Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish a Monthly Fee Assessed on Members' MPIDs, 7324-7327 [2021-01731]

Download as PDF 7324 Federal Register / Vol. 86, No. 16 / Wednesday, January 27, 2021 / Notices subparagraph (f)(2) of Rule 19b–4 18 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) 19 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: khammond on DSKJM1Z7X2PROD with NOTICES 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– NYSEAMER–2021–03 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–NYSEAMER–2021–03. 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–NYSEAMER–2021–03, and should be submitted on or before February 17, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–01727 Filed 1–26–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–90964; File No. SR– CboeEDGA–2021–004] Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish a Monthly Fee Assessed on Members’ MPIDs January 21, 2021. 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 January 13, 2021, 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 Equities’’) proposes to amend its fee schedule to establish a fee in connection with a Member’s Market Participant Identifier(s) (‘‘MPID’’). The text of the 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 18 17 CFR 240.19b–4(f)(2). 19 15 U.S.C. 78s(b)(2)(B). VerDate Sep<11>2014 17:04 Jan 26, 2021 1 15 Jkt 253001 PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 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 to adopt a monthly fee assessed on Members’ MPIDs.3 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 16 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 16% of consolidated equity market share and currently the Exchange represents approximately 1.0% of the U.S. equities market. 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 further notes that broker3 The Exchange initially filed the proposed fee changes January 4, 2021 (SR–CboeEDGA–2021– 002). On January 13, 2021, the Exchange withdrew that filing and submitted this proposal. 4 See Cboe Global Markets, U.S. Equities Market Volume Summary, Month-to-Date (January 13, 2021), available at https://markets.cboe.com/us/ equities/market_statistics/. E:\FR\FM\27JAN1.SGM 27JAN1 Federal Register / Vol. 86, No. 16 / Wednesday, January 27, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES dealers are not compelled to be Members of the Exchange, and a significant proportion of broker-dealers that trade U.S. equity securities have, in fact, chosen not to apply for membership on the Exchange. By way of background, an MPID is a four-character unique identifier that is approved by the Exchange and assigned to a Member for use on the Exchange to identify the Member firm on the orders sent to the Exchange and resulting executions. Members may choose to request more than one MPID as a unique identifier(s) for their transactions on the Exchange. The Exchange notes that a Member may have multiple MPIDs for use by separate business units and trading desks or to support Sponsored Participant 5 access. Certain members currently leverage multiple MPIDs to obtain benefits from and added value in their participation on the Exchange. Multiple MPIDs provide unique benefits to and efficiencies for Members by allowing: (1) Members to manage their trading activity more efficiently by assigning different MPIDs to different trading desks and/or strategies within the firm; and (2) Sponsoring Members 6 to segregate Sponsored Participants by MPID to allow for detailed client-level reporting, billing, and administration, and to market the ability to use separate MPIDs to Sponsored Participants, which, in turn, may serve as a potential incentive for increased order flow traded through the Sponsoring Member. The Exchange proposes to adopt a fee applicable to Members that use multiple MPIDs to facilitate their trading on the Exchange. Specifically, as proposed, the Exchange would assess a monthly MPID Fee of $150 per MPID per Member, with a Member’s first MPID provided free of charge. The Exchange believes the proposed assessment of an MPID Fee aligns with the additional value and benefits provided to Members that choose to utilize more than one MPID to facilitate their trading on the Exchange. The Exchange also believes that assessing a fee on additional MPIDs will 5 A Sponsored Participant is a person which has entered into a sponsorship arrangement with a Sponsoring Member pursuant to Rule 11.3, which permits a Sponsored Participant to obtain authorized access to the System only if such access is authorized in advance by one or more Sponsoring Members. See Rules 1.5(z) and 11.3. 6 A Sponsoring Member is a Member that is a registered broker-dealer and that has been designated by a Sponsored Participant to execute, clear and settle transactions resulting from the System. The Sponsoring Member shall be either (i) a clearing firm with membership in a clearing agency registered with the Commission that maintains facilities through which transactions may be cleared or (ii) a correspondent firm with a clearing arrangement with any such clearing firm. See Rule 1.5(aa) VerDate Sep<11>2014 17:04 Jan 26, 2021 Jkt 253001 be beneficial because such fee will promote efficiency in MPID use. The MPID Fee will be assessed on a pro-rated basis for new MPIDs by charging a Member based on the trading day in the month during which an additional MPID becomes effective for use. If a Member cancels an additional MPID on or after the first business day of the month, the Member will be required to pay the entire MPID Fee for that month. The Exchange believes that this practice is appropriate to balance the administrative costs associated with disabling MPIDs. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.7 Specifically, the Exchange believes the proposed rule change is consistent with Section 6(b)(4) of the Act,8 which requires that Exchange rules provide for the equitable allocation of reasonable dues, fees, and other charges among its Members 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) 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 believes that the proposed MPID Fee is consistent with the Act in that it is reasonable, equitable, and not unfairly discriminatory. In particular, the Exchange believes that the proposed fee is reasonable because it is reasonably aligned with the benefits provided to Members that choose to utilize multiple MPIDs to facilitate their trading on the Exchange. While each Member must have an MPID to participate on the Exchange, additional MPIDs are optional and will be assessed the proposed fee. Additional MPIDs 7 15 8 15 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(4). Frm 00083 Fmt 4703 Sfmt 4703 7325 currently allow for Members to realize certain benefits from and added value to their participation on the Exchange but also require the Exchange to allocate additional administrative resources to manage each MPID that a Member chooses to use for its trading activity. Therefore, the Exchange believes that it is reasonable to assess a modest fee on any additional MPIDs that Members choose to use to facilitate their trading. The Exchange again notes that it is optional for a Member to request and employ additional MPIDs, and a large portion (approximately 36%) of the Exchange’s Members currently utilize just the one MPID necessary to participate on the Exchange. The Exchange also believes that assessing a modest fee on additional MPIDs is reasonably designed to promote efficiency in MPID use. The Exchange had previously implemented an MPID Fee,9 and observed that, as a result of an MPID Fee, Members were incentivized to more effectively administer their MPIDs and reduce the number of under-used or superfluous MPIDs, or MPIDs that did not contribute additional value to a Member’s participation on the Exchange. Reduction of such MPIDs, in turn, reduces Exchange resources allocated to administration and maintenance of those MPIDs. In particular, the Exchange observed that within the first few months of introducing the previous MPID Fee, the number of MPIDs on the Exchange decreased by approximately 17%, demonstrating that Members may choose to be more efficient in their use of MPIDs in response to an MPID Fee, such as that proposed in this fee change.10 The Exchange further believes the proposed MPID Fee is reasonable because the amount assessed is less than the analogous fees charged by at least one other market; namely, Nasdaq Stock Market LLC (‘‘Nasdaq’’).11 The Exchange’s proposed MPID Fee at $150 a month per MPID, with no charge associated with a Members’ first MPID, is lower than Nasdaq’s MPID fee of $550 per MPID, which is charged for all MPIDs used by a Nasdaq member, 9 See Securities and Exchange Release No. 65188 (August 24, 2011), 76 FR 53988 (August 30, 2011) (SR–EDGA–2011–27). The Exchange notes that its prior MPID Fees expired as a result of its integration with BATS technology, acquired by Cboe Global Markets, Inc. in 2017. 10 The reduction in MPIDs may also demonstrate that Members are free to cancel MPIDs on the Exchange and choose, instead, to utilize unique identifiers associated with participation on other exchanges. 11 See Nasdaq Price List, MPID Fees, available at https://nasdaqtrader.com/Trader.aspx?id=PriceList Trading2. E:\FR\FM\27JAN1.SGM 27JAN1 7326 Federal Register / Vol. 86, No. 16 / Wednesday, January 27, 2021 / Notices khammond on DSKJM1Z7X2PROD with NOTICES including a member’s first MPIDs. Additionally, the Exchange believes that charging a full-month’s fee for an additional MPID cancelled on or after the first business day of the month is reasonable in that it reasonably accounts for the administrative costs associated with disabling such MPIDs, and is a practice consistent with Nasdaq’s similar cancellation policy in connection with its MPID fees.12 The Exchange believes that the proposed MPID Fee is equitable and not unfairly discriminatory because it will apply equally to all Members that choose to employ two or more MPIDs based on the number of additional MPIDs that they use to facilitate their trading on the Exchange. As stated, additional MPIDs beyond a Member’s first MPID are optional, and Members may choose to trade using such additional MPIDs to achieve additional benefits and added value to support their individual business needs. Moreover, the Exchange believes the proposed fee is equitable and not unfairly discriminatory because it is proportional to the potential value or benefit received by Members with a greater number of MPIDs. That is, those Members that choose to employ a greater number of additional MPIDs have the opportunity to more effectively manage firm-wide trading activity and client-level administration, as well as potentially appeal to customers through the use of separate MPIDs, which may result in increased order flow through a Sponsoring Member. A Member may request at any time that the Exchange terminate an MPID, including MPIDs that may be under-used or superfluous, or that do not contribute additional value to a Member’s participation on the Exchange. 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 competition that is not necessary in furtherance of the purposes of the Act because the proposed MPID Fee will apply equally to all Members that choose to employ additional MPIDs and equally to each additional MPID. As stated, additional MPIDs are optional and Members may choose to utilize additional MPIDs, or not, based on their view of the additional benefits and added value provided by utilizing the single MPID necessary to participate on the Exchange. The Exchange believes the proposed fee will be assessed proportionately to the potential value or 12 See id. VerDate Sep<11>2014 17:04 Jan 26, 2021 Jkt 253001 benefit received by Members with a greater number of MPIDs and notes that a Member may request at any time that the Exchange terminate any MPID, including those that may be under-used or superfluous, or that do not contribute additional value to a Member’s participation on the Exchange. 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, including competition for exchange memberships. Members have numerous alternative venues that they may participate on, including 15 other equities exchanges, as well as offexchange venues, including over 50 alternative trading systems.13 The Exchange represents a small percentage of the overall market. Based on publicly available information, no single equities exchange has more than 16% market share.14 Indeed, participants can readily choose to submit their order flow to other exchange and off-exchange venues if they deem fee levels at those other venues to be more favorable.15 In addition to this the Exchange notes that at least one other exchange currently has MPID fees in place,16 which have been previously filed with the Commission. 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.’’ 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’; 13 See U.S. Securities and Exchange Commission Alternative Trading Systems (‘‘ATS’’) List (December 4, 2020), available at https:// www.sec.gov/foia/docs/atslist.htm. 14 See supra note 4. 15 See e.g., supra note 10. 16 See supra note 11. PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 [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.’ . . .’’ 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 neither solicited nor received comments on the proposed rule change. 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) of the Act 17 and subparagraph (f)(2) of Rule 19b–4 thereunder,18 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) of the Act 19 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–2021–004 on the subject line. 17 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 19 15 U.S.C. 78s(b)(2)(B). 18 17 E:\FR\FM\27JAN1.SGM 27JAN1 Federal Register / Vol. 86, No. 16 / Wednesday, January 27, 2021 / Notices 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–2021–004. 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. SR–CboeEDGA–2021–004, and should be submitted on or before February 17, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–01731 Filed 1–26–21; 8:45 am] khammond on DSKJM1Z7X2PROD with NOTICES BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–90957; File No. SR– CboeBZX–2021–012] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Expand the Annual Listing Fee Cap for Outcome Strategy ETPs To Include Series Having Returns Based on Two or More Reference Indexes January 21, 2021. 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 January 13, 2021, Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I, II, and III 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 the Substance of the Proposed Rule Change Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) is filing with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change to amend the fees applicable to securities listed on the Exchange, which are set forth in BZX Rule 14.13. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/bzx/), 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. 1 15 20 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:04 Jan 26, 2021 2 17 Jkt 253001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00085 Fmt 4703 Sfmt 4703 7327 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is proposing to amend Rule 14.13(b)(2)(C) related to the listing of exchange-traded products (‘‘ETPs’’) 3 on the Exchange. Specifically, the Exchange is proposing to modify the fee definition of Outcome Strategy ETPs provided under Rule 14.13(b)(2)(C)(iii) (the ‘‘Rule’’) to include ETPs that provide returns based on the performance of more than one underlying instruments. By way of background, Outcome Strategy ETPs are ETPs that are designed to provide a particular set of returns over a specified outcome period based on the performance of an underlying instrument during the ETP’s outcome period. As an example, an Outcome Strategy ETP would include an ETP that employs the following strategy (the ‘‘Buffer Strategy’’): The ETP seeks to provide investment returns that match the gains of a particular index (the ‘‘Reference Index’’) up to a maximized annual return (the ‘‘Cap Level’’) while guarding against certain declines in that same underlying index (the ‘‘Buffer Level’’) over a particular period of time (the ‘‘Outcome Period’’). If over the course of the Outcome Period, the Reference Index increases in value, the ETP would appreciate by approximately the same amount, up to the Cap Level. If over the course of the Outcome Period, the Reference Index decreases in value by an amount equal to or less than the Buffer Level, then the ETP would provide an approximate total return of zero. If over the course of the Outcome Period, the Reference Index decreases in value by an amount greater than the Buffer Level, then the ETP would decrease in value by approximately the same percentage as the Reference Index, minus the Buffer Level. Such outcomes would only apply for the specified Outcome Period and the ETP would reset at the end of that Outcome Period in order to employ the same Buffer Strategy for the following Outcome Period.4 As such, the Outcome Period applicable to each ETP is particularly important and investors need to have 3 As defined in Rule 11.8(e)(1)(A), the term ‘‘ETP’’ means any security listed pursuant to Exchange Rule 14.11. 4 The Exchange notes that the Cap Levels, Buffer Levels, and the duration of each Outcome Period will vary across Outcome Strategy Series, but that the concepts of providing exposure to a particular reference instrument with an upside cap and limited downside over a particular period of time generally define Outcome Strategy ETPs. E:\FR\FM\27JAN1.SGM 27JAN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 86, Number 16 (Wednesday, January 27, 2021)]
[Notices]
[Pages 7324-7327]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-01731]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90964; File No. SR-CboeEDGA-2021-004]


Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of Proposed Rule Change To 
Establish a Monthly Fee Assessed on Members' MPIDs

January 21, 2021.
    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 January 13, 2021, 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe EDGA Exchange, Inc. (the ``Exchange'' or ``EDGA Equities'') 
proposes to amend its fee schedule to establish a fee in connection 
with a Member's Market Participant Identifier(s) (``MPID''). 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 to adopt a monthly 
fee assessed on Members' MPIDs.\3\
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed fee changes 
January 4, 2021 (SR-CboeEDGA-2021-002). On January 13, 2021, the 
Exchange withdrew that filing and submitted this proposal.
---------------------------------------------------------------------------

    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 16 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 16% of consolidated equity market share 
and currently the Exchange represents approximately 1.0% of the U.S. 
equities market. 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 further 
notes that broker-

[[Page 7325]]

dealers are not compelled to be Members of the Exchange, and a 
significant proportion of broker-dealers that trade U.S. equity 
securities have, in fact, chosen not to apply for membership on the 
Exchange.
---------------------------------------------------------------------------

    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (January 13, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
---------------------------------------------------------------------------

    By way of background, an MPID is a four-character unique identifier 
that is approved by the Exchange and assigned to a Member for use on 
the Exchange to identify the Member firm on the orders sent to the 
Exchange and resulting executions. Members may choose to request more 
than one MPID as a unique identifier(s) for their transactions on the 
Exchange. The Exchange notes that a Member may have multiple MPIDs for 
use by separate business units and trading desks or to support 
Sponsored Participant \5\ access. Certain members currently leverage 
multiple MPIDs to obtain benefits from and added value in their 
participation on the Exchange. Multiple MPIDs provide unique benefits 
to and efficiencies for Members by allowing: (1) Members to manage 
their trading activity more efficiently by assigning different MPIDs to 
different trading desks and/or strategies within the firm; and (2) 
Sponsoring Members \6\ to segregate Sponsored Participants by MPID to 
allow for detailed client-level reporting, billing, and administration, 
and to market the ability to use separate MPIDs to Sponsored 
Participants, which, in turn, may serve as a potential incentive for 
increased order flow traded through the Sponsoring Member.
---------------------------------------------------------------------------

    \5\ A Sponsored Participant is a person which has entered into a 
sponsorship arrangement with a Sponsoring Member pursuant to Rule 
11.3, which permits a Sponsored Participant to obtain authorized 
access to the System only if such access is authorized in advance by 
one or more Sponsoring Members. See Rules 1.5(z) and 11.3.
    \6\ A Sponsoring Member is a Member that is a registered broker-
dealer and that has been designated by a Sponsored Participant to 
execute, clear and settle transactions resulting from the System. 
The Sponsoring Member shall be either (i) a clearing firm with 
membership in a clearing agency registered with the Commission that 
maintains facilities through which transactions may be cleared or 
(ii) a correspondent firm with a clearing arrangement with any such 
clearing firm. See Rule 1.5(aa)
---------------------------------------------------------------------------

    The Exchange proposes to adopt a fee applicable to Members that use 
multiple MPIDs to facilitate their trading on the Exchange. 
Specifically, as proposed, the Exchange would assess a monthly MPID Fee 
of $150 per MPID per Member, with a Member's first MPID provided free 
of charge. The Exchange believes the proposed assessment of an MPID Fee 
aligns with the additional value and benefits provided to Members that 
choose to utilize more than one MPID to facilitate their trading on the 
Exchange. The Exchange also believes that assessing a fee on additional 
MPIDs will be beneficial because such fee will promote efficiency in 
MPID use.
    The MPID Fee will be assessed on a pro-rated basis for new MPIDs by 
charging a Member based on the trading day in the month during which an 
additional MPID becomes effective for use. If a Member cancels an 
additional MPID on or after the first business day of the month, the 
Member will be required to pay the entire MPID Fee for that month. The 
Exchange believes that this practice is appropriate to balance the 
administrative costs associated with disabling MPIDs.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\7\ Specifically, the 
Exchange believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\8\ which requires that Exchange rules provide for 
the equitable allocation of reasonable dues, fees, and other charges 
among its Members 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) 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.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes that the proposed MPID Fee is consistent with 
the Act in that it is reasonable, equitable, and not unfairly 
discriminatory. In particular, the Exchange believes that the proposed 
fee is reasonable because it is reasonably aligned with the benefits 
provided to Members that choose to utilize multiple MPIDs to facilitate 
their trading on the Exchange. While each Member must have an MPID to 
participate on the Exchange, additional MPIDs are optional and will be 
assessed the proposed fee. Additional MPIDs currently allow for Members 
to realize certain benefits from and added value to their participation 
on the Exchange but also require the Exchange to allocate additional 
administrative resources to manage each MPID that a Member chooses to 
use for its trading activity. Therefore, the Exchange believes that it 
is reasonable to assess a modest fee on any additional MPIDs that 
Members choose to use to facilitate their trading. The Exchange again 
notes that it is optional for a Member to request and employ additional 
MPIDs, and a large portion (approximately 36%) of the Exchange's 
Members currently utilize just the one MPID necessary to participate on 
the Exchange.
    The Exchange also believes that assessing a modest fee on 
additional MPIDs is reasonably designed to promote efficiency in MPID 
use. The Exchange had previously implemented an MPID Fee,\9\ and 
observed that, as a result of an MPID Fee, Members were incentivized to 
more effectively administer their MPIDs and reduce the number of under-
used or superfluous MPIDs, or MPIDs that did not contribute additional 
value to a Member's participation on the Exchange. Reduction of such 
MPIDs, in turn, reduces Exchange resources allocated to administration 
and maintenance of those MPIDs. In particular, the Exchange observed 
that within the first few months of introducing the previous MPID Fee, 
the number of MPIDs on the Exchange decreased by approximately 17%, 
demonstrating that Members may choose to be more efficient in their use 
of MPIDs in response to an MPID Fee, such as that proposed in this fee 
change.\10\
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    \9\ See Securities and Exchange Release No. 65188 (August 24, 
2011), 76 FR 53988 (August 30, 2011) (SR-EDGA-2011-27). The Exchange 
notes that its prior MPID Fees expired as a result of its 
integration with BATS technology, acquired by Cboe Global Markets, 
Inc. in 2017.
    \10\ The reduction in MPIDs may also demonstrate that Members 
are free to cancel MPIDs on the Exchange and choose, instead, to 
utilize unique identifiers associated with participation on other 
exchanges.
---------------------------------------------------------------------------

    The Exchange further believes the proposed MPID Fee is reasonable 
because the amount assessed is less than the analogous fees charged by 
at least one other market; namely, Nasdaq Stock Market LLC 
(``Nasdaq'').\11\ The Exchange's proposed MPID Fee at $150 a month per 
MPID, with no charge associated with a Members' first MPID, is lower 
than Nasdaq's MPID fee of $550 per MPID, which is charged for all MPIDs 
used by a Nasdaq member,

[[Page 7326]]

including a member's first MPIDs. Additionally, the Exchange believes 
that charging a full-month's fee for an additional MPID cancelled on or 
after the first business day of the month is reasonable in that it 
reasonably accounts for the administrative costs associated with 
disabling such MPIDs, and is a practice consistent with Nasdaq's 
similar cancellation policy in connection with its MPID fees.\12\
---------------------------------------------------------------------------

    \11\ See Nasdaq Price List, MPID Fees, available at https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
    \12\ See id.
---------------------------------------------------------------------------

    The Exchange believes that the proposed MPID Fee is equitable and 
not unfairly discriminatory because it will apply equally to all 
Members that choose to employ two or more MPIDs based on the number of 
additional MPIDs that they use to facilitate their trading on the 
Exchange. As stated, additional MPIDs beyond a Member's first MPID are 
optional, and Members may choose to trade using such additional MPIDs 
to achieve additional benefits and added value to support their 
individual business needs. Moreover, the Exchange believes the proposed 
fee is equitable and not unfairly discriminatory because it is 
proportional to the potential value or benefit received by Members with 
a greater number of MPIDs. That is, those Members that choose to employ 
a greater number of additional MPIDs have the opportunity to more 
effectively manage firm-wide trading activity and client-level 
administration, as well as potentially appeal to customers through the 
use of separate MPIDs, which may result in increased order flow through 
a Sponsoring Member. A Member may request at any time that the Exchange 
terminate an MPID, including MPIDs that may be under-used or 
superfluous, or that do not contribute additional value to a Member's 
participation on the Exchange.

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 competition that is not necessary in 
furtherance of the purposes of the Act because the proposed MPID Fee 
will apply equally to all Members that choose to employ additional 
MPIDs and equally to each additional MPID. As stated, additional MPIDs 
are optional and Members may choose to utilize additional MPIDs, or 
not, based on their view of the additional benefits and added value 
provided by utilizing the single MPID necessary to participate on the 
Exchange. The Exchange believes the proposed fee will be assessed 
proportionately to the potential value or benefit received by Members 
with a greater number of MPIDs and notes that a Member may request at 
any time that the Exchange terminate any MPID, including those that may 
be under-used or superfluous, or that do not contribute additional 
value to a Member's participation on the Exchange.
    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, 
including competition for exchange memberships. Members have numerous 
alternative venues that they may participate on, including 15 other 
equities exchanges, as well as off-exchange venues, including over 50 
alternative trading systems.\13\ The Exchange represents a small 
percentage of the overall market. Based on publicly available 
information, no single equities exchange has more than 16% market 
share.\14\ Indeed, participants can readily choose to submit their 
order flow to other exchange and off-exchange venues if they deem fee 
levels at those other venues to be more favorable.\15\ In addition to 
this the Exchange notes that at least one other exchange currently has 
MPID fees in place,\16\ which have been previously filed with the 
Commission. 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.'' 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.' . . .'' 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.
---------------------------------------------------------------------------

    \13\ See U.S. Securities and Exchange Commission Alternative 
Trading Systems (``ATS'') List (December 4, 2020), available at 
https://www.sec.gov/foia/docs/atslist.htm.
    \14\ See supra note 4.
    \15\ See e.g., supra note 10.
    \16\ See supra note 11.
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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 neither solicited nor received comments on the 
proposed rule change.

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) of the Act \17\ and subparagraph (f)(2) of Rule 
19b-4 thereunder,\18\ because it establishes a due, fee, or other 
charge imposed by the Exchange.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    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) of the Act \19\ to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \19\ 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 No. SR-CboeEDGA-2021-004 on the subject line.

[[Page 7327]]

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-2021-004. 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. SR-CboeEDGA-2021-004, and should be submitted 
on or before February 17, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-01731 Filed 1-26-21; 8:45 am]
BILLING CODE 8011-01-P

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