Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule, 51113-51117 [2020-18100]

Download as PDF Federal Register / Vol. 85, No. 161 / Wednesday, August 19, 2020 / Notices jbell on DSKJLSW7X2PROD with NOTICES addressing various circumstances, which will enable the Exchange to continue to be organized and have the capacity to be able to carry out the purposes of the Act. In particular, the proposed rule changes would allow the Board to retain both control and flexibility over the location and timing of stockholder meetings, would allow the Board to postpone, recess, reschedule or cancel a stockholder meeting, would allow only the presiding person of a stockholder meeting to adjourn and reset a stockholder meeting date in the absence of quorum, would allow for shorter notice in order for the Board to call a special meeting, would allow the Board and the Corporation to continue to function (including remotely) in the case of an emergency, such as the ongoing COVID–19 pandemic, and would provide the Board with increased flexibility in populating the Nomination and Governance Committee. Each of these proposed changes is designed to assist the Exchange in most effectively and efficiently managing evolving corporate matters as they arise, many of which are highly complex and may be time sensitive. Additionally, as indicated above, a majority of the proposed changes align certain Sections in the Parent Bylaws with current best practices and with the DCGL (as well as a change in accordance with Delaware common law) and are also consistent with bylaw provisions of Cboe’s peer corporations. Accordingly, the Exchange believes the proposed changes are widely accepted as appropriate governance measures. Lastly, the proposed nonsubstantive changes to the Parent Bylaws provide additional clarity within the Parent Bylaws and make them easier to understand. By making certain provisions read more in plain English, updating paragraph lettering and numbering, making certain terms uniform and simplifying language throughout, the proposed nonsubstantive changes benefit investors by providing more clarity and reduced complexity within the Parent Bylaws and making the Parent Bylaw [sic] better organized and easier to follow thus reducing potential investor confusion. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The proposed rule change is not intended to address competitive issues but rather is VerDate Sep<11>2014 16:34 Aug 18, 2020 Jkt 250001 concerned solely with updating the Parent Bylaws to reflect the changes described above. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Within 45 days of the date of publication of this notice in the Federal Register or within such longer period up to 90 days (i) as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or (ii) as to which the Exchange consents, the Commission will: A. By order approve or disapprove such proposed rule change, or B. institute proceedings to determine whether the proposed rule change should be 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 Number SR– CboeBYX–2020–022 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–CboeBYX–2020–022. 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 PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 51113 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–CboeBYX–2020–022 and should be submitted on or before September 9, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–18101 Filed 8–18–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–89539; File No. SR– CboeEDGA–2020–023] Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule August 13, 2020. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (the ‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on August 3, 2020, Cboe EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) 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 self-regulatory organization. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. 15 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 15 U.S.C. 78a. 3 17 CFR 240.19b–4. 1 15 E:\FR\FM\19AUN1.SGM 19AUN1 51114 Federal Register / Vol. 85, No. 161 / Wednesday, August 19, 2020 / 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’’) is filing with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change to amend the fee schedule. 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. jbell on DSKJLSW7X2PROD with NOTICES 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, as well as a fee code, effective August 3, 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,4 no single registered equities exchange has more than 18% of the market share. Thus, in such a low-concentrated and highly competitive market, no single equities 4 See Cboe Global Markets, U.S. Equities Market Volume Summary, Month-to-Date (July 31, 2020), available at https://markets.cboe.com/us/equities/ market_statistics/. VerDate Sep<11>2014 16:34 Aug 18, 2020 Jkt 250001 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 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’’,5 ‘‘4’’,6 ‘‘B’’,7 ‘‘V’’,8 and ‘‘Y’’ 9 where that Member has an ADAV 10 of greater than or equal to 0.10% of the TCV.11 5 Appended to orders that add liquidity to EDGA, pre and post market (Tapes A or C). 6 Appended to orders that add liquidity to EDGA, pre and post market (Tape B). 7 Appended to orders that add liquidity to EDGA (Tape B). 8 Appended to orders that add liquidity to EDGA (Tape A). 9 Appended to orders that add liquidity to EDGA (Tape C). 10 ADAV means average daily volume calculated as the number of shares added per day. ADAV is calculated on a monthly basis. 11 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. PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 Likewise, Remove Volume Tier 1 provides Members an opportunity to receive an enhanced rebate for their liquidity removing orders that yield fee codes ‘‘N’’,12 ‘‘W’’,13 ‘‘6’’,14 and ‘‘BB’’ 15 where that Member adds or removes an ADV 16 of greater than or equal to 0.05% of the TCV. Specifically, the Exchanges proposes to amend Add Volume Tiers 2 and 3 and delete Remove Volume Tier 2 under footnote 7. Currently, Tier 2 provides a Member with an opportunity to receive a reduced fee of $0.0022 for qualifying, liquidity adding orders (i.e. yielding fee code 3, 4, B, V, or Y) where a Member has an ADAV greater than or equal to 0.45% of the TCV, and Tier 3 provides a Member with an opportunity to receive a reduced fee of $0.0016 for qualifying orders where a Member adds or removes an ADV of greater than or equal to 0.65% of the TCV. The proposed rule change moves the criteria and reduced fee amount currently in Tier 3 to Tier 2 (and removes Tier 2’s current reduced fee amount and criteria) and proposes a to adopt new criteria and reduced fee amount in Tier 3. As proposed, new Tier 3 provides a Member a reduced fee of $0.0015 for qualifying orders where a Member adds or removes an ADV of greater than or equal to 0.75% of the TCV. The restructuring of Tier 3 to Tier 2 and the new criteria and reduced fee offered in proposed Tier 3 is designed to provide Members with an additional opportunity to receive a reduced fee on their liquidity adding orders, and thus incentive, to increase their overall order flow, both adding and removing orders, in order to achieve the proposed criteria and receive the reduced fee. Proposed Tier 3 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 tier is available to all 12 Appended to orders that remove liquidity from EDGA (Tape C). 13 Appended to orders that remove liquidity from EDGA (Tape A). 14 Appended to orders that remove liquidity from EDGA, pre and post market (All Tapes). 15 Appended to orders that remove liquidity from EDGA (Tape B). 16 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. E:\FR\FM\19AUN1.SGM 19AUN1 Federal Register / Vol. 85, No. 161 / Wednesday, August 19, 2020 / Notices 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 tier. The Exchange next proposes to delete Remove Volume Tier 2,17 which currently provides 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 removes an ADV of greater than or equal to 0.10% of the TCV and has a Step-Up Remove TCV from October 2019 of greater than or equal to 0.05%. The proposed rule change removes this tier as the Exchange has observed that none of its Members have been choosing to meet the criteria in current Tier 2 to achieve an enhanced rebate of $0.0028, but instead, have opted to meet the criteria in current Tier 3 (Tier 2, as amended) to receive an enhanced rebate for the same amount. Finally, in the Fee Code and Associated Fees table in the Fee Schedule, the Exchange proposes to amend the standard fee applied to orders yielding fee code ‘‘MM’’, which is appended to non-displayed orders that add liquidity using Mid-Point Peg, from $0.00080 to $0.0010. The Exchange notes that this is consistent with fees assessed on similar liquidity adding, Mid-Point Peg orders on other equities exchanges and off-exchange venues.18 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,19 in general, and furthers the objectives of Section 6(b)(4),20 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) 21 requirements that the rules of 17 And, as a result, updates current Tier 3 to Tier jbell on DSKJLSW7X2PROD with NOTICES 2. 18 See Nasdaq BX, Inc. Pricing List, ‘‘Fee to Add Liquidity using Order with Midpoint Pegging’’, available at https://www.nasdaqtrader.com/ Trader.aspx?id=bx_pricing, which assesses a fee of $0.0015 for firm orders with Midpoint Pegging adding non-displayed liquidity; and Nasdaq PSX, Inc. Pricing List, ‘‘Rebates to Add Non-Displayed Liquidity via an Order with Midpoint Pegging’’, available at [sic], which assesses a rebate of $0.0023 for firm orders with Midpoint Pegging adding nondisplayed liquidity. The Exchange notes that this is comparable to the fee that it proposes to asses as the standard fee for orders at $0.0030¥the proposed fee at $0.0010 = $0.0020. 19 15 U.S.C. 78f. 20 15 U.S.C. 78f(b)(4). 21 15 U.S.C. 78f.(b)(5). VerDate Sep<11>2014 16:34 Aug 18, 2020 Jkt 250001 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 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 the proposed restructured and additional Add Volume Tiers are reasonable because they each provide an additional opportunity for Members to receive a discounted rate by means of liquidity adding and removing orders. The Exchange notes that relative volume-based incentives and discounts have been widely adopted by exchanges 22, including the Exchange 23, 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 their order flow, and it represents a small percentage of the overall market. It is also only one of several taker-maker 22 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. 23 See generally, Cboe EDGA U.S. Equities Exchange Fee Schedule, Footnote 7, Add/Remove Volume Tiers. PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 51115 exchanges. Competing equity exchanges offer similar tiered pricing structures, including schedules of rebates and fees that apply based upon members achieving certain volume and/or growth thresholds, as well as assess similar fees or rebates for similar types of orders, to that of the Exchange. These competing pricing schedules, moreover, are presently comparable to those that the Exchange provides, including the pricing of comparable criteria and/or fees and rebates.24 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, the Exchange believes that providing a greater reduced fee is reasonable as it is commensurate with the proposed criteria, that is, it reasonably reflects the scaled difficulty in achieving the ADV threshold as a percentage TCV in Tier 2 (as relocated from current Tier 3) as compared to proposed Tier 3. Also, the proposed reduced fee corresponding to the proposed criteria in Tier 3 does not 24 See supra note 18. See also supra note 20 [sic]. Nasdaq offers credits between $0.00005 and $0.00305 per share for liquidity adding orders depending on different criteria achieved and member-base, which similarly equate to the reduced rate which the Exchange proposes for liquidity adding orders. BX charges between $0.0024 and $0.0028 per share between for liquidity adding orders for certain Consolidated Volumebased criteria achieved, which is substantially similar to the reduced rate which the Exchange proposes for liquidity adding orders. E:\FR\FM\19AUN1.SGM 19AUN1 jbell on DSKJLSW7X2PROD with NOTICES 51116 Federal Register / Vol. 85, No. 161 / Wednesday, August 19, 2020 / Notices represent a significant departure from the fees currently offered, or criteria required, under the Exchange’s existing tiers. For example, the discounted fees assessed under existing Add Volume Tier 1, for which a Member must have a daily volume add (ADAV) of 0.10% or greater than the TCV, is $0.0026 per share, and the discounted fee in restructured Tier 2 (current Tier 3), for which a Member must add or remove an ADV of greater than or equal to 0.65% of the TCV, is $0.0016. The Exchange believes that the step-up in difficulty in achieving an add volume threshold of 0.10% to achieving and add/remove volume threshold of 0.65% is commensurate with the difference in the reduced fees offered per the respective tiers. The Exchange notes too that the add/remove volume threshold between proposed Tier 2 and proposed Tier 3 is a smaller increase in difficulty and therefore is commensurate with the proposed smaller increase between the reduced fees offered. The Exchange believes the proposed rule change to delete Remove Volume Tier 2 is reasonable as its Members have not been choosing to meet the criteria under current Tier 2 to receive the enhanced rebate of $0.0028, but instead continue to opt to meet the criteria in current Tier 3 for which they can receive the same enhanced rebate. Therefore, the Exchange believes it is reasonable to remove an unused tier, particularly where another existing tier offers other criteria to achieve the same rebate. The Exchange further believes the proposed rule change to increase the fee amount for fee code MM is reasonable because, as stated above, in order to operate in the highly competitive equities markets, the Exchange and its competing exchanges seek to offer similar pricing structures, including assessing comparable fees for similar types of orders. Thus, the Exchange believes the proposed fee is reasonable as it is generally aligned with the amounts assessed for the same type of non-display orders using Mid-Point Peg that add liquidity on other equities exchanges,25 as well as off-exchange venues. The Exchange believes that the proposal represents an equitable allocation of fees and rebates and is not unfairly discriminatory because all Members are eligible for the proposed Add Volume Tier 3 and would have the opportunity to meet the tier’s criteria and would receive the proposed fee if such criteria is met. Without having a view of activity on other markets and 25 See supra note 18. VerDate Sep<11>2014 16:34 Aug 18, 2020 Jkt 250001 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 Volume tier. While the Exchange has no way of predicting with certainty how the proposed tier will impact Member activity, the Exchange anticipates that at least four Members will be able to compete for and reach the proposed tier. 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 likewise believes that the proposed rule change to deleted Remove Volume Tier 2 is represents an equitable allocation of rebates and is not unfairly discriminatory because it will no longer be available to any Member to choose to meet the tier. The Exchange also notes that proposed Add Volume Tier 3 and deleted Remove Volume Tier 2 will not adversely impact any Member’s pricing or their ability to qualify for other reduced fee or enhanced rebate tiers. Should a Member not meet the proposed criteria under the proposed tier, the Member will merely not receive that reduced fee/enhanced rebate. Further, Members already do not choose to meet the proposed deleted tier, therefore, will not be adversely impacted. Furthermore, the proposed reduced fee in Add Volume Tier 3 would uniformly apply to all Members that meet the required criteria under the respective proposed tiers. Finally, the Exchange believes that increasing the fee amount for orders yielding fee code MM represents an equitable allocation of fees and is not unfairly discriminatory because, as stated, it is appropriately in line with the rates assessed by competing exchanges and it will continue to automatically apply to all Members’ non-displayed liquidity adding orders using Mid-Point Peg. 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 PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 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 individual stocks for all types of orders, large and small.’’ 26 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 Add Volume tier, have a reasonable opportunity to meet the tier’s criteria and will all receive the proposed fee if such criteria is met. Additionally, the proposed Add Volume 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. Further, the Exchange does not believe that the proposed removal of Remove Volume Tier 2 imposes any burden on intramarket competition because, as noted above, no Members have been opting to achieve this tier and instead have been striving to achieve another Remove Volume Tier which offers the exact same enhanced rebate. In addition to this, the Exchange believes that the proposed fee for orders yielding fee code MM will continue to apply automatically to all such Members’ orders. Next, the Exchange believes the proposed rule change does not impose any burden on intermarket competition 26 Securities Exchange Act Release No. 51808, 70 FR 37495, 37498–99 (June 29, 2005) (S7–10–04) (Final Rule). E:\FR\FM\19AUN1.SGM 19AUN1 Federal Register / Vol. 85, No. 161 / Wednesday, August 19, 2020 / Notices jbell on DSKJLSW7X2PROD with NOTICES 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 18% of the market share.27 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 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.’’ 28 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’. . . .’’.29 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. 27 See supra note 4. Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 29 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)). 28 See VerDate Sep<11>2014 16:34 Aug 18, 2020 Jkt 250001 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) 30 of the Act and subparagraph (f)(2) of Rule 19b–4 31 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 Commission shall institute proceedings under Section 19(b)(2)(B) 32 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 Number SR– CboeEDGA–2020–023 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–2020–023. 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 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 32 15 U.S.C. 78s(b)(2)(B). 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–CboeEDGA–2020–023 and should be submitted on or before September 9, 2020. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.33 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2020–18100 Filed 8–18–20; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–89550; File No. SR– CboeBZX–2020–060] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing of a Proposed Rule Change To Amend the Fifth Amended and Restated Bylaws of the Exchange’s Parent Corporation, Cboe Global Markets, Inc. August 13, 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 July 30, 2020, Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule 30 15 33 17 31 17 1 15 PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 51117 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. E:\FR\FM\19AUN1.SGM 19AUN1

Agencies

[Federal Register Volume 85, Number 161 (Wednesday, August 19, 2020)]
[Notices]
[Pages 51113-51117]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-18100]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89539; File No. SR-CboeEDGA-2020-023]


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

August 13, 2020.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on August 3, 2020, Cboe EDGA Exchange, Inc. (the 
``Exchange'' or ``EDGA'') 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 self-
regulatory organization. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.

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[[Page 51114]]

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. 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, as well as a fee code, effective August 3, 
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,\4\ no single registered 
equities exchange has more than 18% 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 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.
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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (July 31, 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'',\5\ ``4'',\6\ ``B'',\7\ ``V'',\8\ and ``Y'' \9\ 
where that Member has an ADAV \10\ of greater than or equal to 0.10% of 
the TCV.\11\ Likewise, Remove Volume Tier 1 provides Members an 
opportunity to receive an enhanced rebate for their liquidity removing 
orders that yield fee codes ``N'',\12\ ``W'',\13\ ``6'',\14\ and ``BB'' 
\15\ where that Member adds or removes an ADV \16\ of greater than or 
equal to 0.05% of the TCV.
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    \5\ Appended to orders that add liquidity to EDGA, pre and post 
market (Tapes A or C).
    \6\ Appended to orders that add liquidity to EDGA, pre and post 
market (Tape B).
    \7\ Appended to orders that add liquidity to EDGA (Tape B).
    \8\ Appended to orders that add liquidity to EDGA (Tape A).
    \9\ Appended to orders that add liquidity to EDGA (Tape C).
    \10\ ADAV means average daily volume calculated as the number of 
shares added per day. ADAV is calculated on a monthly basis.
    \11\ 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.
    \12\ Appended to orders that remove liquidity from EDGA (Tape 
C).
    \13\ Appended to orders that remove liquidity from EDGA (Tape 
A).
    \14\ Appended to orders that remove liquidity from EDGA, pre and 
post market (All Tapes).
    \15\ Appended to orders that remove liquidity from EDGA (Tape 
B).
    \16\ 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.
---------------------------------------------------------------------------

    Specifically, the Exchanges proposes to amend Add Volume Tiers 2 
and 3 and delete Remove Volume Tier 2 under footnote 7. Currently, Tier 
2 provides a Member with an opportunity to receive a reduced fee of 
$0.0022 for qualifying, liquidity adding orders (i.e. yielding fee code 
3, 4, B, V, or Y) where a Member has an ADAV greater than or equal to 
0.45% of the TCV, and Tier 3 provides a Member with an opportunity to 
receive a reduced fee of $0.0016 for qualifying orders where a Member 
adds or removes an ADV of greater than or equal to 0.65% of the TCV. 
The proposed rule change moves the criteria and reduced fee amount 
currently in Tier 3 to Tier 2 (and removes Tier 2's current reduced fee 
amount and criteria) and proposes a to adopt new criteria and reduced 
fee amount in Tier 3. As proposed, new Tier 3 provides a Member a 
reduced fee of $0.0015 for qualifying orders where a Member adds or 
removes an ADV of greater than or equal to 0.75% of the TCV. The 
restructuring of Tier 3 to Tier 2 and the new criteria and reduced fee 
offered in proposed Tier 3 is designed to provide Members with an 
additional opportunity to receive a reduced fee on their liquidity 
adding orders, and thus incentive, to increase their overall order 
flow, both adding and removing orders, in order to achieve the proposed 
criteria and receive the reduced fee. Proposed Tier 3 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 tier is available to all

[[Page 51115]]

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 tier.
    The Exchange next proposes to delete Remove Volume Tier 2,\17\ 
which currently provides 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 removes an ADV 
of greater than or equal to 0.10% of the TCV and has a Step-Up Remove 
TCV from October 2019 of greater than or equal to 0.05%. The proposed 
rule change removes this tier as the Exchange has observed that none of 
its Members have been choosing to meet the criteria in current Tier 2 
to achieve an enhanced rebate of $0.0028, but instead, have opted to 
meet the criteria in current Tier 3 (Tier 2, as amended) to receive an 
enhanced rebate for the same amount.
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    \17\ And, as a result, updates current Tier 3 to Tier 2.
---------------------------------------------------------------------------

    Finally, in the Fee Code and Associated Fees table in the Fee 
Schedule, the Exchange proposes to amend the standard fee applied to 
orders yielding fee code ``MM'', which is appended to non-displayed 
orders that add liquidity using Mid-Point Peg, from $0.00080 to 
$0.0010. The Exchange notes that this is consistent with fees assessed 
on similar liquidity adding, Mid-Point Peg orders on other equities 
exchanges and off-exchange venues.\18\
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    \18\ See Nasdaq BX, Inc. Pricing List, ``Fee to Add Liquidity 
using Order with Midpoint Pegging'', available at https://www.nasdaqtrader.com/Trader.aspx?id=bx_pricing, which assesses a fee 
of $0.0015 for firm orders with Midpoint Pegging adding non-
displayed liquidity; and Nasdaq PSX, Inc. Pricing List, ``Rebates to 
Add Non-Displayed Liquidity via an Order with Midpoint Pegging'', 
available at [sic], which assesses a rebate of $0.0023 for firm 
orders with Midpoint Pegging adding non-displayed liquidity. The 
Exchange notes that this is comparable to the fee that it proposes 
to asses as the standard fee for orders at $0.0030-the proposed fee 
at $0.0010 = $0.0020.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\19\ in general, and 
furthers the objectives of Section 6(b)(4),\20\ 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) \21\ 
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.
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    \19\ 15 U.S.C. 78f.
    \20\ 15 U.S.C. 78f(b)(4).
    \21\ 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 the proposed restructured 
and additional Add Volume Tiers are reasonable because they each 
provide an additional opportunity for Members to receive a discounted 
rate by means of liquidity adding and removing orders. The Exchange 
notes that relative volume-based incentives and discounts have been 
widely adopted by exchanges \22\, including the Exchange \23\, 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 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, including schedules of rebates and 
fees that apply based upon members achieving certain volume and/or 
growth thresholds, as well as assess similar fees or rebates for 
similar types of orders, to that of the Exchange. These competing 
pricing schedules, moreover, are presently comparable to those that the 
Exchange provides, including the pricing of comparable criteria and/or 
fees and rebates.\24\
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    \22\ 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.
    \23\ See generally, Cboe EDGA U.S. Equities Exchange Fee 
Schedule, Footnote 7, Add/Remove Volume Tiers.
    \24\ See supra note 18. See also supra note 20 [sic]. Nasdaq 
offers credits between $0.00005 and $0.00305 per share for liquidity 
adding orders depending on different criteria achieved and member-
base, which similarly equate to the reduced rate which the Exchange 
proposes for liquidity adding 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 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, the Exchange believes that providing a greater 
reduced fee is reasonable as it is commensurate with the proposed 
criteria, that is, it reasonably reflects the scaled difficulty in 
achieving the ADV threshold as a percentage TCV in Tier 2 (as relocated 
from current Tier 3) as compared to proposed Tier 3. Also, the proposed 
reduced fee corresponding to the proposed criteria in Tier 3 does not

[[Page 51116]]

represent a significant departure from the fees currently offered, or 
criteria required, under the Exchange's existing tiers. For example, 
the discounted fees assessed under existing Add Volume Tier 1, for 
which a Member must have a daily volume add (ADAV) of 0.10% or greater 
than the TCV, is $0.0026 per share, and the discounted fee in 
restructured Tier 2 (current Tier 3), for which a Member must add or 
remove an ADV of greater than or equal to 0.65% of the TCV, is $0.0016. 
The Exchange believes that the step-up in difficulty in achieving an 
add volume threshold of 0.10% to achieving and add/remove volume 
threshold of 0.65% is commensurate with the difference in the reduced 
fees offered per the respective tiers. The Exchange notes too that the 
add/remove volume threshold between proposed Tier 2 and proposed Tier 3 
is a smaller increase in difficulty and therefore is commensurate with 
the proposed smaller increase between the reduced fees offered.
    The Exchange believes the proposed rule change to delete Remove 
Volume Tier 2 is reasonable as its Members have not been choosing to 
meet the criteria under current Tier 2 to receive the enhanced rebate 
of $0.0028, but instead continue to opt to meet the criteria in current 
Tier 3 for which they can receive the same enhanced rebate. Therefore, 
the Exchange believes it is reasonable to remove an unused tier, 
particularly where another existing tier offers other criteria to 
achieve the same rebate.
    The Exchange further believes the proposed rule change to increase 
the fee amount for fee code MM is reasonable because, as stated above, 
in order to operate in the highly competitive equities markets, the 
Exchange and its competing exchanges seek to offer similar pricing 
structures, including assessing comparable fees for similar types of 
orders. Thus, the Exchange believes the proposed fee is reasonable as 
it is generally aligned with the amounts assessed for the same type of 
non-display orders using Mid-Point Peg that add liquidity on other 
equities exchanges,\25\ as well as off-exchange venues.
---------------------------------------------------------------------------

    \25\ See supra note 18.
---------------------------------------------------------------------------

    The Exchange believes that the proposal represents an equitable 
allocation of fees and rebates and is not unfairly discriminatory 
because all Members are eligible for the proposed Add Volume Tier 3 and 
would have the opportunity to meet the tier's criteria and would 
receive the proposed fee 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 Volume tier. While the 
Exchange has no way of predicting with certainty how the proposed tier 
will impact Member activity, the Exchange anticipates that at least 
four Members will be able to compete for and reach the proposed tier. 
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 likewise believes that the proposed rule 
change to deleted Remove Volume Tier 2 is represents an equitable 
allocation of rebates and is not unfairly discriminatory because it 
will no longer be available to any Member to choose to meet the tier. 
The Exchange also notes that proposed Add Volume Tier 3 and deleted 
Remove Volume Tier 2 will not adversely impact any Member's pricing or 
their ability to qualify for other reduced fee or enhanced rebate 
tiers. Should a Member not meet the proposed criteria under the 
proposed tier, the Member will merely not receive that reduced fee/
enhanced rebate. Further, Members already do not choose to meet the 
proposed deleted tier, therefore, will not be adversely impacted. 
Furthermore, the proposed reduced fee in Add Volume Tier 3 would 
uniformly apply to all Members that meet the required criteria under 
the respective proposed tiers.
    Finally, the Exchange believes that increasing the fee amount for 
orders yielding fee code MM represents an equitable allocation of fees 
and is not unfairly discriminatory because, as stated, it is 
appropriately in line with the rates assessed by competing exchanges 
and it will continue to automatically apply to all Members' non-
displayed liquidity adding orders using Mid-Point Peg.

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 individual stocks for all types of orders, 
large and small.'' \26\
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    \26\ 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 Add Volume tier, have a reasonable opportunity to meet 
the tier's criteria and will all receive the proposed fee if such 
criteria is met. Additionally, the proposed Add Volume 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. Further, the Exchange does not 
believe that the proposed removal of Remove Volume Tier 2 imposes any 
burden on intramarket competition because, as noted above, no Members 
have been opting to achieve this tier and instead have been striving to 
achieve another Remove Volume Tier which offers the exact same enhanced 
rebate. In addition to this, the Exchange believes that the proposed 
fee for orders yielding fee code MM will continue to apply 
automatically to all such Members' orders.
    Next, the Exchange believes the proposed rule change does not 
impose any burden on intermarket competition

[[Page 51117]]

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 18% of the market share.\27\ 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.'' \28\ 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'. . . .''.\29\ 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.
---------------------------------------------------------------------------

    \27\ See supra note 4.
    \28\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \29\ 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) \30\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \31\ 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 
Commission shall institute proceedings under Section 19(b)(2)(B) \32\ 
of the Act to determine whether the proposed rule change should be 
approved or disapproved.
---------------------------------------------------------------------------

    \30\ 15 U.S.C. 78s(b)(3)(A).
    \31\ 17 CFR 240.19b-4(f)(2).
    \32\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeEDGA-2020-023 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-2020-023. 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-CboeEDGA-2020-023 and should be 
submitted on or before September 9, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-18100 Filed 8-18-20; 8:45 am]
BILLING CODE 8011-01-P
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