Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule Applicable to Members and Non-Members of the Exchange Pursuant to EDGA Rules 15.1(a) and (c), 14265-14269 [2020-04905]
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Federal Register / Vol. 85, No. 48 / Wednesday, March 11, 2020 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88329; File No. SR–NYSE–
2020–01]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Designation of Longer Period for
Commission Action on Proposed Rule
Change To Amend the Rule 6800
Series, the Exchange’s Compliance
Rule Regarding the National Market
System Plan Governing the
Consolidated Audit Trail
proceedings to determine whether to
disapprove, the proposed rule change
(File No. SR–NYSE–2020–01).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.6
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–04907 Filed 3–10–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
lotter on DSKBCFDHB2PROD with NOTICES
March 5, 2020.
On January 3, 2020, New York Stock
Exchange LLC (‘‘NYSE’’ or ‘‘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 to amend the Exchange’s
compliance rule regarding the National
Market System Plan Governing the
Consolidated Audit Trail. The proposed
rule change was published for comment
in the Federal Register on January 23,
2020.3 The Commission has received no
comment letters on the proposed rule
change.
Section 19(b)(2) of the Act 4 provides
that within 45 days of the publication of
notice of the filing of a proposed rule
change, or within such longer period up
to 90 days as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or as to which the
self-regulatory organization consents,
the Commission shall either approve the
proposed rule change, disapprove the
proposed rule change, or institute
proceedings to determine whether the
proposed rule change should be
disapproved. The 45th day for this filing
is March 8, 2020.
The Commission is extending the 45day time period for Commission action
on the proposed rule change. The
Commission finds that it is appropriate
to designate a longer period within
which to take action on the proposed
rule change so that it has sufficient time
to consider the proposed rule change.
Accordingly, pursuant to Section
19(b)(2)(A)(ii)(I) of the Act 5 and for the
reasons stated above, the Commission
designates April 22, 2020, as the date by
which the Commission shall either
approve, disapprove, or institute
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 87990
(January 16, 2020), 85 FR 3963.
4 15 U.S.C. 78s(b)(2).
5 15 U.S.C. 78s(b)(2)(A)(ii)(I).
2 17
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[Release No. 34–88327; File No. SR–
CboeEDGA–2020–007]
Self-Regulatory Organizations; Cboe
EDGA Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend the
Fee Schedule Applicable to Members
and Non-Members of the Exchange
Pursuant to EDGA Rules 15.1(a) and
(c)
March 5, 2020.
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 March 2,
2020, Cboe EDGA Exchange, Inc. (the
‘‘Exchange’’) filed with the Securities
and Exchange Commission (the
‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) is filing with
the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change to amend the fee
schedule applicable to Members and
non-Members of the Exchange pursuant
to EDGA Rules 15.1(a) and (c). The text
of the proposed rule change is provided
in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/edga/),
at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
CFR 200.30–3(a)(31).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
Frm 00082
Fmt 4703
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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
fee schedule in connection with its
Add/Remove Volume Tiers, effective
March 2, 2020.
The Exchange first 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 or
incentives to be insufficient. More
specifically, the Exchange is only one of
13 registered equities exchanges, as well
as a number of alternative trading
systems and other off-exchange venues
that do not have similar self-regulatory
responsibilities under the Exchange Act,
to which market participants may direct
their order flow. Based on publicly
available information,3 no single
registered equities exchange has more
than 17% of the market share. Thus, in
such a low-concentrated and highly
competitive market, no single equities
exchange possesses significant pricing
power in the execution of order flow.
The Exchange in particular operates a
‘‘Taker-Maker’’ model whereby it pays
credits to members that remove
liquidity and assesses fees to those that
add liquidity. The Exchange’s fee
schedule sets forth the standard rebates
and rates applied per share for orders
that provide and remove liquidity,
respectively. Particularly, for securities
at or above $1.00, the Exchange
provides a standard rebate of $0.0018
per share for orders that remove
liquidity and assesses a fee of $0.0030
per share for orders that add liquidity.
The Exchange believes that the evershifting market share among the
3 See Cboe Global Markets, U.S. Equities Market
Volume Summary, Month-to-Date (February 25,
2020), available at https://markets.cboe.com/us/
equities/market_statistics/.
6 17
PO 00000
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exchanges from month to month
demonstrates that market participants
can shift order flow, or discontinue or
reduce use of certain categories of
products, in response to fee changes.
Accordingly, competitive forces
constrain the Exchange’s transaction
fees, and market participants can readily
trade on competing venues if they deem
pricing levels at those other venues to
be more favorable.
In response to the competitive
environment described above, the
Exchange offers tiered pricing which
provides Members opportunities to
qualify for higher rebates or reduced
fees where certain volume criteria and
thresholds are met. Tiered pricing
provides incremental incentives for
Members to strive for higher or different
tier levels by offering increasingly
higher discounts or enhanced benefits
for satisfying increasingly more
stringent criteria or different criteria.
The Exchange currently provides for
such tiers pursuant to footnote 7 of the
fee schedule, which specifically offers
Add/Remove Volume Tiers. To
illustrate, Add Volume Tier 1 provides
Members an opportunity to receive a
reduced fee of $0.0026 for their liquidity
adding orders that yield fee codes ‘‘3’’,4
‘‘4’’,5 ‘‘B’’,6 ‘‘V’’,7 and ‘‘Y’’ 8 where that
Member has an ADAV 9 of greater than
or equal to 0.10% of the TCV 10.
Likewise, Remove Volume Tier 1
provides Members an opportunity to
receive an enhanced rebate for their
liquidity removing orders that yield fee
codes ‘‘N’’,11 ‘‘W’’,12 ‘‘6’’,13 and ‘‘BB’’ 14
where that Member adds or removes an
ADV 15 of greater than or equal to 0.05%
4 Appended to orders that add liquidity to EDGA,
pre and post market (Tapes A or C).
5 Appended to orders that add liquidity to EDGA,
pre and post market (Tape B).
6 Appended to orders that add liquidity to EDGA
(Tape B).
7 Appended to orders that add liquidity to EDGA
(Tape A).
8 Appended to orders that add liquidity to EDGA,
(Tape C).
9 ADAV means average daily volume calculated
as the number of shares added per day. ADAV is
calculated on a monthly basis.
10 TCV means total consolidated volume
calculated as the volume reported by all exchanges
and trade reporting facilities to a consolidated
transaction reporting plan for the month for which
the fees apply.
11 Appended to orders that remove liquidity from
EDGA (Tape C).
12 Appended to orders that remove liquidity from
EDGA (Tape A).
13 Appended to orders that remove liquidity from
EDGA, pre and post market (All Tapes).
14 Appended to orders that remove liquidity from
EDGA (Tape B).
15ADV means daily volume calculated as the
number of shares added to, removed from, or routed
by, the exchange, or any combination or subset
thereof, per day. ADV is calculated on a monthly
basis.
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of the TCV. The Exchanges proposes to
add adopt an additional Add Volume
Tier and an additional Remove Volume
Tier under footnote 7.
First, the Exchange proposes to adopt
Add Volume Tier 3, which would
provide a Member with an opportunity
to receive a reduced fee of $0.0016 for
qualifying, liquidity adding orders (i.e.,
yielding fee code 3, 4, B, V, or Y) where
a Member adds or removes an ADV of
greater than or equal to 0.65% of the
TCV. Second, the Exchange proposes to
adopt Remove Volume Tier 3, which
would provide a Member with an
opportunity to receive an enhanced
rebate of $0.0028 for qualifying,
liquidity removing orders (i.e., yielding
fee code N, W, 6, or BB) where a
Member adds or removes an ADV of
greater than or equal to 0.65% of the
TCV. The proposed criteria in both tiers
are designed to incentivize Members to
increase their overall order flow, both
adding and removing orders, in order to
receive a reduced fee on their liquidity
adding orders as well as an enhanced
rebate on their liquidity removing
orders. The proposed tiers provide both
liquidity providing Members and
liquidity executing Members additional
opportunities to receive a reduced fee
and an enhanced rebate. Thus, it
provides liquidity adding Members on
the Exchange a further incentive to
contribute to a deeper, more liquid
market, and liquidity executing
Members on the Exchange a further
incentive to increase transactions and
take execution opportunities provided
by such increased liquidity. The
Exchange believes that this, in turn,
benefits all Members by contributing
towards a robust and well-balanced
market ecosystem. The Exchange notes
the proposed tiers are available to all
Members and are competitively
achievable for all Members that submit
add and/or remove order flow, in that,
all firms that submit the requisite order
flow could compete to meet the tiers.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,16
in general, and furthers the objectives of
Section 6(b)(4),17 in particular, as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its Members and
issuers and other persons using its
facilities. The Exchange also believes
that the proposed rule change is
consistent with the objectives of Section
16 15
17 15
PO 00000
U.S.C. 78f.
U.S.C. 78f(b)(4).
Frm 00083
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6(b)(5) 18 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest, and,
particularly, is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange operates in a highlycompetitive 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 or incentives to be
insufficient. The proposed rule change
reflects a competitive pricing structure
designed to incentivize market
participants to direct their order flow to
the Exchange, which the Exchange
believes would enhance market quality
to the benefit of all Members.
In particular, the Exchange believes
that both proposed Add Volume Tier 3
and Remove Volume Tier 3 are
reasonable because they each provide an
additional opportunity for Members to
receive either a discounted rate or an
enhanced rebate by means of liquidity
adding and/or removing orders. The
Exchange notes that relative volumebased incentives and discounts have
been widely adopted by exchanges,19
including the Exchange,20 and are
reasonable, equitable and nondiscriminatory because they are open to
all members on an equal basis and
provide additional benefits or discounts
that are reasonably related to (i) the
value to an exchange’s market quality
and (ii) associated higher levels of
market activity, such as higher levels of
liquidity provision and/or growth
patterns. Additionally, as noted above,
the Exchange operates in highly
competitive market. The Exchange is
only one of several equity venues to
which market participants may direct
18 15
U.S.C. 78f(b)(5).
e.g., the Nasdaq Stock Market LLC Rules,
Equity 7, Sec. 118(a)(1); and the Nasdaq BX, Inc.
Rules, Equity 7 Pricing Schedule, Sec. 118(a), both
of which generally provide credits to members for
adding and/or removing liquidity that reaches
certain thresholds of Consolidated Volume; see also
Cboe BYX U.S. Equities Exchange Fee Schedule,
Footnote 1, Add/Remove Volume Tiers, which
provides similar incentives for liquidity adding and
removing orders.
20 See generally, Cboe EDGA U.S. Equities
Exchange Fee Schedule, Footnote 7, Add/Remove
Volume Tiers.
19 See
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their order flow, and it represents a
small percentage of the overall market.
It is also only one of several taker-maker
exchanges. Competing equity exchanges
offer similar tiered pricing structures to
that of the Exchange, including
schedules of rebates and fees that apply
based upon members achieving certain
volume and/or growth thresholds. These
competing pricing schedules, moreover,
are presently comparable to those that
the Exchange provides, including the
pricing of comparable criteria and fees
and rebates.21
Specifically, the Exchange believes
the proposed tier criteria under Add
Volume Tier 3 and Remove Volume Tier
3, that is, an ADV threshold component
as a percentage of TCV for, is a
reasonable means to further incentivize
Members to increase their overall order
flow to the Exchange by encouraging
those Members to strive for the
different, incrementally more difficult
tier criteria under the proposed tiers to
receive a reduced rate and/or enhanced
rebate. As such, adopting criteria based
on a Member’s adding and removing
orders will encourage liquidity
providing Members to provide for a
deeper, more liquid market, and
Members executing on the Exchange to
increase transactions and take such
execution opportunities provided by
increased liquidity. The Exchange
believes that an increase in overall order
flow as a result of the proposed tiers
would benefit all investors by
deepening the Exchange’s liquidity
pool, providing greater execution
incentives and opportunities, offering
additional flexibility for all investors to
enjoy cost savings, supporting the
quality of price discovery, promoting
market transparency and improving
investor protection.
In line with the relative difficulty of
the proposed criteria for Add Volume
Tier 3 and Remove Volume Tier 3, the
Exchange believes that providing a
greater reduced fee and an additional
enhanced rebate, respectively, is
reasonable as they are commensurate
with the proposed criteria, that is, they
reasonably reflect the scaled difficulty
(Add Volume Tier 3) or different, yet
comparable criteria (Remove Volume
21 See supra note 19. Nasdaq offers credits
between $0.0025 and $0.0029 and BX offers
between $0.0014 and $0.0029 per share for liquidity
removing orders depending on different
Consolidated Volume-based criteria achieved,
which are substantially similar to the rebate rate
which the Exchange proposes for liquidity
removing orders. BX charges between $0.0024 and
$0.0028 per share between for liquidity adding
orders for certain Consolidated Volume-based
criteria achieved, which is substantially similar to
the reduced fee rate which the Exchange proposes
for liquidity adding orders.
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Tier 3) from achieving respective Tiers
1 and 2 to achieving the proposed ADV
threshold as a percentage TCV in the
respective proposed tiers. Also, the
proposed fee and rebate corresponding
to the proposed criteria do not represent
a significant departure from the fees and
rebates current offered, or criteria
required, under the Exchange’s existing
tiers. For example, the discounted fees
assessed under the existing Add Volume
Tiers, for which a Member must have an
daily volume add (ADAV) of 0.10% or
greater than the TCV (Add Volume Tier
1) or a daily volume add (ADAV) of
0.45% or greater than the TCV (Add
Volume Tier 2), is $0.0026 per share and
$0.0022 per share, respectively. The
Exchange believes that, as proposed, the
percentage of TCV that a Member’s add
or remove ADV must meet is a
meaningful increase over the percentage
of TCV that other threshold components
must meet in Add Volume Tiers 1 and
2. Therefore the proposed criteria is
incrementally more difficult to achieve
and, thus, commensurate with a greater
reduced fee. Similarly, the enhanced
rebates under the existing Remove
Volume Tiers, for which a Member must
have an add or remove ADV of 0.05%
of the TCV (Tier 1), is $0.0022, or a
remove ADV of greater than or equal to
0.10% of the TCV plus a Step-Up
Remove TCV from October 2019 of
greater than or equal to 0.05% (Tier 2),
is $0.0028. The Exchange believes that,
as proposed, the percentage of TCV that
a Member’s add or remove ADV must
meet is a meaningful increase over the
percentage of TCV that other threshold
components must meet in respective
Tiers 1 and 2, however, Tier 2 also
provides for two-pronged criteria that a
Member must achieve to receive the
corresponding enhanced rebate.
Therefore the Exchange believes that the
proposed criteria in Tier 3 is similar in
difficulty to achieve from Tier 2 and,
thus, commensurate with the same
enhanced rebate. Also, as stated, the
proposed reduced fee offered for
liquidity adding orders and enhanced
rebate offered for liquidity removing
orders is in line with fees and rebates
for liquidity adding or removing orders
in place on other equities exchanges.22
The Exchange believes that the
proposal represents an equitable
allocation of rebates and is not unfairly
discriminatory because all Members are
eligible for the proposed Add and
Remove Volume tiers, and would have
the opportunity to meet the tiers’
criteria and would receive the proposed
fee and/or rebate if such criteria is met.
Without having a view of activity on
22 See
PO 00000
supra note 21.
Frm 00084
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14267
other markets and off-exchange venues,
the Exchange has no way of knowing
whether this proposed rule change
would definitely result in any Members
qualifying for the new Add or Remove
Volume tiers. While the Exchange has
no way of predicting with certainty how
the proposed tiers will impact Member
activity, the Exchange anticipates that at
least four Members will be able to
compete for and reach each of the
proposed tiers. The Exchange
anticipates that the tiers will include
various Member types, including
liquidity providers (e.g. wholesale firms
that mainly make markets for retail
orders), broker-dealers (e.g. bulge
bracket firms that conduct trading on
behalf of customers), and proprietary
firms, each providing distinct types of
order flow to the Exchange to the benefit
of all market participants. For example,
broker-dealer customer order flow
provides more trading opportunities,
which attracts Market Makers. Increased
Market Maker activity facilitates tighter
spreads which potentially increases
order flow from other market
participants. The Exchange also notes
that the proposed tiers will not
adversely impact any Member’s pricing
or their ability to qualify for other
reduced fee or enhanced rebate tiers.
Rather, should a Member not meet the
proposed criteria under the respective
tiers, the Member will merely not
receive that reduced fee/enhanced
rebate. Furthermore, the proposed
reduced fee and enhanced rebate would
uniformly apply to all Members that
meet the required criteria under the
respective proposed tiers.
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 intramarket or
intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Rather, as
discussed above, the Exchange believes
that the proposed change would
encourage the submission of additional
order flow to a public exchange, thereby
promoting market depth, execution
incentives and enhanced execution
opportunities, as well as price discovery
and transparency for all Members. As a
result, the Exchange believes that the
proposed change furthers the
Commission’s goal in adopting
Regulation NMS of fostering
competition among orders, which
promotes ‘‘more efficient pricing of
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individual stocks for all types of orders,
large and small.’’ 23
The Exchange believes the proposed
rule change does not impose any burden
on intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Particularly,
the proposed change applies to all
Members equally in that all Members
are eligible for the proposed tiers, have
a reasonable opportunity to meet the
tiers’ criteria and will all receive the
proposed fee and/or rebate if such
criteria is met. Additionally the
proposed tier changes are designed to
attract additional order flow to the
Exchange. The Exchange believes that
the additional tier criteria would
incentivize market participants to direct
liquidity and executing order flow to the
Exchange, bringing with it improved
price transparency. Greater overall order
flow and pricing transparency benefits
all market participants on the Exchange
by providing more trading
opportunities, enhancing market
quality, and continuing to encourage
Members to send orders, thereby
contributing towards a robust and wellbalanced market ecosystem, which
benefits all market participants.
Next, the Exchange believes the
proposed rule change does not impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
As previously discussed, the Exchange
operates in a highly competitive market.
Members have numerous alternative
venues that they may participate on and
direct their order flow, including 12
other equities exchanges and offexchange venues and alternative trading
systems. Additionally, the Exchange
represents a small percentage of the
overall market. Based on publicly
available information, no single equities
exchange has more than 17% of the
market share.24 Therefore, no exchange
possesses significant pricing power in
the execution of order flow. Indeed,
participants can readily choose to send
their orders to other exchange and offexchange venues if they deem fee levels
at those other venues to be more
favorable. Moreover, the Commission
has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Specifically, in Regulation
NMS, the Commission highlighted the
importance of market forces in
determining prices and SRO revenues
23 Securities Exchange Act Release No. 51808, 70
FR 37495, 37498–99 (June 29, 2005) (S7–10–04)
(Final Rule).
24 See supra note 3.
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and, also, recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 25 The
fact that this market is competitive has
also long been recognized by the courts.
In NetCoalition v. Securities and
Exchange Commission, the D.C. Circuit
stated as follows: ‘‘[n]o one disputes
that competition for order flow is
‘fierce.’ . . . As the SEC explained, ‘[i]n
the U.S. national market system, buyers
and sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’
[and] ‘no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’. 26 Accordingly, the
Exchange does not believe its proposed
fee change imposes any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
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 is effective
upon filing pursuant to Section
19(b)(3)(A) 27 of the Act and
subparagraph (f)(2) of Rule 19b–4 28
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
25 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
26 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
27 15 U.S.C. 78s(b)(3)(A).
28 17 CFR 240.19b–4(f)(2).
PO 00000
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Commission shall institute proceedings
under Section 19(b)(2)(B) 29 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File No. SR–
CboeEDGA–2020–007 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 No.
SR–CboeEDGA–2020–007. 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 No.
29 15
E:\FR\FM\11MRN1.SGM
U.S.C. 78s(b)(2)(B).
11MRN1
Federal Register / Vol. 85, No. 48 / Wednesday, March 11, 2020 / Notices
SR–CboeEDGA–2020–007, and should
be submitted on or before April 1, 2020.
Secretary, and at the Commission’s
Public Reference Room.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
J. Matthew DeLesDernier,
Assistant Secretary.
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 aspects of such
statements.
[FR Doc. 2020–04905 Filed 3–10–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88326; File No. SR–
CboeEDGA–2020–006]
Self-Regulatory Organizations; Cboe
EDGA Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Adopt the
Dark Routing Technique Routing
Option; To Eliminate References to the
ROUD, ROUE, and ROUQ Routing
Options; and To Reflect Additional
Routing Strategies for Which the
Exchange May Route Orders With a
Short Sale Instruction
March 5, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on February
26, 2020, Cboe EDGA Exchange, Inc.
(the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
lotter on DSKBCFDHB2PROD with NOTICES
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) proposes to
make certain changes to Rule 11.11
(Routing to Away Trading Centers) and
to make corresponding amendments to
its Fee Schedule.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/edga/),
at the Exchange’s Office of the
30 17
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)(iii).
4 17 CFR 240.19b–4(f)(6).
1 15
VerDate Sep<11>2014
16:37 Mar 10, 2020
Jkt 250001
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to: (i) Adopt
the DRT routing option under proposed
Rule 11.11(g)(2); (ii) amend Rule
11.11(g) to eliminate the ROUD, ROUE,
and ROUQ routing options and to
eliminate any such references in its Fee
Schedule; and (iii) amend Rule 11.11(a)
to make clear that if a User 5 selects the
RDOT, RDOX, or INET routing options,
orders with a short sale 6 instruction
when a short sale circuit breaker
pursuant to Rule 201 of Regulation
SHO 7 (the ‘‘SSCB’’) is in effect are
eligible for routing by the Exchange. The
Exchange intends to implement the
proposed rule changes on March 2,
2020.
Adopting DRT
The Exchange proposes to adopt the
DRT under subparagraph (g)(2) as a new
routing option available on the
Exchange. As noted in proposed Rule
11.11(g)(2), the DRT routing option
would instruct the System 8 to route to
alternative trading systems (‘‘ATSs’’)
included in the System routing table.9
The proposed description of DRT is
identical to existing Cboe BZX
5 See
Exchange Rule 1.5(ee).
Exchange Rule 11.6(o). The term ‘‘short
sale’’ is defined as ‘‘any sale of a security which the
seller does not own or any sale which is
consummated by the delivery of a security
borrowed by, or for the account of, the seller.’’ 17
CFR 242.200(a).
7 See 17 CFR 242.201; Securities Exchange Act
Release No. 61595 (February 26, 2010), 75 FR 11232
(March 10, 2010).
8 See Exchange Rule 1.5(cc).
9 The term ‘‘System routing table’’ refers to the
proprietary process for determining the specific
trading venues to which the System routes orders
and the order in which it routes them. See
Exchange Rule 11.11(g).
6 See
PO 00000
Frm 00086
Fmt 4703
Sfmt 4703
14269
Exchange, Inc. (‘‘BZX’’) and Cboe BYX
Exchange, Inc. (‘‘BYX’’) Rules
11.13(b)(3)(D) and Cboe EDGX
Exchange, Inc. (‘‘EDGX’’) Rule
11.11(g)(2).10 Thus, the proposed
amendment is intended to add certain
system functionality currently offered
by BZX, BYX, and EDGX in order to
provide a consistent technology offering
for Users across the Cboe affiliated
exchanges.
Currently, for routing mechanisms
that route orders to ATSs, the Exchange
routes such orders using a preselected
sequence of venues pursuant to the
applicable System routing table and
every order is routed to such venues in
that sequence.11 Stated another way, all
orders entered with a routing strategy
that is eligible for routing to ATSs will
first seek liquidity on the Exchange and
any unexecuted portion of the order will
then be routed in accordance with the
pre-established sequence in the System
routing table.
As proposed, the DRT routing
mechanism would instead use a
randomly generated, weighted
permutation to prioritize off-exchange
venues based on a ‘‘score’’ 12 for each
off-exchange venue, where a higher
score will result in a greater likelihood
that the off-exchange venue will be
selected earlier in the permutation. The
DRT routing mechanism will be
established in the System routing table
and replace the existing routing
mechanism that routes orders to ATSs.
The Exchange believes that converting
from this mechanical, sequential routing
strategy to the more dynamic strategy
applied with DRT will allow an offexchange venue with a lower score to
occasionally be selected before an offexchange venue with a higher score, and
thus provides the Exchange with the
most accurate view of the quality at
each market. As a result, the Exchange
believes that DRT may result in
improved execution quality.
Additionally, converting to DRT will
result in uniformity that will simplify
the Exchange’s routing logic and
10 The Exchange notes that EDGX Rule 11.11(g)(2)
was recently modified to mirror BZX/BYX Rules
11.13(b)(3)(D). See Securities Exchange Act Release
No. 88154 (February 12, 2020), 85 FR 8327
(February 13, 2020) (SR–CboeEDGX–2020–006).
11 The Exchange notes that the current routing
mechanism is set forth in the System routing table,
and is not referenced in Exchange Rules.
Nonetheless, the Exchange proposes to adopt the
DRT under subparagraph (g)(2) of Rule 11.11 to
harmonize the Exchange’s rules with BZX/BYX
Rule 11.13(b)(3)(D) and EDGX Rule 11.11(g)(2).
12 ‘‘Scores’’ are assigned to each off-exchange
venue by the Exchange and are determined based
on various factors, such as order fill percentage,
latency, and price improvement.
E:\FR\FM\11MRN1.SGM
11MRN1
]]>Agencies
[Federal Register Volume 85, Number 48 (Wednesday, March 11, 2020)]
[Notices]
[Pages 14265-14269]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04905]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88327; File No. SR-CboeEDGA-2020-007]
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Fee Schedule Applicable to Members and Non-Members of the
Exchange Pursuant to EDGA Rules 15.1(a) and (c)
March 5, 2020.
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 March 2, 2020, Cboe EDGA Exchange, Inc. (the ``Exchange'')
filed with the Securities and Exchange Commission (the ``Commission'')
the proposed rule change as described in Items I and II below, which
Items have been prepared by the Exchange. 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGA Exchange, Inc. (the ``Exchange'' or ``EDGA'') is filing
with the Securities and Exchange Commission (``Commission'') a proposed
rule change to amend the fee schedule applicable to Members and non-
Members of the Exchange pursuant to EDGA Rules 15.1(a) and (c). The
text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/edga/), at the Exchange's Office of the Secretary, 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 aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its fee schedule in connection with
its Add/Remove Volume Tiers, effective March 2, 2020.
The Exchange first 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 or incentives to be insufficient. More specifically, the
Exchange is only one of 13 registered equities exchanges, as well as a
number of alternative trading systems and other off-exchange venues
that do not have similar self-regulatory responsibilities under the
Exchange Act, to which market participants may direct their order flow.
Based on publicly available information,\3\ no single registered
equities exchange has more than 17% of the market share. Thus, in such
a low-concentrated and highly competitive market, no single equities
exchange possesses significant pricing power in the execution of order
flow. The Exchange in particular operates a ``Taker-Maker'' model
whereby it pays credits to members that remove liquidity and assesses
fees to those that add liquidity. The Exchange's fee schedule sets
forth the standard rebates and rates applied per share for orders that
provide and remove liquidity, respectively. Particularly, for
securities at or above $1.00, the Exchange provides a standard rebate
of $0.0018 per share for orders that remove liquidity and assesses a
fee of $0.0030 per share for orders that add liquidity. The Exchange
believes that the ever-shifting market share among the
[[Page 14266]]
exchanges from month to month demonstrates that market participants can
shift order flow, or discontinue or reduce use of certain categories of
products, in response to fee changes. Accordingly, competitive forces
constrain the Exchange's transaction fees, and market participants can
readily trade on competing venues if they deem pricing levels at those
other venues to be more favorable.
---------------------------------------------------------------------------
\3\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (February 25, 2020), available at https://markets.cboe.com/us/equities/market_statistics/.
---------------------------------------------------------------------------
In response to the competitive environment described above, the
Exchange offers tiered pricing which provides Members opportunities to
qualify for higher rebates or reduced fees where certain volume
criteria and thresholds are met. Tiered pricing provides incremental
incentives for Members to strive for higher or different tier levels by
offering increasingly higher discounts or enhanced benefits for
satisfying increasingly more stringent criteria or different criteria.
The Exchange currently provides for such tiers pursuant to footnote 7
of the fee schedule, which specifically offers Add/Remove Volume Tiers.
To illustrate, Add Volume Tier 1 provides Members an opportunity to
receive a reduced fee of $0.0026 for their liquidity adding orders that
yield fee codes ``3'',\4\ ``4'',\5\ ``B'',\6\ ``V'',\7\ and ``Y'' \8\
where that Member has an ADAV \9\ of greater than or equal to 0.10% of
the TCV \10\. Likewise, Remove Volume Tier 1 provides Members an
opportunity to receive an enhanced rebate for their liquidity removing
orders that yield fee codes ``N'',\11\ ``W'',\12\ ``6'',\13\ and ``BB''
\14\ where that Member adds or removes an ADV \15\ of greater than or
equal to 0.05% of the TCV. The Exchanges proposes to add adopt an
additional Add Volume Tier and an additional Remove Volume Tier under
footnote 7.
---------------------------------------------------------------------------
\4\ Appended to orders that add liquidity to EDGA, pre and post
market (Tapes A or C).
\5\ Appended to orders that add liquidity to EDGA, pre and post
market (Tape B).
\6\ Appended to orders that add liquidity to EDGA (Tape B).
\7\ Appended to orders that add liquidity to EDGA (Tape A).
\8\ Appended to orders that add liquidity to EDGA, (Tape C).
\9\ ADAV means average daily volume calculated as the number of
shares added per day. ADAV is calculated on a monthly basis.
\10\ TCV means total consolidated volume calculated as the
volume reported by all exchanges and trade reporting facilities to a
consolidated transaction reporting plan for the month for which the
fees apply.
\11\ Appended to orders that remove liquidity from EDGA (Tape
C).
\12\ Appended to orders that remove liquidity from EDGA (Tape
A).
\13\ Appended to orders that remove liquidity from EDGA, pre and
post market (All Tapes).
\14\ Appended to orders that remove liquidity from EDGA (Tape
B).
\15\ADV means daily volume calculated as the number of shares
added to, removed from, or routed by, the exchange, or any
combination or subset thereof, per day. ADV is calculated on a
monthly basis.
---------------------------------------------------------------------------
First, the Exchange proposes to adopt Add Volume Tier 3, which
would provide a Member with an opportunity to receive a reduced fee of
$0.0016 for qualifying, liquidity adding orders (i.e., yielding fee
code 3, 4, B, V, or Y) where a Member adds or removes an ADV of greater
than or equal to 0.65% of the TCV. Second, the Exchange proposes to
adopt Remove Volume Tier 3, which would provide a Member with an
opportunity to receive an enhanced rebate of $0.0028 for qualifying,
liquidity removing orders (i.e., yielding fee code N, W, 6, or BB)
where a Member adds or removes an ADV of greater than or equal to 0.65%
of the TCV. The proposed criteria in both tiers are designed to
incentivize Members to increase their overall order flow, both adding
and removing orders, in order to receive a reduced fee on their
liquidity adding orders as well as an enhanced rebate on their
liquidity removing orders. The proposed tiers provide both liquidity
providing Members and liquidity executing Members additional
opportunities to receive a reduced fee and an enhanced rebate. Thus, it
provides liquidity adding Members on the Exchange a further incentive
to contribute to a deeper, more liquid market, and liquidity executing
Members on the Exchange a further incentive to increase transactions
and take execution opportunities provided by such increased liquidity.
The Exchange believes that this, in turn, benefits all Members by
contributing towards a robust and well-balanced market ecosystem. The
Exchange notes the proposed tiers are available to all Members and are
competitively achievable for all Members that submit add and/or remove
order flow, in that, all firms that submit the requisite order flow
could compete to meet the tiers.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\16\ in general, and
furthers the objectives of Section 6(b)(4),\17\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its Members and issuers and other persons
using its facilities. The Exchange also believes that the proposed rule
change is consistent with the objectives of Section 6(b)(5) \18\
requirements that the rules of an exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest, and, particularly, is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
---------------------------------------------------------------------------
\16\ 15 U.S.C. 78f.
\17\ 15 U.S.C. 78f(b)(4).
\18\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange 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 or
incentives to be insufficient. The proposed rule change reflects a
competitive pricing structure designed to incentivize market
participants to direct their order flow to the Exchange, which the
Exchange believes would enhance market quality to the benefit of all
Members.
In particular, the Exchange believes that both proposed Add Volume
Tier 3 and Remove Volume Tier 3 are reasonable because they each
provide an additional opportunity for Members to receive either a
discounted rate or an enhanced rebate by means of liquidity adding and/
or removing orders. The Exchange notes that relative volume-based
incentives and discounts have been widely adopted by exchanges,\19\
including the Exchange,\20\ and are reasonable, equitable and non-
discriminatory because they are open to all members on an equal basis
and provide additional benefits or discounts that are reasonably
related to (i) the value to an exchange's market quality and (ii)
associated higher levels of market activity, such as higher levels of
liquidity provision and/or growth patterns. Additionally, as noted
above, the Exchange operates in highly competitive market. The Exchange
is only one of several equity venues to which market participants may
direct
[[Page 14267]]
their order flow, and it represents a small percentage of the overall
market. It is also only one of several taker-maker exchanges. Competing
equity exchanges offer similar tiered pricing structures to that of the
Exchange, including schedules of rebates and fees that apply based upon
members achieving certain volume and/or growth thresholds. These
competing pricing schedules, moreover, are presently comparable to
those that the Exchange provides, including the pricing of comparable
criteria and fees and rebates.\21\
---------------------------------------------------------------------------
\19\ See e.g., the Nasdaq Stock Market LLC Rules, Equity 7, Sec.
118(a)(1); and the Nasdaq BX, Inc. Rules, Equity 7 Pricing Schedule,
Sec. 118(a), both of which generally provide credits to members for
adding and/or removing liquidity that reaches certain thresholds of
Consolidated Volume; see also Cboe BYX U.S. Equities Exchange Fee
Schedule, Footnote 1, Add/Remove Volume Tiers, which provides
similar incentives for liquidity adding and removing orders.
\20\ See generally, Cboe EDGA U.S. Equities Exchange Fee
Schedule, Footnote 7, Add/Remove Volume Tiers.
\21\ See supra note 19. Nasdaq offers credits between $0.0025
and $0.0029 and BX offers between $0.0014 and $0.0029 per share for
liquidity removing orders depending on different Consolidated
Volume-based criteria achieved, which are substantially similar to
the rebate rate which the Exchange proposes for liquidity removing
orders. BX charges between $0.0024 and $0.0028 per share between for
liquidity adding orders for certain Consolidated Volume-based
criteria achieved, which is substantially similar to the reduced fee
rate which the Exchange proposes for liquidity adding orders.
---------------------------------------------------------------------------
Specifically, the Exchange believes the proposed tier criteria
under Add Volume Tier 3 and Remove Volume Tier 3, that is, an ADV
threshold component as a percentage of TCV for, is a reasonable means
to further incentivize Members to increase their overall order flow to
the Exchange by encouraging those Members to strive for the different,
incrementally more difficult tier criteria under the proposed tiers to
receive a reduced rate and/or enhanced rebate. As such, adopting
criteria based on a Member's adding and removing orders will encourage
liquidity providing Members to provide for a deeper, more liquid
market, and Members executing on the Exchange to increase transactions
and take such execution opportunities provided by increased liquidity.
The Exchange believes that an increase in overall order flow as a
result of the proposed tiers would benefit all investors by deepening
the Exchange's liquidity pool, providing greater execution incentives
and opportunities, offering additional flexibility for all investors to
enjoy cost savings, supporting the quality of price discovery,
promoting market transparency and improving investor protection.
In line with the relative difficulty of the proposed criteria for
Add Volume Tier 3 and Remove Volume Tier 3, the Exchange believes that
providing a greater reduced fee and an additional enhanced rebate,
respectively, is reasonable as they are commensurate with the proposed
criteria, that is, they reasonably reflect the scaled difficulty (Add
Volume Tier 3) or different, yet comparable criteria (Remove Volume
Tier 3) from achieving respective Tiers 1 and 2 to achieving the
proposed ADV threshold as a percentage TCV in the respective proposed
tiers. Also, the proposed fee and rebate corresponding to the proposed
criteria do not represent a significant departure from the fees and
rebates current offered, or criteria required, under the Exchange's
existing tiers. For example, the discounted fees assessed under the
existing Add Volume Tiers, for which a Member must have an daily volume
add (ADAV) of 0.10% or greater than the TCV (Add Volume Tier 1) or a
daily volume add (ADAV) of 0.45% or greater than the TCV (Add Volume
Tier 2), is $0.0026 per share and $0.0022 per share, respectively. The
Exchange believes that, as proposed, the percentage of TCV that a
Member's add or remove ADV must meet is a meaningful increase over the
percentage of TCV that other threshold components must meet in Add
Volume Tiers 1 and 2. Therefore the proposed criteria is incrementally
more difficult to achieve and, thus, commensurate with a greater
reduced fee. Similarly, the enhanced rebates under the existing Remove
Volume Tiers, for which a Member must have an add or remove ADV of
0.05% of the TCV (Tier 1), is $0.0022, or a remove ADV of greater than
or equal to 0.10% of the TCV plus a Step-Up Remove TCV from October
2019 of greater than or equal to 0.05% (Tier 2), is $0.0028. The
Exchange believes that, as proposed, the percentage of TCV that a
Member's add or remove ADV must meet is a meaningful increase over the
percentage of TCV that other threshold components must meet in
respective Tiers 1 and 2, however, Tier 2 also provides for two-pronged
criteria that a Member must achieve to receive the corresponding
enhanced rebate. Therefore the Exchange believes that the proposed
criteria in Tier 3 is similar in difficulty to achieve from Tier 2 and,
thus, commensurate with the same enhanced rebate. Also, as stated, the
proposed reduced fee offered for liquidity adding orders and enhanced
rebate offered for liquidity removing orders is in line with fees and
rebates for liquidity adding or removing orders in place on other
equities exchanges.\22\
---------------------------------------------------------------------------
\22\ See supra note 21.
---------------------------------------------------------------------------
The Exchange believes that the proposal represents an equitable
allocation of rebates and is not unfairly discriminatory because all
Members are eligible for the proposed Add and Remove Volume tiers, and
would have the opportunity to meet the tiers' criteria and would
receive the proposed fee and/or rebate if such criteria is met. Without
having a view of activity on other markets and off-exchange venues, the
Exchange has no way of knowing whether this proposed rule change would
definitely result in any Members qualifying for the new Add or Remove
Volume tiers. While the Exchange has no way of predicting with
certainty how the proposed tiers will impact Member activity, the
Exchange anticipates that at least four Members will be able to compete
for and reach each of the proposed tiers. The Exchange anticipates that
the tiers will include various Member types, including liquidity
providers (e.g. wholesale firms that mainly make markets for retail
orders), broker-dealers (e.g. bulge bracket firms that conduct trading
on behalf of customers), and proprietary firms, each providing distinct
types of order flow to the Exchange to the benefit of all market
participants. For example, broker-dealer customer order flow provides
more trading opportunities, which attracts Market Makers. Increased
Market Maker activity facilitates tighter spreads which potentially
increases order flow from other market participants. The Exchange also
notes that the proposed tiers will not adversely impact any Member's
pricing or their ability to qualify for other reduced fee or enhanced
rebate tiers. Rather, should a Member not meet the proposed criteria
under the respective tiers, the Member will merely not receive that
reduced fee/enhanced rebate. Furthermore, the proposed reduced fee and
enhanced rebate would uniformly apply to all Members that meet the
required criteria under the respective proposed tiers.
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 intramarket or intermarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
Rather, as discussed above, the Exchange believes that the proposed
change would encourage the submission of additional order flow to a
public exchange, thereby promoting market depth, execution incentives
and enhanced execution opportunities, as well as price discovery and
transparency for all Members. As a result, the Exchange believes that
the proposed change furthers the Commission's goal in adopting
Regulation NMS of fostering competition among orders, which promotes
``more efficient pricing of
[[Page 14268]]
individual stocks for all types of orders, large and small.'' \23\
---------------------------------------------------------------------------
\23\ Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
---------------------------------------------------------------------------
The Exchange believes the proposed rule change does not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the proposed
change applies to all Members equally in that all Members are eligible
for the proposed tiers, have a reasonable opportunity to meet the
tiers' criteria and will all receive the proposed fee and/or rebate if
such criteria is met. Additionally the proposed tier changes are
designed to attract additional order flow to the Exchange. The Exchange
believes that the additional tier criteria would incentivize market
participants to direct liquidity and executing order flow to the
Exchange, bringing with it improved price transparency. Greater overall
order flow and pricing transparency benefits all market participants on
the Exchange by providing more trading opportunities, enhancing market
quality, and continuing to encourage Members to send orders, thereby
contributing towards a robust and well-balanced market ecosystem, which
benefits all market participants.
Next, the Exchange believes the proposed rule change does not
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As previously
discussed, the Exchange operates in a highly competitive market.
Members have numerous alternative venues that they may participate on
and direct their order flow, including 12 other equities exchanges and
off-exchange venues and alternative trading systems. Additionally, the
Exchange represents a small percentage of the overall market. Based on
publicly available information, no single equities exchange has more
than 17% of the market share.\24\ Therefore, no exchange possesses
significant pricing power in the execution of order flow. Indeed,
participants can readily choose to send their orders to other exchange
and off-exchange venues if they deem fee levels at those other venues
to be more favorable. Moreover, the Commission has repeatedly expressed
its preference for competition over regulatory intervention in
determining prices, products, and services in the securities markets.
Specifically, in Regulation NMS, the Commission highlighted the
importance of market forces in determining prices and SRO revenues and,
also, recognized that current regulation of the market system ``has
been remarkably successful in promoting market competition in its
broader forms that are most important to investors and listed
companies.'' \25\ The fact that this market is competitive has also
long been recognized by the courts. In NetCoalition v. Securities and
Exchange Commission, the D.C. Circuit stated as follows: ``[n]o one
disputes that competition for order flow is `fierce.' . . . As the SEC
explained, `[i]n the U.S. national market system, buyers and sellers of
securities, and the broker-dealers that act as their order-routing
agents, have a wide range of choices of where to route orders for
execution' [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers'. . . .''. \26\ Accordingly, the Exchange does not believe its
proposed fee change imposes any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
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\24\ See supra note 3.
\25\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\26\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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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 is effective upon filing pursuant to
Section 19(b)(3)(A) \27\ of the Act and subparagraph (f)(2) of Rule
19b-4 \28\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\27\ 15 U.S.C. 78s(b)(3)(A).
\28\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \29\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\29\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File No. SR-CboeEDGA-2020-007 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 No. SR-CboeEDGA-2020-007. 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 No.
[[Page 14269]]
SR-CboeEDGA-2020-007, and should be submitted on or before April 1,
2020.
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\30\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-04905 Filed 3-10-20; 8:45 am]
BILLING CODE 8011-01-P
