80 FR 54638 - Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Rule 11.21(d), Relating to the Routing of Retail Orders

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 80, Issue 175 (September 10, 2015)

[Federal Register Volume 80, Number 175 (Thursday, September 10, 2015)]
[Notices]
[Pages 54638-54640]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2015-22739]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-75824; File No. SR-EDGX-2015-40]


Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Rule 11.21(d), Relating to the Routing of Retail Orders

September 3, 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 August 31, 2015, EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the Exchange. The Exchange 
has designated this proposal as a ``non-controversial'' proposed rule 
change pursuant to Section 19(b)(3)(A) of the Act \3\ and Rule 19b-
4(f)(6)(iii) thereunder,\4\ which renders it effective upon filing with 
the Commission. The Commission is publishing this notice 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\ 15 U.S.C. 78s(b)(3)(A).
    \4\ 17 CFR 240.19b-4(f)(6)(iii).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend Rule 11.21(d) to state that 
unless otherwise instructed by the Member,\5\ a Retail Order \6\ will 
be identified as Retail when routed to an away Trading Center, 
including an exchange that operates a retail liquidity program.
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    \5\ The term ``Member'' is defined as ``any registered broker or 
dealer that has been admitted to membership in the Exchange. A 
Member will have the status of a ``member'' of the Exchange as that 
term is defined in Section 3(a)(3) of the Act. Membership may be 
granted to a sole proprietor, partnership, corporation, limited 
liability company or other organization which is a registered broker 
or dealer pursuant to Section 15 of the Act, and which has been 
approved by the Exchange.'' See Exchange Rule 1.5(n).
    \6\ The term ``Retail Order'' ``(i) is an agency order or 
riskless principal order that meets the criteria of FINRA Rule 
5320.03 that originates from a natural person; (ii) is submitted to 
EDGX by a Member, provided that no change is made to the terms of 
the order; and (iii) does not originate from a trading algorithm or 
any other computerized methodology.'' See Exchange Rule 11.21(a).
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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

[[Page 54639]]

the Commission's Public Reference Room.

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

1. Purpose
    Exchange Rule 11.21 defines a Retail Order and sets forth the 
attestation requirements \7\ that Members must complete prior to 
sending Retail Orders to the Exchange. Rule 11.21(d) also provides that 
Members may designate orders as Retail Orders on an order-by-order 
basis or a port level basis by designating particular FIX ports as 
Retail Order Ports.\8\ Going forward, the Exchange proposes to identify 
Retail Orders as Retail when they are routed to an away Trading Center, 
including an exchange that operates a retail liquidity program.\9\ As 
amended, Rule 11.21(d) would state that, unless otherwise instructed by 
the Member, a Retail Order will be identified as Retail when routed to 
an away Trading Center. As stated above, Members may designate their 
orders as Retail in accordance with Rule 11.21(b) for purposes of order 
handling on the EDGX Book. Under the proposed rule change, Members 
would be able to instruct the Exchange to remove such Retail 
designation from their Retail Orders when such orders are routed to an 
away Trading Center.
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    \7\ Members must submit a signed written attestation, in a form 
prescribed by the Exchange, that they have implemented policies and 
procedures that are reasonably designed to ensure that substantially 
all orders designated by the Member as a ``Retail Order'' comply 
with the above requirements. See Exchange Rule 11.21(b).
    \8\ See Securities Exchange Act Release No. 68554 (December 31, 
2012), 78 FR 966 (January 7, 2013) (SR-EDGX-2012-48) (Notice of 
Filing and Immediate Effectiveness).
    \9\ Currently, BATS Y-Exchange, Inc. (``BYX''), the New York 
Stock Exchange, Inc. (``NYSE''), NYSE MKT LLC (``NYSE MKT''), NYSE 
Arca, Inc. (``NYSE Arca''), and the Nasdaq Stock Market OMX BX LLC 
(``Nasdaq OMX BX'') operate retail liquidity programs. See BYX Rule 
11.24, NYSE Rule 107C, NYSE MKT--Equities Rule 107C, NYSE Arca 
Equities Rule 7.44, and Nasdaq OMX BX Rule 4780. These exchange's 
also require their members to submit a signed written attestation, 
in a form prescribed by that exchange, that they have implemented 
policies and procedures that are reasonably designed to ensure that 
substantially all orders designated by the member as a ``Retail 
Order'' as defined by that exchange. Id. Each exchange would be 
required to file a proposed rule change with the Commission to amend 
its definition of ``Retail Order.'' To the extent the Exchange 
routes an order identified as Retail to participate in an exchange's 
retail liquidity program, it will ensure that it does so in 
compliance with that exchange's rules governing its retail liquidity 
program, including that the order satisfies that exchange's 
definition of ``Retail Order.''
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Implementation Date
    The Exchange proposes to implement the proposed rule change on or 
about September 10, 2015.\10\
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    \10\ The Exchange understands that implementation of the 
proposed rule change on September 10, 2015 is contingent upon the 
Commission waiving the 30-day operative delay. 17 CFR 240.19b-
4(f)(6)(iii).
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6(b) of the Act,\11\ in general, and furthers the 
objectives of Section 6(b)(5) of the Act,\12\ in particular, in that it 
is designed to prevent fraudulent and manipulative acts and practices, 
to promote just and equitable principles of trade, and to remove 
impediments to and perfect the mechanism of a free and open market and 
a national market system. The proposal promotes just and equitable 
principles of trade because enabling Members to identify their Retail 
Orders as Retail when they are routed to an away Trading Center, 
including exchanges that operate a retail liquidity program, would 
allow those orders to receive the best execution quality and potential 
price improvement. The proposal also promotes transparency by 
disseminating additional order information. In addition, providing 
Members the ability to elect that their routed Retail Order not be 
identified as Retail [sic] provides Member flexibility with regard to 
the handling of their Retail Orders by permitting them to elect that 
their Retail Order not be identified as Retail when routed to an away 
Trading Center.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(5).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes its proposed rule change would not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange believes the 
proposal would enhance competition for retail order flow by enabling 
Members to identify their Retail Orders as Retail when they are routed 
to an away Trading Center, including exchanges that operate a retail 
liquidity program.

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 Exchange has filed the proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \13\ and Rule 19b-4(f)(6) thereunder.\14\ 
Because the proposed rule change does not: (i) Significantly affect the 
protection of investors or the public interest; (ii) impose any 
significant burden on competition; and (iii) become operative for 30 
days from the date on which it was filed, or such shorter time as the 
Commission may designate, the proposed rule change has become effective 
pursuant to Section 19(b)(3)(A) of the Act and Rule 19b-4(f)(6) 
thereunder.\15\
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    \13\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \14\ 17 CFR 240.19b-4(f)(6).
    \15\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
give the Commission written notice of the Exchange's intent to file 
the proposed rule change, along with a brief description and text of 
the proposed rule change, at least five business days prior to the 
date of filing of the proposed rule change, or such shorter time as 
designated by the Commission. The Exchange has satisfied this 
requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally does 
not become operative for 30 days after the date of filing. However, 
Rule 19b-4(f)(6)(iii) permits the Commission to designate a shorter 
time if such action is consistent with the protection of investors and 
the public interest. The Exchange has asked the Commission to waive the 
30-day operative delay so that the proposal may become operative 
immediately upon filing. Waiver of the 30-day operative delay would 
permit the Exchange to identify Retail Orders as Retail when routed to 
an away Trading Center, including exchanges that operate a retail 
liquidity program, enabling the orders to receive potential price 
improvement. Based on the foregoing, the Commission believes that 
waiving the 30-day operative delay is consistent with the protection of

[[Page 54640]]

investors and the public interest.\16\ The Commission hereby grants the 
Exchange's request and designates the proposal operative upon filing.
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    \16\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    At any time within 60 days of the filing of the 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. If the Commission 
takes such action, the Commission shall institute proceedings to 
determine whether the proposed rule should be approved or 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 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 [email protected]. Please include 
File Number SR-EDGX-2015-40 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.

All submissions should refer to File Number SR-EDGX-2015-40. 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-2015-40 and 
should be submitted on or before October 1, 2015.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-22739 Filed 9-9-15; 8:45 am]
BILLING CODE 8011-01-P