Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change Amending the Fee Schedule Assessed on Members To Establish a Monthly Trading Rights Fee, 52925-52929 [2019-21474]
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Federal Register / Vol. 84, No. 192 / Thursday, October 3, 2019 / Notices
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.
Interested persons are invited to
submit written data, views, and
arguments concerning the proposed rule
change, 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–
CboeEDGA–2019–014 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–CboeEDGA–2019–014. 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 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
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).
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comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CboeEDGA–2019–014 and
should be submitted on or before
October 24, 2019. Rebuttal comments
should be submitted by November 6,
2019.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(3)(C) of the Act,67 that File
Number SR–CboeEDGA–2019–014 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.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.68
Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019–21473 Filed 10–2–19; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87144; File No. SR–
CboeEDGX–2019–050]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Suspension of
and Order Instituting Proceedings To
Determine Whether To Approve or
Disapprove a Proposed Rule Change
Amending the Fee Schedule Assessed
on Members To Establish a Monthly
Trading Rights Fee
September 27, 2019.
I. Introduction
On August 1, 2019, Cboe EDGX
Exchange, Inc. (‘‘EDGX’’ or the
‘‘Exchange’’) 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
(File Number SR–CboeEDGX–2019–050)
to amend the EDGX fee schedule to
establish a monthly Trading Rights Fee
to be assessed on Members. The
proposed rule change was immediately
effective upon filing with the
Commission pursuant to Section
19(b)(3)(A) of the Act.3 The proposed
rule change was published for comment
in the Federal Register on August 20,
67 15
U.S.C. 78s(b)(3)(C).
CFR 200.30–3(a)(57) and (58).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A).
68 17
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52925
2019.4 The Commission has received
one comment letter on the proposal, and
one response letter from the Exchange.5
Under Section 19(b)(3)(C) of the Act,6
the Commission is hereby: (i)
Temporarily suspending the proposed
rule change; and (ii) instituting
proceedings to determine whether to
approve or disapprove the proposed
rule change.
II. Description of the Proposed Rule
Change
The Exchange proposes to amend the
Membership Fees section of the EDGX
fee schedule to establish a monthly
Trading Rights Fee, which would be
assessed on Members that trade more
than a specified volume in U.S.
equities.7 Specifically, the Exchange
proposes to charge Members a Trading
Rights Fee of $500 per month for the
ability to trade on the Exchange.8 A
Member would not be charged the
monthly Trading Rights Fee if it
qualifies for one of the following
waivers: (1) The Member has a monthly
ADV 9 of less than 100,000 shares, (2) at
least 90% of the Member’s orders
submitted to the Exchange per month
are retail orders,10 or (3) a new Member
is within the first three months of their
membership.11
III. Suspension of the Proposed Rule
Change
Pursuant to Section 19(b)(3)(C) of the
Act,12 at any time within 60 days of the
date of filing of a proposed rule change
pursuant to Section 19(b)(1) of the
4 See Securities Exchange Act Release No. 86686
(August 14, 2019), 84 FR 43222 (‘‘Notice’’).
5 See Letters from: Theodore R. Lazo, Managing
Director and Associate General Counsel, SIFMA,
dated September 12, 2019 (‘‘SIFMA Letter’’); Adrian
Griffiths, Assistant General Counsel, Cboe, dated
September 25, 2019 (‘‘Exchange Response Letter’’).
Comment letters are available on the Commission’s
website at: https://www.sec.gov/comments/srcboeedgx-2019-050/srcboeedgx2019050.htm.
6 15 U.S.C. 78s(b)(3)(C).
7 See Notice, supra note 4, at 43222. The
Commission notes that the Exchange’s affiliates,
Cboe BYX Exchange, Inc., Cboe BZX Exchange, Inc.,
and Cboe EDGA Exchange, Inc., each also filed a
proposed rule change to amend their fee schedules
to establish a monthly Trading Rights Fee to be
assessed on Members: CboeBYX–2019–013,
CboeBZX–2019–072, and CboeEDGA–2019–014,
respectively.
8 See id.
9 See id. ‘‘ADV’’ means average daily volume
calculated as the number of shares added or
removed, combined, per day. ADV is calculated on
a monthly basis. See id. at n.5.
10 See id. at 43222.
11 See id. For any month in which a firm is
approved for Membership with the Exchange, the
monthly Trading Rights Fee would be pro-rated in
accordance with the date on which Membership is
approved. See id. at 43223.
12 15 U.S.C. 78s(b)(3)(C).
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Act,13 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.
The Exchange asserts that the
proposed Trading Rights Fee ‘‘is
reasonable because it will assist in
funding the overall regulation and
maintenance of the Exchange’’ and will
contribute to ‘‘ensuring that adequate
resources are devoted to regulation.’’ 14
The Exchange also believes the
proposed fee is reasonable because it
‘‘represents a modest charge’’ applied to
firms that ‘‘have chosen to become
members of the Exchange,’’ and such
firms consume more regulatory
resources and ‘‘benefit from the
Exchange’s regulatory efforts by having
access to a well-regulated market.’’ 15
The Exchange notes that its Regulatory
Services Agreement (‘‘RSA’’) costs,
which cover regulatory services in
connection with market and financial
surveillance, examinations,
investigations, and disciplinary
procedure, have increased 17.5%, while
the Exchange’s overall regulatory costs
have grown 117%, from 2016 to 2019.16
The Exchange also asserts that the
proposed Trading Rights Fee is
reasonable because the ‘‘cost of this
membership fee is generally less than
the analogous membership fees of other
markets’’ and that a number of national
securities exchanges currently charge
similar Trading Rights fees to assist in
funding their regulatory efforts.17
The Exchange states that it believes
the proposed Trading Rights Fee is
equitable and not unfairly
discriminatory because it will apply
equally to all Members that do not
qualify for a waiver.18 The Exchange
further asserts that the proposed fee is
equitable and not unfairly
discriminatory because it will
‘‘contribute to a portion of the costs
13 15
U.S.C. 78s(b)(1).
Notice, supra note 4, at 43224.
15 See id.
16 See id.
17 See id. The Exchange notes, for example, that
the Exchange’s proposed Trading Rights Fee of $500
a month is ‘‘substantially lower’’ than the monthly
$1,250 Trading Rights Fee that Nasdaq assesses on
its members. Id.
18 See id. at 43225.
14 See
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incurred by the Exchange in providing
its Members with an efficient and wellregulated market, which benefits all
Members.’’ 19
In regard to the proposed waivers
pursuant to which Members would not
be charged the Trading Rights Fee, the
Exchange states that it believes that
such waivers are reasonable.20
Specifically, the Exchange states that
the proposed waiver for Members that
trade less than a monthly ADV of
100,000 shares is reasonable because it
would allow such smaller Members to
continue to trade at a lower cost.21 In
addition, the Exchange states the waiver
is reasonable because such firms
consume fewer regulatory resources.22
The Exchange also asserts that the
proposed ADV threshold of 100,000 is
reasonable because the median ADV per
firm per month on the Exchange is
443,192; therefore, the proposed ADV
threshold would serve to capture
‘‘smaller volume firm outliers as
compared to the overall ADV across all
firms.’’ 23
The Exchange also states that the
second waiver for Members that submit
90% or more of their orders per month
as retail orders is reasonable because it
would ensure that ‘‘retail broker
members can continue to submit orders
for individual investors at a lower cost,
thereby continuing to encourage retail
investor participation on the
Exchange.’’ 24 The Exchange also argues
that increased liquidity in retail order
flow could benefit all market
participants by incentivizing other
Members to send order flow to the
Exchange and increasing overall
liquidity, as well by positively
impacting market quality by reflecting
long-term investment intentions of retail
participation.25 The Exchange also
asserts that the retail order volume
threshold is reasonable because it would
serve to capture broker-dealers that are
primarily in the business of handling
orders on behalf of retail investors,
rather than larger broker-dealers that
may route some retail orders on behalf
of other broker-dealers, but for the most
part are engaging in a significant
amount of activity not related to
servicing retail investors.26
Finally the Exchange states that it
believes that not charging a Trading
19 See
id.
id. at 43224–25. The Exchange also asserts
that the waivers are equitable and not unfairly
discriminatory in the Notice. See id. at 43225.
21 See id. at 43224.
22 See id.
23 See id. at 43224–25.
24 See id. at 43225.
25 See id.
26 See id.
20 See
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Rights Fee for new Members is
reasonable because it would incentivize
firms to become Members of the
Exchange and bring additional liquidity
to the market to the benefit of all market
participants.27 The Exchange asserts
that the proposed waiver for new
Members is also reasonable because ‘‘it
will allow new firms the flexibility in
resources needed to initially adjust to
the Exchange’s market-model and
functionality.’’ 28
Regarding competition, the Exchange
states that it believes the proposed rule
change does not impose any burden on
either intramarket or intermarket
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.29 The Exchange
notes that, with regard to intramarket
competition, the proposed rule change
would apply equally to all Members that
reach an ADV of 100,000 shares traded
or greater, those in which less than 90%
of their order volume is retail order
volume per month, and those that are
not within their first three months of
new Membership on the Exchange.30 In
regard to intermarket competition, the
Exchange states that it operates in a
highly competitive market, and that this
includes competition for exchange
memberships.31 The Exchange explains
that Members have numerous venues on
which they can participate, including
other equities exchanges and offexchange venues such as alternative
trading systems.32 The Exchange asserts
that while trade-through and best
execution obligations may require a firm
to access the Exchange, no firm is
compelled to be a Member of the
Exchange in order to participate on the
Exchange, and accordingly firms may
freely choose to participate on the
Exchange without holding a
Membership.33 The Exchange believes
that if the proposed fee is unattractive
to members, the Exchange is likely to
lose membership and market share as a
result.34
As noted above, the Commission
received one comment letter on the
27 See
id. at 43224.
id.
29 See id. at 43225.
30 See id.
31 See id.
32 See id. at 43225–26. The Exchange states that
it represents a small percentage of the overall
market, and based on publicly available
information, no single equities exchange has more
than 20% market share, and no exchange group has
more than 22% market share. See id. at 43226. The
Exchange references the Cboe Global Markets U.S.
Equities Market Volume Summary (July 31, 2019),
available at https://markets.cboe.com/us/equities/
market_share. See id. at n.15.
33 See id. at 43226.
34 See id.
28 See
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proposed rule change.35 SIFMA notes
that the Exchange previously filed a
proposed rule change to institute a
trading rights fee, and the Commission
suspended that filing.36 SIFMA argues
that, like the prior proposal, the
Exchange did not provide sufficient
information in the filing to support a
finding that the proposal is consistent
with the Act.37 Specifically, SIFMA
asserts that the Exchange should
provide quantitative data showing its
anticipated revenues, costs and
profitability, as well as describe its
methodology for estimating the baseline
and expected costs and revenues.38
Further, SIFMA argues that the
Exchange should provide specific detail
regarding the amount of its regulatory
costs rather than information about
broad percentage increases in such
costs.39 In addition, SIFMA believes the
Exchange should provide specific detail
about the amount of revenue it would
expect to receive from the Trading
Rights Fee, as well as the amount of
revenue it receives from other sources
that are intended to fund regulation,
such as registration and licensing fees.40
SIFMA also asserts the Exchange’s
Trading Rights Fee would not be
constrained by competition because
broker-dealers must pay this fee prior to
being able to satisfy their regulatory
obligations and deciding where to route
orders.41 SIFMA notes that tradethrough requirements under Regulation
NMS, as well as broker-dealers’ best
execution obligations, effectively
require direct or indirect access and
connection to all registered exchanges,
and each exchange remains the
exclusive purveyor of those services.42
In response, the Exchange reiterated
several of the arguments for the
proposed rule change that were
provided in the Notice. In addition, the
Exchange states that contrary to
SIFMA’s assertions, the instant filing
contains significantly more information
and analysis in regard to the proposed
fee, including information related to
increases in regulatory costs.43 The
Exchange indicates that the proposed
fee would defray only a portion of these
increasing costs.44 The Exchange also
asserts that in regard to competition,
broker-dealers are not compelled to
35 See
supra note 5.
SIFMA Letter, supra note 5, at 1.
37 See id.
38 See id. at 2.
39 See id.
40 See id.
41 See id.
42 See id.
43 See Exchange Response Letter, supra note 5, at
36 See
2.
44 See
id.
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become members of any particular
exchange, and a number of brokerdealers are able to meet their business
and compliance needs by trading via
other arrangements.45
The Exchange originally filed a
proposal to implement a Trading Rights
Fee on April 29, 2019.46 That proposal,
CboeEDGX–2019–029, was published
for comment in the Federal Register on
May 16, 2019.47 On June 28, 2019,
pursuant to Section 19(b)(3)(C) of the
Act, the Commission: (i) Temporarily
suspended the proposed rule change;
and (ii) instituted proceedings to
determine whether to approve or
disapprove the proposed rule change.48
The instant filing proposes an identical
Trading Rights Fee and raises similar
concerns as to whether it is consistent
with the Act.49
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.50 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.’’ 51
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; 52 (2) perfect the mechanism of
a free and open market and a national
market system, protect investors and the
public interest, and not be designed to
permit unfair discrimination between
customers, issuers, brokers, or
dealers; 53 and (3) not impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.54
45 See
id.
Securities Exchange Act Release No. 85838
(May 10, 2019), 84 FR 22174.
47 See id.
48 See Securities Exchange Act Release No. 86231
(June 28, 2019), 84 FR 32233 (July 5, 2019).
49 See id.
50 See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose
of, and Statutory Basis for, the Proposed Rule
Change’’).
51 See id.
52 15 U.S.C. 78f(b)(4).
53 15 U.S.C. 78f(b)(5).
54 15 U.S.C. 78f(b)(8).
46 See
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52927
In temporarily suspending the
Exchange’s fee change, the Commission
intends to further consider whether
assessing the proposed monthly Trading
Rights Fee on certain Members is
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 permit unfair
discrimination between customers,
issuers, brokers or dealers; and do not
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.55
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 changes.56
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) 57 and 19(b)(2)(B) of the
Act 58 to determine whether the
proposed rule change should be
approved or disapproved. Institution of
proceedings does not indicate that the
Commission has reached any
conclusions with respect to any of the
issues involved. Rather, the Commission
seeks and encourages interested persons
to provide additional comment on the
proposed rule change to inform the
Commission’s analysis of whether to
disapprove the proposed rule change.
Pursuant to Section 19(b)(2)(B) of the
Act,59 the Commission is providing
notice of the grounds for possible
disapproval under consideration:
• Section 6(b)(4) of the Act, which
requires that the rules of a national
securities exchange ‘‘provide for the
equitable allocation of reasonable dues,
55 See 15 U.S.C. 78f(b)(4), (5), and (8),
respectively.
56 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).
57 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.
58 15 U.S.C. 78s(b)(2)(B).
59 15 U.S.C. 78s(b)(2)(B).
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Federal Register / Vol. 84, No. 192 / Thursday, October 3, 2019 / Notices
fees, and other charges among its
members and issuers and other persons
using its facilities,’’ 60
• Section 6(b)(5) of the Act, which
requires, among other things, that the
rules of a national securities exchange
be ‘‘designed to perfect the operation of
a free and open market and a national
market system’’ and ‘‘protect investors
and the public interest,’’ and not be
‘‘designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers,’’ 61 and
• Section 6(b)(8) of the Act, which
requires that the rules of a national
securities exchange ‘‘not impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of [the Act].’’ 62
As noted above, the proposal imposes
a new monthly Trading Rights Fee on
certain Members. The Commission
notes that the Exchange’s statements in
support of the proposed rule change are
general in nature and lack detail and
specificity. For example, while the
Exchange asserts that the proposed fee
will fund overall regulation and
maintenance of the Exchange and
provides broad figures illustrating the
percentage by which RSA and
regulatory costs have increased from
2016 to 2019, the Exchange has not
described how the proposed fee would
address these regulatory increases.63
Further, the rationale provided does not
address how the proposed fee is an
equitable allocation of fees beyond
noting that it applies to all Members
who do not qualify for a waiver, and
broadly asserting that the proposed fee
should benefit ‘‘all Members’’ by
contributing to the provision of ‘‘an
efficient and well-regulated market’’ for
Members.64
As discussed above, one commenter
asserts, among other concerns, that the
Exchange’s cost-based discussion is not
sufficiently detailed to support its
claims that the proposed Trading Rights
Fee is consistent with the requirements
of the Act, and that the Exchange has
not offered sufficient detail to establish
that the proposed fee would be
constrained by significant competitive
forces.65 The commenter indicates that,
among other things, additional
information addressing both revenues
and costs is lacking in the Exchange’s
proposal.
Under the Commission’s Rules of
Practice, the ‘‘burden to demonstrate
60 15
U.S.C. 78f(b)(4).
U.S.C. 78f(b)(5).
62 15 U.S.C. 78f(b)(8).
63 See Notice, supra note 4, at 43224.
64 See id. at 43225.
65 See SIFMA Letter, supra note 5, at 1–2
61 15
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that a proposed rule change is
consistent with the [Act] and the rules
and regulations issued thereunder . . .
is on the [SRO] that proposed the rule
change.’’ 66 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,67 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.68
The Commission is instituting
proceedings to allow for additional
consideration and comment on the
issues raised herein, including as to
whether the proposed fees are
consistent with the Act, and
specifically, with its requirements that
exchange fees be reasonable and
equitably allocated; be designed to
perfect the mechanism of a free and
open market and the national market
system, protect investors and the public
interest, and not be unfairly
discriminatory; or not impose an
unnecessary or inappropriate burden on
competition.69
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. Such
comments should be submitted by
October 24, 2019. Rebuttal comments
should be submitted by November 7,
2019. Although there do not appear to
be any issues relevant to approval or
disapproval which 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.70
The Commission asks that
commenters address the sufficiency and
merit of the Exchange’s statements in
support of the proposal, in addition to
66 Rule 700(b)(3), Commission Rules of Practice,
17 CFR 201.700(b)(3).
67 See id.
68 See id.
69 See 15 U.S.C. 78f(b)(4), (5), and (8).
70 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).
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any other comments they may wish to
submit about the proposed rule change.
Interested persons are invited to
submit written data, views, and
arguments concerning the proposed rule
change, 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–2019–050 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–2019–050. 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 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–CboeEDGX–2019–050 and
should be submitted on or before
October 24, 2019. Rebuttal comments
should be submitted by November 7,
2019.
E:\FR\FM\03OCN1.SGM
03OCN1
Federal Register / Vol. 84, No. 192 / Thursday, October 3, 2019 / Notices
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(3)(C) of the Act,71 that File
Number SR–CboeEDGX–2019–050 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.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.72
Eduardo A. Aleman,
Deputy Secretary.
Affairs Reform and Restructuring Act of
1998 (112 Stat. 2681, et seq.; 22 U.S.C.
6501 note, et seq.), Delegation of
Authority No. 234 of October 1, 1999,
and Delegation of Authority No. 236–3
of August 28, 2000.
Matthew R. Lussenhop,
Principal Deputy Assistant Secretary, Bureau
of Educational and Cultural Affairs,
Department of State.
[FR Doc. 2019–21535 Filed 10–2–19; 8:45 am]
BILLING CODE 4710–05–P
DEPARTMENT OF TRANSPORTATION
[FR Doc. 2019–21474 Filed 10–2–19; 8:45 am]
BILLING CODE 8011–01–P
Federal Railroad Administration
[Docket Number FRA–1999–5756]
DEPARTMENT OF STATE
Petition for Waiver of Compliance
[Public Notice: 10917]
Notice of Determinations; Culturally
Significant Objects Imported for
Exhibition—Determinations: ‘‘A
Wonder to Behold: Craftsmanship and
the Creation of Babylon’s Ishtar Gate’’
Exhibition
Notice is hereby given of the
following determinations: I hereby
determine that certain objects to be
included in the exhibition ‘‘A Wonder
to Behold: Craftsmanship and the
Creation of Babylon’s Ishtar Gate,’’
imported from abroad for temporary
exhibition within the United States, are
of cultural significance. The objects are
imported pursuant to loan agreements
with the foreign owners or custodians.
I also determine that the exhibition or
display of the exhibit objects at the
Institute for the Study of the Ancient
World, New York University, New York,
New York, from on or about November
6, 2019, until on or about May 24, 2020,
and at possible additional exhibitions or
venues yet to be determined, is in the
national interest. I have ordered that
Public Notice of these determinations be
published in the Federal Register.
FOR FURTHER INFORMATION CONTACT: Chi
D. Tran, Paralegal Specialist, Office of
the Legal Adviser, U.S. Department of
State (telephone: 202–632–6471; email:
section2459@state.gov). The mailing
address is U.S. Department of State,
L/PD, SA–5, Suite 5H03, Washington,
DC 20522–0505.
SUPPLEMENTARY INFORMATION: The
foregoing determinations were made
pursuant to the authority vested in me
by the Act of October 19, 1965 (79 Stat.
985; 22 U.S.C. 2459), Executive Order
12047 of March 27, 1978, the Foreign
SUMMARY:
71 15
72 17
U.S.C. 78s(b)(3)(C).
CFR 200.30–3(a)(57) and (58).
VerDate Sep<11>2014
17:22 Oct 02, 2019
Jkt 250001
Under part 211 of title 49 Code of
Federal Regulations (CFR), this
document provides the public notice
that on September 3, 2019, the Canadian
National Railway (CN) petitioned the
Federal Railroad Administration (FRA)
to extend and modify a waiver of
compliance from certain provisions of
the Federal railroad safety regulations
contained at 49 CFR part 229.
Specifically, CN seeks to extend its
waiver for 81 carbody style locomotives
(BCOL 4601–4626 and CN 2400–2454)
that are not equipped with a brake valve
adjacent to each end exit door. CN also
requests relief from a condition of the
original waiver which required such
locomotives to be captive to CN’s
system while operated in the United
States. FRA assigned the petition Docket
Number FRA–1999–5756.
CN explains that all locomotives
covered under its request are equipped
with a rear walkway from which the
engineer may be directed during a
reverse movement. CN further states it
has been complying with the existing
conditions of the waiver and is not
aware of any operational problems with
these locomotives while in service in
the United States.
A copy of the petition, as well as any
written communications concerning the
petition, is available for review online at
www.regulations.gov and in person at
the U.S. Department of Transportation’s
(DOT) Docket Operations Facility, 1200
New Jersey Avenue SE, W12–140,
Washington, DC 20590. The Docket
Operations Facility is open from 9 a.m.
to 5 p.m., Monday through Friday,
except Federal Holidays.
Interested parties are invited to
participate in these proceedings by
submitting written views, data, or
comments. FRA does not anticipate
scheduling a public hearing in
PO 00000
Frm 00062
Fmt 4703
Sfmt 4703
52929
connection with these proceedings since
the facts do not appear to warrant a
hearing. If any interested parties desire
an opportunity for oral comment and a
public hearing, they should notify FRA,
in writing, before the end of the
comment period and specify the basis
for their request.
All communications concerning these
proceedings should identify the
appropriate docket number and may be
submitted by any of the following
methods:
• Website: https://
www.regulations.gov. Follow the online
instructions for submitting comments.
• Fax: 202–493–2251.
• Mail: Docket Operations Facility,
U.S. Department of Transportation, 1200
New Jersey Avenue SE, W12–140,
Washington, DC 20590.
• Hand Delivery: 1200 New Jersey
Avenue SE, Room W12–140,
Washington, DC 20590, between 9 a.m.
and 5 p.m., Monday through Friday,
except Federal Holidays.
Communications received by
November 18, 2019 will be considered
by FRA before final action is taken.
Comments received after that date will
be considered if practicable.
Anyone can search the electronic
form of any written communications
and comments received into any of our
dockets by the name of the individual
submitting the comment (or signing the
document, if submitted on behalf of an
association, business, labor union, etc.).
Under 5 U.S.C. 553(c), DOT solicits
comments from the public to better
inform its processes. DOT posts these
comments, without edit, including any
personal information the commenter
provides, to www.regulations.gov, as
described in the system of records
notice (DOT/ALL–14 FDMS), which can
be reviewed at https://
www.transportation.gov/privacy. See
also https://www.regulations.gov/
privacyNotice for the privacy notice of
regulations.gov.
Issued in Washington, DC.
John Karl Alexy,
Associate Administrator for Railroad Safety,
Chief Safety Officer.
[FR Doc. 2019–21513 Filed 10–2–19; 8:45 am]
BILLING CODE 4910–06–P
DEPARTMENT OF TRANSPORTATION
Federal Transit Administration
[FTA Docket No. FTA 2019–0017]
Agency Information Collection Activity
Under OMB Review
AGENCY:
Federal Transit Administration,
DOT.
E:\FR\FM\03OCN1.SGM
03OCN1
]]>Agencies
[Federal Register Volume 84, Number 192 (Thursday, October 3, 2019)]
[Notices]
[Pages 52925-52929]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-21474]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87144; File No. SR-CboeEDGX-2019-050]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.;
Suspension of and Order Instituting Proceedings To Determine Whether To
Approve or Disapprove a Proposed Rule Change Amending the Fee Schedule
Assessed on Members To Establish a Monthly Trading Rights Fee
September 27, 2019.
I. Introduction
On August 1, 2019, Cboe EDGX Exchange, Inc. (``EDGX'' or the
``Exchange'') 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 (File Number SR-CboeEDGX-2019-050) to amend the
EDGX fee schedule to establish a monthly Trading Rights Fee to be
assessed on Members. The proposed rule change was immediately effective
upon filing with the Commission pursuant to Section 19(b)(3)(A) of the
Act.\3\ The proposed rule change was published for comment in the
Federal Register on August 20, 2019.\4\ The Commission has received one
comment letter on the proposal, and one response letter from the
Exchange.\5\ Under Section 19(b)(3)(C) of the Act,\6\ the Commission is
hereby: (i) Temporarily suspending the proposed rule change; and (ii)
instituting proceedings to determine whether to approve or disapprove
the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A).
\4\ See Securities Exchange Act Release No. 86686 (August 14,
2019), 84 FR 43222 (``Notice'').
\5\ See Letters from: Theodore R. Lazo, Managing Director and
Associate General Counsel, SIFMA, dated September 12, 2019 (``SIFMA
Letter''); Adrian Griffiths, Assistant General Counsel, Cboe, dated
September 25, 2019 (``Exchange Response Letter''). Comment letters
are available on the Commission's website at: https://www.sec.gov/comments/sr-cboeedgx-2019-050/srcboeedgx2019050.htm.
\6\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange proposes to amend the Membership Fees section of the
EDGX fee schedule to establish a monthly Trading Rights Fee, which
would be assessed on Members that trade more than a specified volume in
U.S. equities.\7\ Specifically, the Exchange proposes to charge Members
a Trading Rights Fee of $500 per month for the ability to trade on the
Exchange.\8\ A Member would not be charged the monthly Trading Rights
Fee if it qualifies for one of the following waivers: (1) The Member
has a monthly ADV \9\ of less than 100,000 shares, (2) at least 90% of
the Member's orders submitted to the Exchange per month are retail
orders,\10\ or (3) a new Member is within the first three months of
their membership.\11\
---------------------------------------------------------------------------
\7\ See Notice, supra note 4, at 43222. The Commission notes
that the Exchange's affiliates, Cboe BYX Exchange, Inc., Cboe BZX
Exchange, Inc., and Cboe EDGA Exchange, Inc., each also filed a
proposed rule change to amend their fee schedules to establish a
monthly Trading Rights Fee to be assessed on Members: CboeBYX-2019-
013, CboeBZX-2019-072, and CboeEDGA-2019-014, respectively.
\8\ See id.
\9\ See id. ``ADV'' means average daily volume calculated as the
number of shares added or removed, combined, per day. ADV is
calculated on a monthly basis. See id. at n.5.
\10\ See id. at 43222.
\11\ See id. For any month in which a firm is approved for
Membership with the Exchange, the monthly Trading Rights Fee would
be pro-rated in accordance with the date on which Membership is
approved. See id. at 43223.
---------------------------------------------------------------------------
III. Suspension of the Proposed Rule Change
Pursuant to Section 19(b)(3)(C) of the Act,\12\ at any time within
60 days of the date of filing of a proposed rule change pursuant to
Section 19(b)(1) of the
[[Page 52926]]
Act,\13\ 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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78s(b)(3)(C).
\13\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
The Exchange asserts that the proposed Trading Rights Fee ``is
reasonable because it will assist in funding the overall regulation and
maintenance of the Exchange'' and will contribute to ``ensuring that
adequate resources are devoted to regulation.'' \14\ The Exchange also
believes the proposed fee is reasonable because it ``represents a
modest charge'' applied to firms that ``have chosen to become members
of the Exchange,'' and such firms consume more regulatory resources and
``benefit from the Exchange's regulatory efforts by having access to a
well-regulated market.'' \15\ The Exchange notes that its Regulatory
Services Agreement (``RSA'') costs, which cover regulatory services in
connection with market and financial surveillance, examinations,
investigations, and disciplinary procedure, have increased 17.5%, while
the Exchange's overall regulatory costs have grown 117%, from 2016 to
2019.\16\ The Exchange also asserts that the proposed Trading Rights
Fee is reasonable because the ``cost of this membership fee is
generally less than the analogous membership fees of other markets''
and that a number of national securities exchanges currently charge
similar Trading Rights fees to assist in funding their regulatory
efforts.\17\
---------------------------------------------------------------------------
\14\ See Notice, supra note 4, at 43224.
\15\ See id.
\16\ See id.
\17\ See id. The Exchange notes, for example, that the
Exchange's proposed Trading Rights Fee of $500 a month is
``substantially lower'' than the monthly $1,250 Trading Rights Fee
that Nasdaq assesses on its members. Id.
---------------------------------------------------------------------------
The Exchange states that it believes the proposed Trading Rights
Fee is equitable and not unfairly discriminatory because it will apply
equally to all Members that do not qualify for a waiver.\18\ The
Exchange further asserts that the proposed fee is equitable and not
unfairly discriminatory because it will ``contribute to a portion of
the costs incurred by the Exchange in providing its Members with an
efficient and well-regulated market, which benefits all Members.'' \19\
---------------------------------------------------------------------------
\18\ See id. at 43225.
\19\ See id.
---------------------------------------------------------------------------
In regard to the proposed waivers pursuant to which Members would
not be charged the Trading Rights Fee, the Exchange states that it
believes that such waivers are reasonable.\20\ Specifically, the
Exchange states that the proposed waiver for Members that trade less
than a monthly ADV of 100,000 shares is reasonable because it would
allow such smaller Members to continue to trade at a lower cost.\21\ In
addition, the Exchange states the waiver is reasonable because such
firms consume fewer regulatory resources.\22\ The Exchange also asserts
that the proposed ADV threshold of 100,000 is reasonable because the
median ADV per firm per month on the Exchange is 443,192; therefore,
the proposed ADV threshold would serve to capture ``smaller volume firm
outliers as compared to the overall ADV across all firms.'' \23\
---------------------------------------------------------------------------
\20\ See id. at 43224-25. The Exchange also asserts that the
waivers are equitable and not unfairly discriminatory in the Notice.
See id. at 43225.
\21\ See id. at 43224.
\22\ See id.
\23\ See id. at 43224-25.
---------------------------------------------------------------------------
The Exchange also states that the second waiver for Members that
submit 90% or more of their orders per month as retail orders is
reasonable because it would ensure that ``retail broker members can
continue to submit orders for individual investors at a lower cost,
thereby continuing to encourage retail investor participation on the
Exchange.'' \24\ The Exchange also argues that increased liquidity in
retail order flow could benefit all market participants by
incentivizing other Members to send order flow to the Exchange and
increasing overall liquidity, as well by positively impacting market
quality by reflecting long-term investment intentions of retail
participation.\25\ The Exchange also asserts that the retail order
volume threshold is reasonable because it would serve to capture
broker-dealers that are primarily in the business of handling orders on
behalf of retail investors, rather than larger broker-dealers that may
route some retail orders on behalf of other broker-dealers, but for the
most part are engaging in a significant amount of activity not related
to servicing retail investors.\26\
---------------------------------------------------------------------------
\24\ See id. at 43225.
\25\ See id.
\26\ See id.
---------------------------------------------------------------------------
Finally the Exchange states that it believes that not charging a
Trading Rights Fee for new Members is reasonable because it would
incentivize firms to become Members of the Exchange and bring
additional liquidity to the market to the benefit of all market
participants.\27\ The Exchange asserts that the proposed waiver for new
Members is also reasonable because ``it will allow new firms the
flexibility in resources needed to initially adjust to the Exchange's
market-model and functionality.'' \28\
---------------------------------------------------------------------------
\27\ See id. at 43224.
\28\ See id.
---------------------------------------------------------------------------
Regarding competition, the Exchange states that it believes the
proposed rule change does not impose any burden on either intramarket
or intermarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act.\29\ The Exchange notes that,
with regard to intramarket competition, the proposed rule change would
apply equally to all Members that reach an ADV of 100,000 shares traded
or greater, those in which less than 90% of their order volume is
retail order volume per month, and those that are not within their
first three months of new Membership on the Exchange.\30\ In regard to
intermarket competition, the Exchange states that it operates in a
highly competitive market, and that this includes competition for
exchange memberships.\31\ The Exchange explains that Members have
numerous venues on which they can participate, including other equities
exchanges and off-exchange venues such as alternative trading
systems.\32\ The Exchange asserts that while trade-through and best
execution obligations may require a firm to access the Exchange, no
firm is compelled to be a Member of the Exchange in order to
participate on the Exchange, and accordingly firms may freely choose to
participate on the Exchange without holding a Membership.\33\ The
Exchange believes that if the proposed fee is unattractive to members,
the Exchange is likely to lose membership and market share as a
result.\34\
---------------------------------------------------------------------------
\29\ See id. at 43225.
\30\ See id.
\31\ See id.
\32\ See id. at 43225-26. The Exchange states that it represents
a small percentage of the overall market, and based on publicly
available information, no single equities exchange has more than 20%
market share, and no exchange group has more than 22% market share.
See id. at 43226. The Exchange references the Cboe Global Markets
U.S. Equities Market Volume Summary (July 31, 2019), available at
https://markets.cboe.com/us/equities/market_share. See id. at n.15.
\33\ See id. at 43226.
\34\ See id.
---------------------------------------------------------------------------
As noted above, the Commission received one comment letter on the
[[Page 52927]]
proposed rule change.\35\ SIFMA notes that the Exchange previously
filed a proposed rule change to institute a trading rights fee, and the
Commission suspended that filing.\36\ SIFMA argues that, like the prior
proposal, the Exchange did not provide sufficient information in the
filing to support a finding that the proposal is consistent with the
Act.\37\ Specifically, SIFMA asserts that the Exchange should provide
quantitative data showing its anticipated revenues, costs and
profitability, as well as describe its methodology for estimating the
baseline and expected costs and revenues.\38\ Further, SIFMA argues
that the Exchange should provide specific detail regarding the amount
of its regulatory costs rather than information about broad percentage
increases in such costs.\39\ In addition, SIFMA believes the Exchange
should provide specific detail about the amount of revenue it would
expect to receive from the Trading Rights Fee, as well as the amount of
revenue it receives from other sources that are intended to fund
regulation, such as registration and licensing fees.\40\
---------------------------------------------------------------------------
\35\ See supra note 5.
\36\ See SIFMA Letter, supra note 5, at 1.
\37\ See id.
\38\ See id. at 2.
\39\ See id.
\40\ See id.
---------------------------------------------------------------------------
SIFMA also asserts the Exchange's Trading Rights Fee would not be
constrained by competition because broker-dealers must pay this fee
prior to being able to satisfy their regulatory obligations and
deciding where to route orders.\41\ SIFMA notes that trade-through
requirements under Regulation NMS, as well as broker-dealers' best
execution obligations, effectively require direct or indirect access
and connection to all registered exchanges, and each exchange remains
the exclusive purveyor of those services.\42\
---------------------------------------------------------------------------
\41\ See id.
\42\ See id.
---------------------------------------------------------------------------
In response, the Exchange reiterated several of the arguments for
the proposed rule change that were provided in the Notice. In addition,
the Exchange states that contrary to SIFMA's assertions, the instant
filing contains significantly more information and analysis in regard
to the proposed fee, including information related to increases in
regulatory costs.\43\ The Exchange indicates that the proposed fee
would defray only a portion of these increasing costs.\44\ The Exchange
also asserts that in regard to competition, broker-dealers are not
compelled to become members of any particular exchange, and a number of
broker-dealers are able to meet their business and compliance needs by
trading via other arrangements.\45\
---------------------------------------------------------------------------
\43\ See Exchange Response Letter, supra note 5, at 2.
\44\ See id.
\45\ See id.
---------------------------------------------------------------------------
The Exchange originally filed a proposal to implement a Trading
Rights Fee on April 29, 2019.\46\ That proposal, CboeEDGX-2019-029, was
published for comment in the Federal Register on May 16, 2019.\47\ On
June 28, 2019, pursuant to Section 19(b)(3)(C) of the Act, the
Commission: (i) Temporarily suspended the proposed rule change; and
(ii) instituted proceedings to determine whether to approve or
disapprove the proposed rule change.\48\ The instant filing proposes an
identical Trading Rights Fee and raises similar concerns as to whether
it is consistent with the Act.\49\
---------------------------------------------------------------------------
\46\ See Securities Exchange Act Release No. 85838 (May 10,
2019), 84 FR 22174.
\47\ See id.
\48\ See Securities Exchange Act Release No. 86231 (June 28,
2019), 84 FR 32233 (July 5, 2019).
\49\ See id.
---------------------------------------------------------------------------
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.\50\ 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.'' \51\
---------------------------------------------------------------------------
\50\ 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'').
\51\ See id.
---------------------------------------------------------------------------
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; \52\ (2) perfect the mechanism of a
free and open market and a national market system, protect investors
and the public interest, and not be designed to permit unfair
discrimination between customers, issuers, brokers, or dealers; \53\
and (3) not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.\54\
---------------------------------------------------------------------------
\52\ 15 U.S.C. 78f(b)(4).
\53\ 15 U.S.C. 78f(b)(5).
\54\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
In temporarily suspending the Exchange's fee change, the Commission
intends to further consider whether assessing the proposed monthly
Trading Rights Fee on certain Members is 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 permit unfair
discrimination between customers, issuers, brokers or dealers; and do
not impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act.\55\
---------------------------------------------------------------------------
\55\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
---------------------------------------------------------------------------
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 changes.\56\
---------------------------------------------------------------------------
\56\ 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).
---------------------------------------------------------------------------
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) \57\ and 19(b)(2)(B) of the Act \58\ to determine whether
the proposed rule change should be approved or disapproved. Institution
of proceedings does not indicate that the Commission has reached any
conclusions with respect to any of the issues involved. Rather, the
Commission seeks and encourages interested persons to provide
additional comment on the proposed rule change to inform the
Commission's analysis of whether to disapprove the proposed rule
change.
---------------------------------------------------------------------------
\57\ 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.
\58\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\59\ the Commission is
providing notice of the grounds for possible disapproval under
consideration:
---------------------------------------------------------------------------
\59\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Section 6(b)(4) of the Act, which requires that the rules
of a national securities exchange ``provide for the equitable
allocation of reasonable dues,
[[Page 52928]]
fees, and other charges among its members and issuers and other persons
using its facilities,'' \60\
---------------------------------------------------------------------------
\60\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Section 6(b)(5) of the Act, which requires, among other
things, that the rules of a national securities exchange be ``designed
to perfect the operation of a free and open market and a national
market system'' and ``protect investors and the public interest,'' and
not be ``designed to permit unfair discrimination between customers,
issuers, brokers, or dealers,'' \61\ and
---------------------------------------------------------------------------
\61\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Section 6(b)(8) of the Act, which requires that the rules
of a national securities exchange ``not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of [the Act].'' \62\
---------------------------------------------------------------------------
\62\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
As noted above, the proposal imposes a new monthly Trading Rights
Fee on certain Members. The Commission notes that the Exchange's
statements in support of the proposed rule change are general in nature
and lack detail and specificity. For example, while the Exchange
asserts that the proposed fee will fund overall regulation and
maintenance of the Exchange and provides broad figures illustrating the
percentage by which RSA and regulatory costs have increased from 2016
to 2019, the Exchange has not described how the proposed fee would
address these regulatory increases.\63\ Further, the rationale provided
does not address how the proposed fee is an equitable allocation of
fees beyond noting that it applies to all Members who do not qualify
for a waiver, and broadly asserting that the proposed fee should
benefit ``all Members'' by contributing to the provision of ``an
efficient and well-regulated market'' for Members.\64\
---------------------------------------------------------------------------
\63\ See Notice, supra note 4, at 43224.
\64\ See id. at 43225.
---------------------------------------------------------------------------
As discussed above, one commenter asserts, among other concerns,
that the Exchange's cost-based discussion is not sufficiently detailed
to support its claims that the proposed Trading Rights Fee is
consistent with the requirements of the Act, and that the Exchange has
not offered sufficient detail to establish that the proposed fee would
be constrained by significant competitive forces.\65\ The commenter
indicates that, among other things, additional information addressing
both revenues and costs is lacking in the Exchange's proposal.
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\65\ See SIFMA Letter, supra note 5, at 1-2
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Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the [SRO]
that proposed the rule change.'' \66\ 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,\67\ 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.\68\
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\66\ Rule 700(b)(3), Commission Rules of Practice, 17 CFR
201.700(b)(3).
\67\ See id.
\68\ See id.
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The Commission is instituting proceedings to allow for additional
consideration and comment on the issues raised herein, including as to
whether the proposed fees are consistent with the Act, and
specifically, with its requirements that exchange fees be reasonable
and equitably allocated; be designed to perfect the mechanism of a free
and open market and the national market system, protect investors and
the public interest, and not be unfairly discriminatory; or not impose
an unnecessary or inappropriate burden on competition.\69\
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\69\ See 15 U.S.C. 78f(b)(4), (5), and (8).
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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. Such comments should be submitted by October 24, 2019.
Rebuttal comments should be submitted by November 7, 2019. Although
there do not appear to be any issues relevant to approval or
disapproval which 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.\70\
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\70\ 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).
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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.
Interested persons are invited to submit written data, views, and
arguments concerning the proposed rule change, 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-2019-050 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-2019-050. 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 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-CboeEDGX-2019-050 and should be
submitted on or before October 24, 2019. Rebuttal comments should be
submitted by November 7, 2019.
[[Page 52929]]
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(3)(C) of the
Act,\71\ that File Number SR-CboeEDGX-2019-050 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.
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\71\ 15 U.S.C. 78s(b)(3)(C).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\72\
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\72\ 17 CFR 200.30-3(a)(57) and (58).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-21474 Filed 10-2-19; 8:45 am]
BILLING CODE 8011-01-P
