at an amount that equals transparency concerning the operation certain prices because such prices are
or exceeds any order to sell in the EDGA of the System. The Exchange also more aggressive than their ranked price
Book and an incoming order to sell will believes that the proposed amendments (i.e., higher prices for orders to buy or
be automatically executed to the extent to clarify and re-structure the lower prices for orders to sell). Further,
that it is priced at an amount that equals Exchange’s priority, execution and to the extent a User would prefer an
or is less than any other order to buy in routing rules will contribute to the execution at more aggressive price
the EDGA Book. These rules further protection of investors and the public levels, such User could simply choose
state that an order to buy shall be interest by making the Exchange’s rules other order type instructions that would
executed at the price(s) of the lowest easier to understand. As described increase the likelihood of execution at
order(s) to sell having priority in the above, the Exchange has proposed to these prices. Finally, the Exchange
EDGA Book and an order to sell shall be adopt rules that describe functionality believes that its proposal to re-locate
executed at the price(s) of the highest in the System that will only be and re-word the Discretionary Range
order(s) to buy having priority in the implicated to the extent an order with instruction reference within Rule
EDGA Book. The Exchange emphasizes a Post Only instruction does not remove 11.8(b), related to Limit Orders, is
liquidity on entry and is posted to the consistent with the Act because the
these current rules only insofar as to
EDGA Book. As also described above, change will correct an error within the
highlight the interconnected nature of
under the Exchange’s current pricing Exchange’s rules and prevent potential
the priority rule.
structure, an order with a Post Only confusion regarding the ability to
The Exchange also proposes to modify instruction will, in all cases, remove
paragraph (h) of Rule 11.11 to clarify the combine a Discretionary Range
contra-side liquidity from the EDGA instruction with a Post Only instruction.
Exchange’s rule regarding the priority of Book. However, the Exchange proposes
routed orders. Paragraph (h) currently to adopt language to reflect the B. Self-Regulatory Organization’s
sets forth the proposition that a routed operation of the System in the event the Statement on Burden on Competition
order does not retain priority on the Exchange’s fee structure is modified and
Exchange while it is being routed to The Exchange does not believe that
an order with a Post Only instruction is
other markets. The Exchange believes the proposed rule changes will result in
able to be posted to the EDGA Book
that its proposed clarification to any burden on competition that is not
without removing liquidity.
paragraph (h) is appropriate because it The Exchange believes that it is necessary or appropriate in furtherance
more clearly states that a routed order consistent with the Act to temporarily of the purposes of the Act. The
is not ranked and maintained in the reduce the Discretionary Range of an proposed rule changes are not designed
EDGA Book pursuant to Rule 11.9(a), order that has been posted to the EDGA to address any competitive issue but
and therefore is not available to execute Book for so long as there is contra-side rather to add specificity and clarity to
against incoming orders pursuant to liquidity on the EDGA Book because Exchange rules, thus providing greater
Rule 11.10. this functionality prevents an apparent transparency regarding the operation of
priority issue on the EDGA Book as the System.
2. Statutory Basis
described above as well as the ability of C. Self-Regulatory Organization’s
The Exchange believes that the an order to execute at a price that trades Statement on Comments on the
proposed rule changes are consistent through the ranked price of an order Proposed Rule Change Received From
with Section 6(b) of the Securities resting on the EDGA Book. The Members, Participants, or Others
Exchange Act of 1934 (the ‘‘Act’’) 23 and Exchange reiterates that such behavior,
further the objectives of Section 6(b)(5) as described above, is temporary in The Exchange has neither solicited
of the Act 24 because they are designed nature; an order’s full Discretionary nor received written comments on the
to promote just and equitable principles Range will be returned as soon as the proposed rule changes.
of trade, to remove impediments to and contra-side liquidity that caused the III. Date of Effectiveness of the
perfect the mechanism of a free and reduction in the first place is no longer Proposed Rule Change and Timing for
open market and a national market maintained on the EDGA Book. The Commission Action
system, to foster cooperation and Exchange believes that its overall
coordination with persons engaged in handling of orders, including the Within 45 days of the date of
facilitating transactions in securities, temporary suspension of the ability of publication of this notice in the Federal
and, in general, to protect investors and an order with a Discretionary Range to Register or within such longer period (i)
mstockstill on DSK4VPTVN1PROD with NOTICES

the public interest. The proposed rule execute at one or more prices is as the Commission may designate up to
changes are also designed to support the consistent with the Act because it 90 days of such date if it finds such
principles of Section 11A(a)(1) 25 of the removes impediments to and perfects longer period to be appropriate and
Act in that they seek to assure fair the mechanism of a free and open publishes its reasons for so finding or
market and a national market system by (ii) as to which the Exchange consents,
23 15 U.S.C. 78f(b). reflecting the relatively passive nature the Commission will: (a) By order
24 15 U.S.C. 78f(b)(5). of an order with a Discretionary Range approve or disapprove such proposed
25 15 U.S.C. 78k–1(a)(1). instruction while honoring the rule change, or (b) institute proceedings

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Document Created: 2018-02-21 09:34:52
Document Modified: 2018-02-21 09:34:52
Category		Regulatory Information
Collection		Federal Register
sudoc Class		AE 2.7: GS 4.107: AE 2.106:
Publisher		Office of the Federal Register, National Archives and Records Administration
Section		Notices
FR Citation		80 FR 12655