81 FR 11335 - Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees as They Apply to the Equity Options Platform

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 81, Issue 42 (March 3, 2016)

[Federal Register Volume 81, Number 42 (Thursday, March 3, 2016)]
[Notices]
[Pages 11335-11337]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2016-04634]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-77242; File No. SR-EDGX-2016-12]


Self-Regulatory Organizations; EDGX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Fees as They Apply to the Equity Options Platform

February 26, 2016.
    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 18, 2016, EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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 Exchange. The 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the fee schedule applicable 
to Members \5\ and non-members of the Exchange pursuant to EDGX Rules 
15.1(a) and (c) (``Fee Schedule'').
---------------------------------------------------------------------------

    \5\ The term ``Member'' is defined as ``any registered broker or 
dealer that has been admitted to membership in the Exchange.'' See 
Exchange Rule 1.5(n).
---------------------------------------------------------------------------

    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 
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
    The Exchange's current approach to routing fees is to set forth in 
a simple manner certain sub-categories of fees that approximate the 
cost of routing to other options exchanges based on the cost of 
transaction fees assessed by each venue as well as costs to the 
Exchange for routing (i.e., clearing fees, connectivity and other 
infrastructure costs, membership fees, etc.) (collectively, ``Routing 
Costs''). The Exchange then monitors the fees charged as compared to 
the costs of its routing services and adjusts its routing fees and/or 
sub-categories to ensure that the Exchange's fees do indeed result in

[[Page 11336]]

a rough approximation of overall Routing Costs, and are not 
significantly higher or lower in any area. The Exchange proposes to 
adopt a routing fee in connection with the launch of the new options 
exchange, ISE Mercury, LLC (``ISE Mercury'') consistent with this 
approach.
    The Exchange proposes to adopt fee code YC which would be appended 
to orders routed to ISE Mercury beginning February 16, 2016, which is 
the same date that ISE Mercury initiated trading.\6\ Orders that yield 
fee code YC would be charged a fee of $0.99 per contract. Proposed fee 
code YC would be applied to all orders routed to ISE Mercury regardless 
of the capacity of the order \7\ or whether the order is in a Penny 
Pilot Security \8\ or not.
---------------------------------------------------------------------------

    \6\ See SEC Approves ISE's Form 1 Application for Third Options 
Exchange, dated February 1, 2016, available at http://www.ise.com/press-room/press-releases/2016/february/ise-mercury-to-launch-on-february-16-2016/. The Exchange initially filed the proposed fee 
change on February 16, 2016 (SR-EDGX-2016-11). On February 18, 2016, 
the Exchange withdrew that filing and submitted this filing.
    \7\ Order capacities include Customer, Professional, Firm, 
Broker-Dealer, Joint Back Office, Market Maker, and Non-BATS Market 
Maker. As defined in the Exchange's Fee Schedule.
    \8\ As defined in the Exchange's Fee Schedule.
---------------------------------------------------------------------------

    The Exchange anticipates that the proposed fee structure will 
approximate the cost of routing orders to ISE Mercury. The Exchange 
also notes that the proposed fee for fee code YC is higher than the 
fees charged by ISE Mercury and is designed to approximate Routing 
Costs based on the highest rate ISE Mercury charges.\9\ As it has done 
historically in connection with the fee structure for routing to other 
options exchanges, the Exchange is proposing the charge set forth above 
to maintain a simple Fee Schedule with respect to routing fees that 
approximates the total cost of routing, including Routing Costs.
---------------------------------------------------------------------------

    \9\ ISE Mercury's standard rates range from a rebate of $0.18 to 
a fee of $0.90 per contract. See ISE Mercury Fee Notice dated 
February 5, 2016 available at http://www.ise.com/assets/mercury/
documents/OptionsExchange/legal/fee/2016/
ISE%20Mercury%20Fee%20Announcement$20160205.pdf.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\10\ in general, and 
furthers the objectives of Section 6(b)(4),\11\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and other persons using its 
facilities. As explained above, the Exchange generally attempts to 
approximate the cost of routing to other options exchanges, including 
other applicable costs to the Exchange for routing. While the proposed 
fee for fee code YC is higher than the fees charged by ISE Mercury, the 
Exchange believes it is reasonable as it takes into account Routing 
Costs based on the highest rate charged by ISE Mercury. The Exchange 
believes that a pricing model based on approximate Routing Costs is a 
reasonable, fair and equitable approach to pricing. Specifically, the 
Exchange believes that its proposal to adopt routing fees to ISE 
Mercury is fair, equitable and reasonable because the fees are 
generally an approximation of the anticipated cost to the Exchange for 
routing orders to ISE Mercury. The Exchange notes that routing through 
the Exchange is voluntary. The Exchange also believes that the proposed 
fee structure for orders routed to and executed at ISE Mercury is fair 
and equitable and not unreasonably discriminatory in that it applies 
equally to all Members.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

(B) Self-Regulatory Organization's Statement on Burden on Competition

    These proposed rule changes do not impose any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. The Exchange does not believe that any of these changes 
represent a significant departure from previous pricing offered by the 
Exchange or pricing offered by the Exchange's competitors. 
Additionally, Members may opt to disfavor the Exchange's pricing if 
they believe that alternatives offer them better value. Accordingly, 
the Exchange does not believe that the proposed changes will impair the 
ability of Members or competing venues to maintain their competitive 
standing in the financial markets. The Exchange does not believe that 
its proposed pricing for routing to ISE Mercury burdens competition, as 
such rates are intended to approximate the cost of routing to ISE 
Mercury. The Exchange notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels to be excessive or providers 
of routing services if they deem routing fee levels to be excessive. 
The Exchange believes that its proposal would not burden intramarket 
competition because the proposed rate would apply uniformly to all 
Members.

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

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from Members or other interested 
parties.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \12\ and paragraph (f) of Rule 19b-4 
thereunder.\13\ 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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2016-12 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-2016-12. 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

[[Page 11337]]

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 
such filing will also 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-2016-12 and should be submitted on or before March 
24, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-04634 Filed 3-2-16; 8:45 am]
 BILLING CODE 8011-01-P