[Federal Register Volume 78, Number 181 (Wednesday, September 18, 2013)]
[Notices]
[Pages 57429-57431]
[FR Doc No: 2013-22650]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-70383; File No. SR-EDGA-2013-27]

Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend the
EDGA Exchange, Inc. Fee Schedule

September 12, 2013.
    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 September 3, 2013, 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. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change

    The Exchange proposes to amend its fees and rebates applicable to
Members \3\ of the Exchange pursuant to EDGA Rule 15.1(a) and (c)
(``Fee Schedule'') to: (i) decrease the rebate for orders yielding Flag
A; and (ii) increase the rebate for orders yielding Flag C. All of the
changes described herein are applicable to EDGA Members. The text of
the proposed rule change is available on the Exchange's Internet Web
site at www.directedge.com, at the Exchange's principal office, and at
the Public Reference Room of the Commission.
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    \3\ ``Member'' is defined as ``any registered broker or dealer,
or any person associated with a 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.'' See Exchange Rule 1.5(n).
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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 self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
has prepared summaries, set forth in

sections A, B and C below, of the most significant aspects of such
statements.

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

1. Purpose
    The Exchange proposes to amend its Fee Schedule to: (i) decrease
the rebate for orders yielding Flag A; and (ii) increase the rebate for
orders yielding Flag C.
Flag A
    In securities priced at or above $1.00, the Exchange currently
provides a rebate of $0.0020 per share for Members' orders that yield
Flag A, which routes to the NASDAQ Stock Market LLC (``Nasdaq'') and
adds liquidity. The Exchange proposes to amend its Fee Schedule to
decrease this rebate to $0.0015 per share for Members' orders that
yield Flag A. The proposed change represents a pass through of the rate
that Direct Edge ECN LLC (d/b/a DE Route) (``DE Route''), the
Exchange's affiliated routing broker-dealer, is rebated for routing
orders in Tape C securities to Nasdaq when it does not qualify for a
volume tiered rebate. When DE Route routes to Nasdaq, it is rebated a
standard rate of $0.0015 per share for Tape C securities.\4\ DE Route
will pass through this rate on Nasdaq to the Exchange and the Exchange,
in turn, will pass through this rate to its Members. The Exchange notes
that the proposed change is in response to Nasdaq's September 2013 fee
change where Nasdaq decreased the rebate it provides its customers,
such as DE Route, from a rebate of $0.0020 per share to a rebate of
$0.0015 per share for orders in Tape C securities that are routed to
Nasdaq.\5\
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    \4\ The Exchange notes that to the extent DE Route does or does
not achieve any volume tiered discount on Nasdaq, its rate for Flag
A will not change. The Exchange further notes that, due to billing
system limitations that do not allow for separate rates by tape, it
will pass through the lesser rebate of $0.0015 per share for all
Tapes A, B & C securities.
    \5\ See Nasdaq, Price List--Trading Connectivity, http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2#rebates
(offering a standard, non-tiered rebate of $0.0015 per share for
Tape C Securities). See also File No. SR-NASDAQ-2013-114.
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Flag C
    In securities priced at or above $1.00, the Exchange currently
provides a rebate of $0.0010 per share for Members' orders that yield
Flag C, which routes to Nasdaq OMX BX, Inc. (``BX''). The Exchange
proposes to amend its Fee Schedule to increase this rebate to $0.0011
per share for Members' orders that yield Flag C. The proposed change
represents a pass through of the rate that DE Route is rebated when it
achieves a volume tiered rebate on BX by routing orders to BX. When DE
Route routes to BX, it is rebated a volume tiered rate of $0.0011 per
share.\6\ DE Route will pass through this rate on BX to the Exchange
and the Exchange, in turn, will pass through this rate to its Members.
The Exchange notes that the proposed change is in response to BX's
September 2013 fee change where BX increased the rebate it provides its
customers, such as DE Route, from a rebate of $0.0010 per share to a
rebate of $0.0011 per share for orders that are routed to BX.\7\
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    \6\ The Exchange notes that to the extent DE Route does or does
not achieve any volume tiered increased rebate on BX, its rate for
Flag C will not change.
    \7\ See BX, BX Pricing List--Trading & Connectivity, http://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing (offering a rebate
to remove liquidity of $0.0011 per share for MPIDs that add an
average of 25,000 but less than 1 million shares per day). See also
File No. SR-BX-2013-051.
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Implementation Date
    The Exchange proposes to implement these amendments to its Fee
Schedule on September 3, 2013.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\8\ in general, and
furthers the objectives of Section 6(b)(4),\9\ 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.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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Flag A
    The Exchange believes that its proposal to decrease the pass
through rebate for Members' orders that yield Flag A from $0.0020 to
$0.0015 per share represents an equitable allocation of reasonable
dues, fees, and other charges among Members and other persons using its
facilities because the Exchange does not levy additional fees or offer
additional rebates for orders that it routes to Nasdaq through DE
Route. Prior to Nasdaq's September 2013 fee change, Nasdaq provided DE
Route a rebate of $0.0020 per share for orders in all tapes yielding
Flag A, which DE Route passed through to the Exchange and the Exchange
passed through to its Members. In September 2013, Nasdaq decreased the
standard rebate it provides its customers, such as DE Route, from a
rebate of $0.0020 per share to a rebate of $0.0015 per share for orders
that are routed to Nasdaq in Tape C securities.\10\ Therefore, the
Exchange believes that the proposed change in Flag A from a rebate of
$0.0020 per share to a rebate of $0.0015 per share is equitable and
reasonable because it accounts for the pricing changes on Nasdaq. In
addition, the proposal allows the Exchange to continue to charge its
Members a pass-through rate for orders that are routed to Nasdaq. The
Exchange notes that routing through DE Route is voluntary. Lastly, the
Exchange also believes that the proposed amendment is non-
discriminatory because it applies uniformly to all Members.
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    \10\ See Nasdaq, Price List--Trading Connectivity, http://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2#rebates
(offering a standard, non-tiered rebate of $0.0015 per share for
Tape C Securities). See also File No. SR-NASDAQ-2013-114.
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Flag C
    The Exchange believes that its proposal to decrease the pass
through rebate for Members' orders that yield Flag C from $0.0010 to
$0.0011 per share represents an equitable allocation of reasonable
dues, fees, and other charges among Members and other persons using its
facilities because the Exchange does not levy additional fees or offer
additional rebates for orders that it routes to BX through DE Route.
Prior to BX's September 2013 fee change, BX provided DE Route a rebate
of $0.0010 per share for orders yielding Flag C, which DE Route passed
through to the Exchange and the Exchange passed through to its Members.
In September 2013, BX increased the rebate it provides its customers,
such as DE Route, from a rebate of $0.0010 per share to a rebate of
$0.0011 per share for orders that are routed to BX and qualify for a
volume tiered rebate.\11\ Therefore, the Exchange believes that the
proposed change in Flag C from a rebate of $0.0010 per share to a
rebate of $0.0011 per share is equitable and reasonable because it
accounts for the pricing changes on BX. In addition, the proposal
allows the Exchange to continue to charge its Members a pass-through
rate for orders that are routed to BX. The Exchange notes that routing
through DE Route is voluntary. Lastly, the Exchange also believes that
the proposed amendment is non-discriminatory because it applies
uniformly to all Members.
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    \11\ See BX, BX Pricing List--Trading & Connectivity, http://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing (offering a rebate
to remove liquidity of $0.0011 per share for MPIDs that add an
average of 25,000 but less than 1 million shares per day). See also
File No. SR-BX-2013-051.

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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 EDGA'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.
Flag A
    The Exchange believes that its proposal to pass through a rebate of
$0.0015 per share for Members' orders that yield Flag A would increase
intermarket competition because it offers customers an alternative
means to route to Nasdaq for the same price as entering orders in Tape
C securities on Nasdaq directly. The Exchange believes that its
proposal would not burden intramarket competition because the proposed
rate would apply uniformly to all Members.
Flag C
    The Exchange believes that its proposal to pass through a rebate of
$0.0011 per share for Members' orders that yield Flag C would increase
intermarket competition because it offers customers an alternative
means to route to BX for the same price as entering orders on BX
directly, provided those orders would have qualified for a volume based
increased rebate. 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 Rule 19b-4(f)(2) \13\ thereunder. At
any time within 60 days of the filing of such 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.
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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 17 CFR 240.19b-4 (f)(2).
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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_ADDRESS>Please include
File Number SR-EDGA-2013-27 on the subject line.

Paper Comments

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

All submissions should refer to File Number SR-EDGA-2013-27. 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-EDGA-2013-27 and should be
submitted on or before October 9, 2013.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-22650 Filed 9-17-13; 8:45 am]
BILLING CODE 8011-01-P


charged by other options exchanges.'' The SIG letter challenges this
assertion is an ``apples to oranges'' comparison because NYSE American
and NYSE Arca based their rates on the number of options issued to the
member and not trading volume, like the exchange does. In fact, the
number of options traded by a member of NYSE American or NYSE Arca is
an appropriate proxy for trading volume as the more options issued to
the member would result in higher volumes traded by that member. Firms
that trade more liquid options generate increased message traffic and
greater pull on exchange resources. Therefore, comparing options traded
to trading volume is an ``apples to apples'' comparison.
    The Exchange proposes a range of fees from $500 to $6,000 per month
depending on trading volume and the type of interface that is utilized
by the Member. These rates are undoubtedly similar to or lower than the
rates charged by NYSE Arca and NYSE American. As of December 20, 2021,
the Exchange maintained a market share of approximately 4.03%.\94\
Among Exchanges with similar market share, the Exchange's proposed
Trading Permit Fees remain similar to or lower than fees charged by
other options exchanges with comparable market share for access/
membership fees.\95\ The proposed rates are also lower than those of
its affiliates, MIAX and MIAX

Emerald, which remain in effect today.\96\
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    \94\ See supra note 77.
    \95\ See supra notes 26-30, and accompanying table. The below
market share numbers are as of December 20, 2021. Id. Cboe C2 had a
market share of 3.72% and charges a monthly Access Fee of $5,000 for
market makers and $1,000 per month for an additional Electronic
Access Permit regardless of trading volume or options traded. See
supra note 28. Nasdaq ISE had a market share of 6.95% and charges a
monthly Access Fee to Primary Market Makers of $5,000 and
Competitive Market Maker of $2,500 regardless of trading volume or
options traded. See supra note 77.
    \96\ See MIAX Fee Schedule, Section 3(b); MIAX Emerald Fee
Schedule, Section 3(b).
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    The SIG Letter states that ``[the Exchange] offers no information
about the capacity and resource costs of access to the other exchanges
or any other basis to support the reasonability of those fees, let
alone compare such costs to those of MIAX Pearl.'' \97\ This statement
is misleading as SIG should be aware that the Exchange does not have
access to this information and when it asked SIG to assist the Exchange
in better understanding the access structure of other exchanges, SIG
refused.
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    \97\ See SIG Letter, supra note 7.
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    The SIG Letter further asserts that the Exchange ``has not
established that the other exchange fees are reasonable, nor that this
would mean that the MIAX Pearl fees are reasonable as well.\98\ SIG
should be aware that it is not the Exchange's obligation to justify why
another exchange's fees are reasonable and it is presumed that such
fees were deemed reasonable by the Commission when filed by the
exchange that proposed said fee. If SIG felt another exchange's fees
were or are unreasonable, they are free to share that concern with the
Commission and were provided an opportunity to submit comment letter on
those earlier proposals from other exchanges. It is the Exchange's
responsibility to show that its own proposed fee change is reasonable
and consistent with the Act, and that assertion is amply supported by
the statements made in this Item 5 and elsewhere herein.
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    \98\ See id.
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The Proposed Fees Are Consistent With Section 6(b)(4) of the Act
Because the Proposed Fees Will Not Result in Excessive Pricing or
Supra-Competitive Profit
    The Exchange has provided ample data that the proposed fees would
not result in excessive pricing or a supra-competitive profit. In this
Third [sic] Proposed Rule Change, the Exchange no longer utilizes a
comparison of its profit margin to that of other options exchanges as a
basis that the Proposed Access Fees are reasonable. Rather, the
Exchange has enhanced its cost and revenue analysis and data in this
Third [sic] Proposed Rule Change to further justify that the Proposed
Access Fees are reasonable in accordance with the Commission Staff's
Guidance. Therefore, the Exchange believes it is no longer necessary to
respond to this portion of the SIG Letter.
Recoupment of Exchange Infrastructure Costs
    Nowhere in this proposal or in the First Proposed Rule Change did
the Exchange assert that it benefits competition to allow a new
exchange entrant to recoup their infrastructure costs. Rather, the
Exchange asserts above that its ``proposed fees are reasonable,
equitably allocated and not unfairly discriminatory because the
Exchange, and its affiliates, are still recouping the initial
expenditures from building out their systems while the legacy exchanges
have already paid for and built their systems.'' The Exchange no longer
makes this assertion in this filing and, therefore, does not believe is
it necessary to respond to SIG's assertion here.

III. Suspension of the Proposed Rule Change

    Pursuant to Section 19(b)(3)(C) of the Act,\99\ at any time within
60 days of the date of filing of a proposed rule change pursuant to
Section 19(b)(1) of the Act,\100\ the Commission summarily may
temporarily suspend the change in the rules of a self-regulatory
organization (``SRO'') 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.
As discussed below, the Commission believes a temporary suspension of
the proposed rule change is necessary and appropriate to allow for
additional analysis of the proposed rule change's consistency with the
Act and the rules thereunder.
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    \99\ 15 U.S.C. 78s(b)(3)(C).
    \100\ 15 U.S.C. 78s(b)(1).
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    As the Exchange further details above, the Exchange first filed a
proposed rule change proposing fee changes as proposed herein on July
1, 2021, with the proposed fee changes being immediately effective.
That proposal, SR-PEARL-2021-32, was published for comment in the
Federal Register on July 15, 2021.\101\ On August 27, 2021, pursuant to
Section 19(b)(3)(C) of the Act, the Commission: (1) Temporarily
suspended the proposed rule change (SR-PEARL-2021-32) and (2)
instituted proceedings to determine whether to approve or disapprove
the proposed rule change.\102\ On October 12, 2021, the Exchange
withdrew SR-PEARL-2021-32. On November 1, 2021, the Exchange filed a
proposed rule change proposing fee changes as proposed herein. That
proposal, SR-PEARL-2021-54, was published for comment in the Federal
Register on November 17, 2021.\103\ On December 20, 2021, the Exchange
withdrew SR-PEARL-2021-54 and filed a proposed rule change proposing
fee changes as proposed herein on December 20, 2021. That filing, SR-
PEARL-2021-59,\104\ was published for comment in the Federal Register
on January 10, 2022.\105\ On February 15, 2022 the Exchange withdrew
SR-PEARL-2021-59 and filed the instant filing, which is substantially
similar.
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    \101\ See Securities Exchange Act Release No. 92366 (July 9,
2021), 86 FR 37379 (SR-PEARL-2021-32). The Commission received one
comment letter on that proposal. Comment for SR-PEARL-2021-32 can be
found at: https://www.sec.gov/comments/sr-pearl-2021-32/srpearl202132.htm.
    \102\ See Securities Exchange Act Release No. 92797 (August 27,
2021), 86 FR 49399 (September 2, 2021).
    \103\ See Securities Exchange Act Release No. 93555 (November
10, 2021), 86 FR 64254 (November 17, 2021) (SR-PEARL-2021-54).
    \104\ See text accompanying supra note 10.
    \105\ See Securities Exchange Act Release No. 93895 (January 4,
2022), 87 FR 1217 (January 10, 2022) (SR-PEARL-2021-59).
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    When exchanges file their proposed rule changes with the
Commission, including fee filings like the Exchange's present proposal,
they are required to provide a statement supporting the proposal's
basis under the Act and the rules and regulations thereunder applicable
to the exchange.\106\ The instructions to Form 19b-4, on which
exchanges file their proposed rule changes, specify that such statement
``should be sufficiently detailed and specific to support a finding
that the proposed rule change is consistent with [those]
requirements.'' \107\
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    \106\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory
Organization's Statement of the Purpose of, and Statutory Basis for,
the Proposed Rule Change'').
    \107\ Id.
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    Among other things, exchange proposed rule changes are subject to
Section 6 of the Act, including Sections 6(b)(4), (5), and (8), which
requires the rules of an exchange to: (1) Provide for the equitable
allocation of reasonable fees among members, issuers, and other persons
using the exchange's facilities; \108\ (2) perfect the mechanism of a
free and open market and a national market system, protect investors
and the public interest, and not permit unfair discrimination between
customers, issuers, brokers, or dealers; \109\ and (3) not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.\110\
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    \108\ 15 U.S.C. 78f(b)(4).
    \109\ 15 U.S.C. 78f(b)(5).
    \110\ 15 U.S.C. 78f(b)(8).
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    In temporarily suspending the Exchange's fee change, the Commission
intends to further consider whether the proposal to remove certain
credits and

increase the monthly Trading Permits fees are consistent with the
statutory requirements applicable to a national securities exchange
under the Act. In particular, the Commission will consider whether the
proposed rule change satisfies the standards under the Act and the
rules thereunder requiring, among other things, that an exchange's
rules provide for the equitable allocation of reasonable fees among
members, issuers, and other persons using its facilities; not be
designed to permit unfair discrimination between customers, issuers,
brokers or dealers; and not impose any burden on competition not
necessary or appropriate in furtherance of the purposes of the
Act.\111\
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    \111\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
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    Therefore, the Commission finds that it is appropriate in the
public interest, for the protection of investors, and otherwise in
furtherance of the purposes of the Act, to temporarily suspend the
proposed rule change.\112\
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    \112\ For purposes of temporarily suspending the proposed rule
change, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change

    The Commission is instituting proceedings pursuant to Sections
19(b)(3)(C) \113\ and 19(b)(2)(B) \114\ of the Act to determine whether
the Exchange's proposed rule change should be approved or disapproved.
Institution of such proceedings is appropriate at this time in view of
the legal and policy issues raised by the proposed rule change.
Institution of proceedings does not indicate that the Commission has
reached any conclusions with respect to any of the issues involved.
Rather, as described below, the Commission seeks and encourages
interested persons to provide comments on the proposed rule change to
inform the Commission's analysis of whether to approve or disapprove
the proposed rule change.
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    \113\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily
suspends a proposed rule change, Section 19(b)(3)(C) of the Act
requires that the Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule change should be
approved or disapproved.
    \114\ 15 U.S.C. 78s(b)(2)(B).
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    Pursuant to Section 19(b)(2)(B) of the Act,\115\ the Commission is
providing notice of the grounds for possible disapproval under
consideration. The Commission is instituting proceedings to allow for
additional analysis of whether the Exchange has sufficiently
demonstrated how the proposed rule change is consistent with Sections
6(b)(4),\116\ 6(b)(5),\117\ and 6(b)(8) \118\ of the Act. Section
6(b)(4) of the Act requires that the rules of a national securities
exchange provide for the equitable allocation of reasonable dues, fees,
and other charges among its members and issuers and other persons using
its facilities. Section 6(b)(5) of the Act requires that the rules of a
national securities exchange be designed, among other things, 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 and, in general, to protect investors and the public
interest, and not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers. Section 6(b)(8) of the Act
requires that the rules of a national securities exchange not impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
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    \115\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act
also provides that proceedings to determine whether to disapprove a
proposed rule change must be concluded within 180 days of the date
of publication of notice of the filing of the proposed rule change.
See id. The time for conclusion of the proceedings may be extended
for up to 60 days if the Commission finds good cause for such
extension and publishes its reasons for so finding, or if the
exchange consents to the longer period. See id.
    \116\ 15 U.S.C. 78f(b)(4).
    \117\ 15 U.S.C. 78f(b)(5).
    \118\ 15 U.S.C. 78f(b)(8).
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    The Commission asks that commenters address the sufficiency of the
Exchange's statements in support of the proposal, in addition to any
other comments they may wish to submit about the proposed rule change.
In particular, the Commission seeks comment on the following aspects of
the proposal and asks commenters to submit data where appropriate to
support their views:
    1. Cost Estimates and Allocation. The Exchange states that it is
not asserting that the Proposed Access Fees are constrained by
competitive forces, but rather set forth a ``cost-plus model,''
employing a ``conservative methodology'' that ``strictly considers only
those costs that are most clearly directly related to the provision and
maintenance of Trading Permits.'' \119\ Setting forth its costs in
providing the Proposed Access Fees, and as summarized in greater detail
above, the Exchange projects $844,741 in aggregate annual estimated
costs for 2021 as the sum of: (1) $188,815 in third-party expenses paid
in total to Equinix (8% of the total applicable expense) for data
center services; Zayo Group Holdings, for network services (4% of the
total applicable expense); SFTI for connectivity support, Thompson
Reuters, NYSE, Nasdaq, and Internap and others (3% of the total
applicable expense) for content, connectivity services, and
infrastructure services; and various other hardware and software
providers (5% of the total applicable expense) supporting the
production environment, and (2) $655,925 in internal expenses,
allocated to (a) employee compensation and benefit costs ($549,824,
approximately 6% of the Exchange's total applicable employee
compensation and benefits expense); (b) depreciation and amortization
($66,316, approximately 5% of the Exchange's total applicable
depreciation and amortization expense); and (c) occupancy costs
($39,775 approximately 8% of the Exchange's total applicable occupancy
expense). Do commenters believe that the Exchange has provided
sufficient detail about how it determined which costs are most clearly
directly associated with providing and maintaining the Proposed Access
Fees? The Exchange describes a ``proprietary'' process involving all
Exchange department heads, including the finance department and
numerous meetings between the Exchange's Chief Information Officer,
Chief Financial Officer, Head of Strategic Planning and Operations,
Chief Technology Officer, various members of the Legal Department, and
other group leaders, but do not specify further what principles were
applied in making these determinations or arriving at particular
allocations. Do commenters believe further explanation is necessary?
For employee compensation and benefit costs, for example, the Exchange
calculated an allocation of employee time in several departments,
including Technology, Back Office, Systems Operations, Networking,
Business Strategy Development, Trade Operations, Finance, and Legal,
but do not provide the job titles and salaries of persons whose time
was accounted for, or explain the methodology used to determine how
much of an employee's time is devoted to that specific activity. What
are commenters' views on whether the Exchange has provided sufficient
detail on the identity and nature of services provided by third
parties? Across all of the Exchange's projected costs, what are
commenters' views on whether the Exchange has provided sufficient
detail on the elements that go into Trading Permit costs, including how
shared costs are

allocated and attributed to Trading Permit expenses, to permit an
independent review and assessment of the reasonableness of purported
cost-based fees and the corresponding profit margin thereon? Should the
Exchange be required to identify for what services or fees the
remaining percentage of un-allocated expenses are attributable to? Do
commenters believe that the costs projected for 2021 are generally
representative of expected costs going forward (to the extent
commenters consider 2021 to be a typical or atypical year), or should
an exchange present an estimated range of costs with an explanation of
how profit margins could vary along the range of estimated costs?
Should the Exchange use cost projections or actual costs estimated for
2021 in a filing made in 2022, or make cost projections for 2022?
---------------------------------------------------------------------------

    \119\ See supra Section II.A.2.
---------------------------------------------------------------------------

    2. Revenue Estimates and Profit Margin Range. The Exchange provides
a single monthly revenue figure as the basis for calculating the profit
margin of 24%. Do commenters believe this is reasonable? If not, why
not? The Exchange states that their proposed fee structure is
``designed to cover its costs with a limited return in excess of such
costs,'' and that ``revenue and associated profit margin [ ] are not
solely intended to cover the costs associated with providing services
subject to the proposed fees,'' and believes that a 24% margin is a
limited return over such costs.\120\ The profit margin is also
dependent on the accuracy of the cost projections which, if inflated
(intentionally or unintentionally), may render the projected profit
margin meaningless. The Exchange acknowledges that this margin may
fluctuate from month to month due to changes in the number of Trading
Permits purchased, and that costs may increase. They also state that
the number of Trading Permits has not materially changed over the prior
months and so the months that the Exchange has used as a baseline to
perform its assessment are representative of reasonably anticipated
costs and expenses.\121\ The Exchange does not account for the
possibility of cost decreases, however. What are commenters' views on
the extent to which actual costs (or revenues) deviate from projected
costs (or revenues)? Do commenters believe that the Exchange's
methodology for estimating the profit margin is reasonable? Should the
Exchange provide a range of profit margins that they believe are
reasonably possible, and the reasons therefor?
---------------------------------------------------------------------------

    \120\ See supra Section II.A.2.
    \121\ See id.
---------------------------------------------------------------------------

    3. Reasonable Rate of Return. Do commenters agree with the Exchange
that its expected 24% profit margin would constitute a reasonable rate
of return over cost for Trading Permits? If not, what would commenters
consider to be a reasonable rate of return and/or what methodology
would they consider to be appropriate for determining a reasonable rate
of return? What are commenters' views regarding what factors should be
considered in determining what constitutes a reasonable rate of return
for Trading Permits? Do commenters believe it relevant to an assessment
of reasonableness that the Exchange's proposed fees for Trading
Permits, even at the highest tier, are lower than those of other
options exchanges to which the Exchange has compared the Proposed
Access Fees? Should an assessment of reasonable rate of return include
consideration of factors other than costs; and if so, what factors
should be considered, and why?
    4. Periodic Reevaluation. The Exchange has addressed whether it
believes a material deviation from the anticipated profit margin would
warrant the need to make a rule filing pursuant to Section 19(b) of the
Act to increase or decrease the fees accordingly, stating that ``[a]ny
requirement that an exchange should conduct a periodic re-evaluation on
a set timeline of its cost justification and amend its fees accordingly
should be established by the Commission holistically, applied to all
exchanges and not just pending fee proposals, such as this filing,''
and that ``[i]n order to be fairly applied, such a mandate should be
applied to existing market data fees as well.'' \122\ In light of the
impact that the number of subscribers has on Trading Permit profit
margins, and the potential for costs to decrease (or increase) over
time, what are commenters' views on the need for exchanges to commit to
reevaluate, on an ongoing and periodic basis, their cost-based Trading
Permit fees to ensure that they stay in line with their stated
profitability target and do not become unreasonable over time, for
example, by failing to adjust for efficiency gains, cost increases or
decreases, and changes in subscribers? How formal should that process
be, how often should that reevaluation occur, and what metrics and
thresholds should be considered? How soon after a new Trading Permit
fee change is implemented should an exchange assess whether its
subscriber estimates were accurate and at what threshold should an
exchange commit to file a fee change if its estimates were inaccurate?
Should an initial review take place within the first 30 days after a
Trading Permit fee is implemented? 60 days? 90 days? Some other period?
---------------------------------------------------------------------------

    \122\ See supra Section II.A.2.
---------------------------------------------------------------------------

    5. Tiered Structure for Trading Permits. The Exchange states that
proposed tiered-pricing structure is reasonable, fair, equitable, and
not unfairly discriminatory because it is the model adopted by the
Exchange when it launched operations for its Trading Permit fees, and
further, that the amount of the fee is directly related to the Member
or non-Member's TCV resulting in higher fees for greater TCV.\123\ What
are commenters' views on the adequacy of the information the Exchange
provides regarding the proposed differentials in fees? Do commenters
believe that the proposed price differences are supported by the
Exchange's assertions that it set the level of each proposed new fee in
a manner that it equitable and not unfairly discriminatory?
---------------------------------------------------------------------------

    \123\ See id.
---------------------------------------------------------------------------

    Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the Exchange
Act and the rules and regulations issued thereunder . . . is on the
[SRO] that proposed the rule change.'' \124\ The description of a
proposed rule change, its purpose and operation, its effect, and a
legal analysis of its consistency with applicable requirements must all
be sufficiently detailed and specific to support an affirmative
Commission finding,\125\ and any failure of an SRO to provide this
information may result in the Commission not having a sufficient basis
to make an affirmative finding that a proposed rule change is
consistent with the Act and the applicable rules and regulations.\126\
Moreover, ``unquestioning reliance'' on an SRO's representations in a
proposed rule change would not be sufficient to justify Commission
approval of a proposed rule change.\127\
---------------------------------------------------------------------------

    \124\ 17 CFR 201.700(b)(3).
    \125\ See id.
    \126\ See id.
    \127\ See Susquehanna Int'l Group, LLP v. Securities and
Exchange Commission, 866 F.3d 442, 446-47 (D.C. Cir. 2017)
(rejecting the Commission's reliance on an SRO's own determinations
without sufficient evidence of the basis for such determinations).
---------------------------------------------------------------------------

    The Commission believes it is appropriate to institute proceedings
to allow for additional consideration and comment on the issues raised
herein, including as to whether the proposal is consistent with the
Act, any potential comments or supplemental information

provided by the Exchange, and any additional independent analysis by
the Commission.

V. Commission's Solicitation of Comments

    The Commission requests written views, data, and arguments with
respect to the concerns identified above as well as any other relevant
concerns. In particular, the Commission invites the written views of
interested persons concerning whether the proposal is consistent with
Sections 6(b)(4), 6(b)(5), and 6(b)(8), or any other provision of the
Act, or the rules and regulations thereunder. The Commission asks that
commenters address the sufficiency and merit of the Exchange's
statements in support of the proposal, in addition to any other
comments they may wish to submit about the proposed rule change.
Although there do not appear to be any issues relevant to approval or
disapproval that would be facilitated by an oral presentation of views,
data, and arguments, the Commission will consider, pursuant to Rule
19b-4, any request for an opportunity to make an oral
presentation.\128\
---------------------------------------------------------------------------

    \128\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by an SRO.
See Securities Acts Amendments of 1975, Report of the Senate
Committee on Banking, Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------

    Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by March 18, 2022. Any person who wishes to file a rebuttal
to any other person's submission must file that rebuttal by April 1,
2022.
    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 No. SR-PEARL-2022-05 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-PEARL-2022-05. 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 website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-PEARL-2022-05 and should be submitted on
or before March 18, 2022. Rebuttal comments should be submitted by
April 1, 2022.

VI. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(3)(C) of the
Act,\129\ that File Numbers SR-PEARL-2022-05 be, and hereby is,
temporarily suspended. In addition, the Commission is instituting
proceedings to determine whether the proposed rule change should be
approved or disapproved.
---------------------------------------------------------------------------

    \129\ 15 U.S.C. 78s(b)(3)(C).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\130\
---------------------------------------------------------------------------

    \130\ 17 CFR 200.30-3(a)(12), (57) and (58).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-03965 Filed 2-24-22; 8:45 am]
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[Federal Register Volume 77, Number 218 (Friday, November 9, 2012)]
[Notices]
[Page 67380]
[FR Doc No: 2012-27368]

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DEPARTMENT OF HEALTH AND HUMAN SERVICES

Food and Drug Administration

[Docket No. FDA-2012-N-0001]

Anesthetic and Analgesic Drug Products Advisory Committee; Notice
of Meeting

AGENCY: Food and Drug Administration, HHS.

ACTION: Notice.

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    This notice announces a forthcoming meeting of a public advisory
committee of the Food and Drug Administration (FDA). The meeting will
be open to the public.
    Name of Committee: Anesthetic and Analgesic Drug Products Advisory
Committee.
    General Function of the Committee: To provide advice and
recommendations to the Agency on FDA's regulatory issues.

DATES: Date and Time: The meeting will be held on December 7, 2012,
from 8 a.m. to 5 p.m.
    Location: FDA White Oak Campus, 10903 New Hampshire Ave., Building
31 Conference Center, the Great Room (rm. 1503), Silver Spring, MD
20992-0002. Information regarding special accommodations due to a
disability, visitor parking, and transportation may be accessed at:
http://www.fda.gov/AdvisoryCommittees/default.htm; under the heading
``Resources for You,'' click on ``Public Meetings at the FDA White Oak
Campus.'' Please note that visitors to the White Oak Campus must enter
through Building 1.
    Contact Person: Philip A. Bautista, Center for Drug Evaluation and
Research, Food and Drug Administration, 10903 New Hampshire Ave., Bldg.
31, rm. 2417, Silver Spring, MD 20993-0002,<PHONE_NUMBER>, FAX: 301-847-
8533, email<EMAIL_ADDRESS>or FDA Advisory Committee Information
Line, 1-800-741-8138<PHONE_NUMBER> in the Washington, DC area). A
notice in the Federal Register about last minute modifications that
impact a previously announced advisory committee meeting cannot always
be published quickly enough to provide timely notice. Therefore, you
should always check the Agency's Web site at http://www.fda.gov/AdvisoryCommittees/default.htm and scroll down to the appropriate
advisory committee meeting link, or call the advisory committee
information line to learn about possible modifications before coming to
the meeting.
    Agenda: The committee will discuss the risks and benefits of new
drug application (NDA) 202880, by Zogenix Inc., for hydrocodone
bitartrate extended-release capsules (proposed tradename ZOHYDRO ER),
an opioid analgesic medication for the management of moderate to severe
chronic pain when a continuous, around-the-clock opioid analgesic is
needed for an extended period of time. This formulation of hydrocodone
bitartrate extended-release capsules represents the first single-entity
(i.e., containing no other active pharmaceutical ingredients, such as
acetaminophen or ibuprofen) hydrocodone-containing drug product. It
will be formulated in dose strengths up to 50 milligrams, and
administered twice daily (i.e., every 12 hours). The committee will be
asked to determine whether the benefit-risk assessment of this product
favors its approval for marketing.
    FDA intends to make background material available to the public no
later than 2 business days before the meeting. If FDA is unable to post
the background material on its Web site prior to the meeting, the
background material will be made publicly available at the location of
the advisory committee meeting, and the background material will be
posted on FDA's Web site after the meeting. Background material is
available at http://www.fda.gov/AdvisoryCommittees/Calendar/default.htm. Scroll down to the appropriate advisory committee meeting
link.
    Procedure: Interested persons may present data, information, or
views, orally or in writing, on issues pending before the committee.
Written submissions may be made to the contact person on or before
November 23, 2012. Oral presentations from the public will be scheduled
between approximately 1 p.m. and 2:30 p.m. Those individuals interested
in making formal oral presentations should notify the contact person
and submit a brief statement of the general nature of the evidence or
arguments they wish to present, the names and addresses of proposed
participants, and an indication of the approximate time requested to
make their presentation on or before November 14, 2012. Time allotted
for each presentation may be limited. If the number of registrants
requesting to speak is greater than can be reasonably accommodated
during the scheduled open public hearing session, FDA may conduct a
lottery to determine the speakers for the scheduled open public hearing
session. The contact person will notify interested persons regarding
their request to speak by November 15, 2012.
    Persons attending FDA's advisory committee meetings are advised
that the Agency is not responsible for providing access to electrical
outlets.
    FDA welcomes the attendance of the public at its advisory committee
meetings and will make every effort to accommodate persons with
physical disabilities or special needs. If you require special
accommodations due to a disability, please contact Philip Bautista at
least 7 days in advance of the meeting.
    FDA is committed to the orderly conduct of its advisory committee
meetings. Please visit our Web site at http://www.fda.gov/AdvisoryCommittees/AboutAdvisoryCommittees/ucm111462.htm for procedures
on public conduct during advisory committee meetings.
    Notice of this meeting is given under the Federal Advisory
Committee Act (5 U.S.C. app. 2).

    Dated: November 5, 2012.
Jill Hartzler Warner,
Acting Associate Commissioner for Special Medical Programs.
[FR Doc. 2012-27368 Filed 11-8-12; 8:45 am]
BILLING CODE 4160-01-P