Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Physical Port Fees for EDGX, 28884-28886 [2018-13299]

Download as PDF 28884 Federal Register / Vol. 83, No. 120 / Thursday, June 21, 2018 / Notices 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 offices 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–NYSE–2018–28, and should be submitted on or before July 12, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.56 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–13303 Filed 6–20–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83450; File No. SR– CboeEDGX–2018–016] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Physical Port Fees for EDGX amozie on DSK3GDR082PROD with NOTICES1 June 15, 2018. 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 June 1, 2018, Cboe 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) 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 the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to implement proposed changes to its fee schedule relating to physical connectivity fees, effective June 1, 2018. By way of background, a physical port is utilized by a Member or non-Member to connect to the Exchange at the data centers where the Exchange’s servers are located. The Exchange currently maintains a presence in two third-party data centers: (i) The primary data center where the Exchange’s business is primarily conducted on a daily basis, and (ii) a secondary data center, which is predominantly maintained for business continuity purposes. The Exchange currently assesses the following physical connectivity fees for Members and non-Members on a CFR 240.19b–4(f)(2). 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). CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 5 The 1 15 17:22 Jun 20, 2018 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend its fees and rebates applicable to Members 5 and non-Members of the Exchange pursuant to EDGX Rule 15.1(a) and (c) to modify its fees for physical ports. The text of the proposed rule change is available at the Exchange’s website at www.markets.cboe.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. 4 17 56 17 VerDate Sep<11>2014 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. Jkt 244001 PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 monthly basis: $2,000 per physical port for a 1 gigabyte circuit and $7,000 per physical port for a 10 gigabyte circuit. The Exchange proposes to increase the fees per physical ports from (i) $2,000 to $2,500 per month, per port for a 1 gigabyte circuit and (ii) $7,000 to $7,500 per month, per port for a 10 gigabyte circuit. The Exchange notes the proposed fees enable it to continue to maintain and improve its market technology and services and also notes that the proposed fee changes are in line with the amounts assessed by other exchanges for similar connections.6 The Exchange also proposes to adopt separate physical port fees for connection to its secondary data center, which is predominantly maintained for business continuity purposes (‘‘Disaster Recovery Systems’’). Particularly, the Disaster Recovery Systems can be accessed via physical ports in Chicago. Members and Non-Members may maintain physical ports in order to be able to connect to the Disaster Recovery Systems in case of a disaster. Currently, physical ports that are used to connect to the Disaster Recovery Systems are assessed the same fees as physical ports used to connect to the Exchange’s trading system. The Exchange proposes to establish separate pricing for physical ports that are used to connect to the Disaster Recovery Systems (‘‘Disaster Recovery Physical Ports’’). Specifically, the Exchange proposes to assess a monthly fee of $2,000 per 1 gigabyte Disaster Recovery Physical Port and a monthly fee of $6,000 per 10 gigabyte Disaster Recovery Physical Port. This amount will continue to enable the Exchange to maintain the Disaster Recovery Physical Ports in case they become necessary. The Exchange notes that the Disaster Recovery Physical Ports may also be used to access the Disaster Recovery Systems for the following affiliate exchanges Cboe BZX Exchange, Inc., Cboe BYX Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe C2 Exchange, Inc., Cboe Exchange, Inc. and Cboe Futures Exchange, LLC as well. The Exchange proposes to provide that market participants will only be assessed a single fee for any Disaster Recovery Physical Port that also accesses the Disaster Recover Systems for these exchanges.7 6 See e.g., NYSE Arca Equities Fees and Charges, NYSE Arca Marketplace: Other Fees and Charges, Connectivity Fees. See also, Nasdaq Phlx LLC Pricing Schedule, Section XI, Direct Connectivity to Phlx. 7 For example, if a market participant uses a 1 gigabyte Disaster Recovery Physical Port to connect to the Disaster Recovery Systems for both BYX and EDGX, the market participant would only be assessed one monthly fee of $2,000. E:\FR\FM\21JNN1.SGM 21JNN1 Federal Register / Vol. 83, No. 120 / Thursday, June 21, 2018 / Notices amozie on DSK3GDR082PROD with NOTICES1 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. The Exchange also notes that it operates in a highly-competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive. The proposed rule change reflects a competitive pricing structure designed to incent market participants to direct their order flow to the Exchange. The Exchange believes that the proposed changes are equitable and non-discriminatory in that it applies uniformly to all Members. Members and non-Members will continue to choose whether they want more than one physical port and/or Disaster Recovery Physical Port and choose the method of connectivity based on their specific needs. All Members that voluntarily select various service options will be charged the same amount for the same services. The Exchange believes that the proposal represents an equitable allocation of reasonable dues, fees, and other charges as its fees for physical connectivity are reasonably constrained by competitive alternatives. If a particular exchange charges excessive fees for connectivity, affected Members and non-Members may opt to terminate their connectivity arrangements with that exchange, and adopt a possible range of alternative strategies, including routing to the applicable exchange through another participant or market center or taking that exchange’s data indirectly. Accordingly, if the Exchange charges excessive fees, it would stand to lose not only connectivity revenues but also revenues associated with the execution of orders routed to it, and, to the extent applicable, market data revenues. The Exchange believes that this competitive dynamic imposes powerful restraints on the ability of any exchange to charge unreasonable fees for connectivity. Furthermore, the proposed rule change is also an equitable allocation of reasonable dues, fees, and other charges as the Exchange believes that the proposed increased physical port fees will enable it to cover its infrastructure 8 15 9 15 U.S.C. 78f. U.S.C. 78f(b)(4). VerDate Sep<11>2014 17:22 Jun 20, 2018 Jkt 244001 costs associated with establishing physical ports to connect to the Exchange’s systems. The additional revenue from the increased fees will also enable the Exchange to continue to maintain and improve its market technology and services. Similarly, the Exchange believes the proposed fees for the Disaster Recovery Physical Ports will allow the Exchange to maintain the Disaster Recovery Physical Ports in case they become necessary. Lastly, the Exchange believes the fees remain competitive with those charged by other venues and therefore continue to be reasonable and equitably allocated to Members.10 B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. As discussed above, the Exchange believes that fees for connectivity are constrained by the robust competition for order flow among exchanges and non-exchange markets. The Exchange does not believe that the proposed 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. Further, excessive fees for connectivity would serve to impair an exchange’s ability to compete for order flow rather than burdening competition. 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 11 and paragraph (f) of Rule 19b–4 thereunder.12 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may 10 See e.g., NYSE Arca Equities Fees and Charges, NYSE Arca Marketplace: Other Fees and Charges, Connectivity Fees. See also, Nasdaq Phlx LLC Pricing Schedule, Section XI, Direct Connectivity to Phlx. 11 15 U.S.C. 78s(b)(3)(A). 12 17 CFR 240.19b–4(f). PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 28885 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. 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 (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CboeEDGX–2018–016 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–CboeEDGX–2018–016. 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 (https://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 this filing will also 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–CboeEDGX–2018–016 and E:\FR\FM\21JNN1.SGM 21JNN1 28886 Federal Register / Vol. 83, No. 120 / Thursday, June 21, 2018 / Notices should be submitted on or before July 12, 2018. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 Eduardo A. Aleman, Assistant Secretary. [FR Doc. 2018–13299 Filed 6–20–18; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–83451; File Nos. SR–LCH SA–2017–012 and SR–LCH SA–2017–013] Self-Regulatory Organizations; LCH SA; Order Approving Proposed Rule Changes Related to LCH SA’s Recovery and Wind Down Plans June 15, 2018. I. Introduction On November 30, 2017, Banque Centrale de Compensation, which conducts business under the name LCH SA (‘‘LCH SA’’), filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 a proposed rule change (LCH SA–2017–012) to adopt a recovery plan (the ‘‘RP’’). The proposed rule change was published for comment in the Federal Register on December 19, 2017.3 On December 7, 2017, LCH SA filed with the Commission a proposed rule change (LCH SA–2017–013) to adopt a wind down plan (‘‘WDP’’).4 The proposed rule change was published for comment in the Federal Register on December 19, 2017.5 On January 23, 2018, pursuant to Section 19(b)(2) of the Act,6 the Commission designated a longer period for Commission action on both proposed rule changes.7 On March 19, 2018 the Commission instituted proceedings under Section 19(b)(2)(B) of the Act 8 to determine whether to 13 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 3 Securities Exchange Act Release No. 34–82316 (Dec. 13, 2017), 82 FR 60246 (Dec. 19, 2017) (SR– LCH–SA–2017–012) (‘‘Notice 012’’). 4 Capitalized terms used in this order but not defined herein have the same meanings specified in LCH SA’s rules. 5 Securities Exchange Act Release No. 34–82317 (Dec. 13, 2017), 82 FR 60238 (Dec. 19, 2017) (SR– LCH SA–2017–013) (‘‘Notice 013’’). 6 15 U.S.C. 78s(b)(2). 7 Securities Exchange Act Release No. 34–82570 (Jan. 23, 2018), 83 FR 4088 (Jan. 29, 2018) (SR– LCH–SA–2017–012) and Securities Exchange Act Release No. 34–82571 (Jan. 23, 2018), 83 FR 4081 (Jan. 29, 2018) (SR–LCH SA–2017–013). 8 15 U.S.C. 78s(b)(2)(B). amozie on DSK3GDR082PROD with NOTICES1 1 15 VerDate Sep<11>2014 17:22 Jun 20, 2018 Jkt 244001 approve or disapprove the proposed rule changes.9 To date, the Commission has not received any comments on the proposed rule changes. For the reasons discussed below, the Commission is approving the proposed rule changes. II. Description of the Proposed Rule Changes 10 As a ‘‘covered clearing agency,’’ 11 LCH SA is required to, among other things, ‘‘establish, implement, maintain and enforce written policies and procedures reasonably designed to . . . maintain a sound risk management framework for comprehensively managing legal, credit, liquidity, operational, general business, investment, custody, and other risks that arise in or are borne by the covered clearing agency, which . . . includes plans for the recovery and orderly winddown of the covered clearing agency necessitated by credit losses, liquidity shortfalls, losses from general business risk, or any other losses.’’ 12 The Commission has previously clarified that it believes that such recovery and wind-down plans are ‘‘rules’’ within the meaning of Exchange Act Section 19(b) and Rule 19b–4 because such plans would constitute changes to a stated policy, practice or interpretation of a covered clearing agency.13 Accordingly, a covered clearing agency, such as LCH SA, must file its RP and WDP with the Commission. A. The RP (LCH SA–2017–012) LCH SA’s RP seeks to maintain the continuity of critical services in times of extreme stress and to facilitate the recovery of LCH SA from such stress. In particular, the RP describes (i) the scenarios and triggers for initiating recovery measures; (ii) various recovery tools used in such recovery; and (iii) the governance framework for managing the RP. Each of those aspects of the RP are discussed in more detail below. The scenarios that could necessitate the implementation of the RP include the default of one or more clearing members, liquidity shortfalls as a result of the default of an investment counterparty of LCH SA or any other investment losses resulting from 9 Securities Exchange Act Release No. 34–82901 (March 19, 2018), 83 FR 12833 (March 23, 2018) (SR–LCH SA–2017–012; SR–LCH SA–2017–013). 10 The descriptions of the proposed rule changes are substantially excerpted from Notice 012 and Notice 013. 11 The term ‘‘covered clearing agency’’ is defined in SEC Rule 17Ad–22(a)(5), 17 CFR 240.17Ad– 22(a)(5). 12 17 CFR 240.17Ad–22(e)(3)(ii). 13 Standards for Covered Clearing Agencies, Securities Exchange Act Release No. 34–78961 (Sep. 28, 2016), 81 FR 70786, 70809 (Oct. 13, 2016). PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 changes in the market value on the investments, a loss resulting from an event which impacts the critical services provided by LCH SA (e.g., failure in the provision of service by a third party), loss of critical contracts with exchanges, or the operational or financial failure of a financial market infrastructure such as an allied clearing house or trade repository.14 The default management process is used to re-establish a matched book and return to business as usual and therefore LCH SA considers it to be a recovery tool.15 When pre-funded resources, such as defaulter’s margin, defaulter’s default fund contributions, LCH SA’s capital, and non-defaulters’ default fund contributions, are no longer available to meet obligations due to member and non-member losses, the RP lists various measures and tools that LCH SA can use to return to business as usual.16 The RP is organized to discuss each tool according to the nature of the loss the tool is designed to address (e.g., clearing member default losses, liquidity shortfalls, operational, business, and investment risks). The RP also discusses the sequence in which these tools would be used and the relative strength of each.17 When pre-funded resources have been exhausted after a clearing member default, LCH SA can call a default fund assessment up to a cap, request voluntary payments from all nondefaulting members, and effectuate service closure.18 In the event such tools are unavailable, certain other businessas-usual tools, such as default fund additional margin, may enable LCH SA to collect additional resources. In the event of a liquidity shortfall, LCH SA may use its central bank credit line to deposit securities received on behalf of defaulting clearing members and obtain liquidity.19 Other potential tools to manage a liquidity stress situation include limits with respect to illiquid collateral, the application of increased haircuts on certain types of collateral to incentivize the use of more liquid collateral, and specific liquidity margins.20 LCH SA also could defer funding for the settlement platform for a limited period of time, but views this as a tool of last resort.21 For most investment, business, and operational losses, LCH SA can allocate 14 See Notice 012, 82 FR at 60247. 15 Id. 16 Id. at 60249. at 60249–60250. 18 Id. at 60249. 19 Id. 20 Id. 21 Id. 17 Id. E:\FR\FM\21JNN1.SGM 21JNN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 83, Number 120 (Thursday, June 21, 2018)]
[Notices]
[Pages 28884-28886]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-13299]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83450; File No. SR-CboeEDGX-2018-016]


Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change Related 
to Physical Port Fees for EDGX

June 15, 2018.
    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 June 1, 2018, Cboe 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 its fees and rebates 
applicable to Members \5\ and non-Members of the Exchange pursuant to 
EDGX Rule 15.1(a) and (c) to modify its fees for physical ports.
---------------------------------------------------------------------------

    \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 
website at www.markets.cboe.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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to implement proposed changes to its fee 
schedule relating to physical connectivity fees, effective June 1, 
2018. By way of background, a physical port is utilized by a Member or 
non-Member to connect to the Exchange at the data centers where the 
Exchange's servers are located. The Exchange currently maintains a 
presence in two third-party data centers: (i) The primary data center 
where the Exchange's business is primarily conducted on a daily basis, 
and (ii) a secondary data center, which is predominantly maintained for 
business continuity purposes. The Exchange currently assesses the 
following physical connectivity fees for Members and non-Members on a 
monthly basis: $2,000 per physical port for a 1 gigabyte circuit and 
$7,000 per physical port for a 10 gigabyte circuit. The Exchange 
proposes to increase the fees per physical ports from (i) $2,000 to 
$2,500 per month, per port for a 1 gigabyte circuit and (ii) $7,000 to 
$7,500 per month, per port for a 10 gigabyte circuit. The Exchange 
notes the proposed fees enable it to continue to maintain and improve 
its market technology and services and also notes that the proposed fee 
changes are in line with the amounts assessed by other exchanges for 
similar connections.\6\
---------------------------------------------------------------------------

    \6\ See e.g., NYSE Arca Equities Fees and Charges, NYSE Arca 
Marketplace: Other Fees and Charges, Connectivity Fees. See also, 
Nasdaq Phlx LLC Pricing Schedule, Section XI, Direct Connectivity to 
Phlx.
---------------------------------------------------------------------------

    The Exchange also proposes to adopt separate physical port fees for 
connection to its secondary data center, which is predominantly 
maintained for business continuity purposes (``Disaster Recovery 
Systems''). Particularly, the Disaster Recovery Systems can be accessed 
via physical ports in Chicago. Members and Non-Members may maintain 
physical ports in order to be able to connect to the Disaster Recovery 
Systems in case of a disaster. Currently, physical ports that are used 
to connect to the Disaster Recovery Systems are assessed the same fees 
as physical ports used to connect to the Exchange's trading system. The 
Exchange proposes to establish separate pricing for physical ports that 
are used to connect to the Disaster Recovery Systems (``Disaster 
Recovery Physical Ports''). Specifically, the Exchange proposes to 
assess a monthly fee of $2,000 per 1 gigabyte Disaster Recovery 
Physical Port and a monthly fee of $6,000 per 10 gigabyte Disaster 
Recovery Physical Port. This amount will continue to enable the 
Exchange to maintain the Disaster Recovery Physical Ports in case they 
become necessary. The Exchange notes that the Disaster Recovery 
Physical Ports may also be used to access the Disaster Recovery Systems 
for the following affiliate exchanges Cboe BZX Exchange, Inc., Cboe BYX 
Exchange, Inc., Cboe EDGA Exchange, Inc., Cboe C2 Exchange, Inc., Cboe 
Exchange, Inc. and Cboe Futures Exchange, LLC as well. The Exchange 
proposes to provide that market participants will only be assessed a 
single fee for any Disaster Recovery Physical Port that also accesses 
the Disaster Recover Systems for these exchanges.\7\
---------------------------------------------------------------------------

    \7\ For example, if a market participant uses a 1 gigabyte 
Disaster Recovery Physical Port to connect to the Disaster Recovery 
Systems for both BYX and EDGX, the market participant would only be 
assessed one monthly fee of $2,000.

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

[[Page 28885]]

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. The Exchange also notes that it operates in a highly-
competitive market in which market participants can readily direct 
order flow to competing venues if they deem fee levels at a particular 
venue to be excessive. The proposed rule change reflects a competitive 
pricing structure designed to incent market participants to direct 
their order flow to the Exchange.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes are equitable and 
non-discriminatory in that it applies uniformly to all Members. Members 
and non-Members will continue to choose whether they want more than one 
physical port and/or Disaster Recovery Physical Port and choose the 
method of connectivity based on their specific needs. All Members that 
voluntarily select various service options will be charged the same 
amount for the same services.
    The Exchange believes that the proposal represents an equitable 
allocation of reasonable dues, fees, and other charges as its fees for 
physical connectivity are reasonably constrained by competitive 
alternatives. If a particular exchange charges excessive fees for 
connectivity, affected Members and non-Members may opt to terminate 
their connectivity arrangements with that exchange, and adopt a 
possible range of alternative strategies, including routing to the 
applicable exchange through another participant or market center or 
taking that exchange's data indirectly. Accordingly, if the Exchange 
charges excessive fees, it would stand to lose not only connectivity 
revenues but also revenues associated with the execution of orders 
routed to it, and, to the extent applicable, market data revenues. The 
Exchange believes that this competitive dynamic imposes powerful 
restraints on the ability of any exchange to charge unreasonable fees 
for connectivity.
    Furthermore, the proposed rule change is also an equitable 
allocation of reasonable dues, fees, and other charges as the Exchange 
believes that the proposed increased physical port fees will enable it 
to cover its infrastructure costs associated with establishing physical 
ports to connect to the Exchange's systems. The additional revenue from 
the increased fees will also enable the Exchange to continue to 
maintain and improve its market technology and services. Similarly, the 
Exchange believes the proposed fees for the Disaster Recovery Physical 
Ports will allow the Exchange to maintain the Disaster Recovery 
Physical Ports in case they become necessary.
    Lastly, the Exchange believes the fees remain competitive with 
those charged by other venues and therefore continue to be reasonable 
and equitably allocated to Members.\10\
---------------------------------------------------------------------------

    \10\ See e.g., NYSE Arca Equities Fees and Charges, NYSE Arca 
Marketplace: Other Fees and Charges, Connectivity Fees. See also, 
Nasdaq Phlx LLC Pricing Schedule, Section XI, Direct Connectivity to 
Phlx.
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. As discussed above, the 
Exchange believes that fees for connectivity are constrained by the 
robust competition for order flow among exchanges and non-exchange 
markets. The Exchange does not believe that the proposed 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. Further, 
excessive fees for connectivity would serve to impair an exchange's 
ability to compete for order flow rather than burdening competition.

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 \11\ and paragraph (f) of Rule 19b-4 
thereunder.\12\ 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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeEDGX-2018-016 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-CboeEDGX-2018-016. 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 (https://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 this filing will also 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-CboeEDGX-2018-016 and

[[Page 28886]]

should be submitted on or before July 12, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
---------------------------------------------------------------------------

    \13\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-13299 Filed 6-20-18; 8:45 am]
BILLING CODE 8011-01-P

This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.