Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule, 27122-27126 [2021-10496]

Download as PDF 27122 Federal Register / Vol. 86, No. 95 / Wednesday, May 19, 2021 / Notices The United States Postal Service® hereby gives notice that, pursuant to 39 U.S.C. 3642 and 3632(b)(3), on May 6, 2021, it filed with the Postal Regulatory Commission a USPS Request to Add Priority Mail Contract 698 to Competitive Product List. Documents are available at www.prc.gov, Docket Nos. MC2021–88, CP2021–91. SUPPLEMENTARY INFORMATION: Sean Robinson, Attorney, Corporate and Postal Business Law. [FR Doc. 2021–10485 Filed 5–18–21; 8:45 am] BILLING CODE 7710–12–P A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91886; File No. SR– CboeEDGX–2021–026] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule May 13, 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 May 3, 2021, Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I 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. khammond on DSKJM1Z7X2PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) 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/ options/regulation/rule_filings/edgx/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. 1 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 16:43 May 18, 2021 Jkt 253001 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. Purpose The Exchange proposes to amend its Fee Schedule applicable to its equities trading platform (‘‘EDGX Equities’’) to (1) modify the criteria of certain NonDisplayed Add Volume Tiers, (2) modify and eliminate certain Retail Volume Tiers, and (3) reduce the rate for internalization for Members meeting a certain volume threshold. The Exchange proposes to implement the proposed change to its Fee Schedule on May 3, 2021. 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,3 no single registered equities exchange has more than 15% 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 ‘‘Maker-Taker’’ model whereby it pays rebates to members that add liquidity and assesses fees to those that remove liquidity. The Exchange’s Fee Schedule sets forth the standard rebates and rates applied per share for orders that provide and remove liquidity, respectively. 3 See Cboe Global Markets, U.S. Equities Market Volume Summary, Month-to-Date (April 26, 2021), available at https://markets.cboe.com/us/equities/ market_statistics/. PO 00000 Frm 00060 Fmt 4703 Sfmt 4703 Additionally, in response to the competitive environment, the Exchange also 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 an incremental incentive for Members to strive for higher tier levels, which provides increasingly higher benefits or discounts for satisfying increasingly more stringent criteria. Non-Displayed Add Volume Tiers Pursuant to footnote 1 of the Fee Schedule, the Exchange offers NonDisplayed Add Volume Tiers that provide an enhanced rebate on Members’ orders yielding fee codes ‘‘DM’’,4 ‘‘HA’’,5 ‘‘MM’’,6 and ‘‘RP’’ 7 where a Member reaches certain required volume-based criteria offered in each tier. Specifically, the criteria for Non-Displayed Add Volume Tiers 1 through 3 are as follows: • Tier 1 provides an enhanced rebated of $0.0015 per share on qualifying orders (i.e., orders yielding fee code DM, HA, MM or RP) where a Member has an ADAV 8 greater than or equal to 0.01% of TCV 9 for NonDisplayed orders that yield fee codes DM, HA, ‘‘HI’’,10 MM or RP. • Tier 2 provides an enhanced rebated of $0.0022 per share on qualifying orders (i.e., orders yielding fee code DM, HA, MM or RP) where a Member has an ADAV greater than or equal to 0.05% of TCV for NonDisplayed orders that yield fee codes DM, HA, HI, MM or RP. • Tier 3 provides an enhanced rebated of $0.0025 per share on qualifying orders (i.e., orders yielding fee code DM, HA, MM or RP) where a Member has an ADAV greater than or equal to 0.10% of TCV for NonDisplayed orders that yield fee codes DM, HA, HI, MM or RP. Now, the Exchange is proposing to increase the ADAV thresholds for NonDisplayed Add Volume Tiers 1 and 2 4 ‘‘DM’’ is appended to orders that add liquidity using MidPoint Discretionary order within discretionary range. 5 ‘‘HA’’ is appended to non-displayed orders that add liquidity. 6 ‘‘MM’’ is appended to non-displayed orders that add liquidity using Mid-Point Peg. 7 ‘‘RP’’ is appended to non-displayed orders that add liquidity using Supplemental Peg. 8 ‘‘ADAV’’ means average daily added volume calculated as the number of shares added per day. ADAV is calculated on a monthly basis. 9 ‘‘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. 10 ‘‘HI’’ is appended to non-displayed orders that receive price improvement and add liquidity. E:\FR\FM\19MYN1.SGM 19MYN1 Federal Register / Vol. 86, No. 95 / Wednesday, May 19, 2021 / Notices and add alternate criteria for Tiers 1 through 3. Specifically, the proposed criteria for Non-Displayed Add Volume Tiers 1 through 3 are as follows: • Tier 1 would provide an enhanced rebated of $0.0015 per share on qualifying orders (i.e., orders yielding fee code DM, HA, MM or RP) where a Member has an ADAV greater than or equal to 0.05% of TCV for NonDisplayed orders that yield fee codes DM, HA, HI, MM or RP; or a Member has an ADAV greater than or equal to 4,000,000 for Non-Displayed orders that yield fee codes DM, HA, HI, MM, or RP. • Tier 2 would provide an enhanced rebated of $0.0022 per share on qualifying orders (i.e., orders yielding fee code DM, HA, MM or RP) where a Member has an ADAV greater than or equal to 0.08% of TCV for NonDisplayed orders that yield fee codes DM, HA, HI, MM or RP; or a Member has an ADAV greater than or equal to 7,000,000 for Non-Displayed orders that yield fee codes DM, HA, HI, MM, or RP. • Tier 3 would provide an enhanced rebated of $0.0025 per share on qualifying orders (i.e., orders yielding fee code DM, HA, MM or RP) where a Member has an ADAV greater than or equal to 0.10% of TCV for NonDisplayed orders that yield fee codes DM, HA, HI, MM or RP; or a Member has an ADAV greater than or equal to 9,000,000 for Non-Displayed orders that yield fee codes DM, HA, HI, MM, or RP. The Exchange notes the NonDisplayed Add Volume Tiers, as modified, continue to be available to all Members and provide Members an opportunity to receive an enhanced rebate, albeit using more stringent criteria. Moreover, the proposed changes are designed to encourage Members to increase non-displayed liquidity on the Exchange, which further contributes to a deeper, more liquid market and provides even more execution opportunities for active market participants at improved prices. Retail Volume Tiers khammond on DSKJM1Z7X2PROD with NOTICES Pursuant to footnote 3 of the Fee Schedule, the Exchange currently offers Retail Volume Tiers which provide Retail Member Organizations (‘‘RMOs’’) 11 an opportunity to receive an enhanced rebate from the standard rebate for Retail Orders 12 that add 11 A ‘‘Retail Member Organization’’ or ‘‘RMO’’ is a Member (or a division thereof) that has been approved by the Exchange under this Rule to submit Retail Orders. See EDGX Rule 11.21(a)(1). 12 A ‘‘Retail Order’’ is an agency or riskless principal order that meets the criteria of FINRA Rule 5320.03 that originates from a natural person and is submitted to the Exchange by a Retail Member Organization, provided that no change is VerDate Sep<11>2014 16:43 May 18, 2021 Jkt 253001 liquidity (i.e., yielding fee code ‘‘ZA’’ 13). Currently, the Retail Volume Tiers offer four levels of criteria difficulty and incentive opportunities in which RMOs may qualify for enhanced rebates for Retail Orders. The tier structure is designed to encourage RMOs to increase their order flow in order to receive an enhanced rebate on their liquidity adding orders, and the Exchange now proposes to amend existing Retail Volume Tier 2. The current Retail Volume Tier 2 provides an enhanced rebate of $0.0036 per share to Members that add a Retail Order ADV 14 (i.e., yielding fee code ZA) equal to or greater than 0.60% of the TCV. Now, the Exchange proposes to increase the rebate to $0.0037 and lessen the Retail Order ADV threshold to 0.45%. Thus, the proposed Retail Volume Tier 2 would provide an enhanced rebate of $0.0037 per share to Members that add a Retail Order ADV (i.e., yielding fee code ZA) equal to or greater than 0.45% of the TCV. The Exchange also proposes to eliminate Retail Volume Tier 4 as the Exchange no longer wishes to, nor is it required to, maintain such a tier. Further, the Exchange would rather redirect resources to proposed Retail Volume Tier 2, which is intended to incentivize increased order flow. Internalization Rate The Exchange proposes to amend footnote 7, which provides a reduced fee for internalization (i.e., orders yielding fee codes ‘‘EA’’ 15 or ‘‘ER’’ 16). An internalized trade is a trade where the two orders inadvertently match against each other and share the same Market Participant Identifier (‘‘MPID’’). Internalized trades (i.e., orders yielding fee codes EA or ER) are charged a standard fee of $0.00050 in securities priced at or above $1.00 and 0.15% of the dollar value in securities priced below $1.00. Currently, footnote 7 provides a reduced fee of $0.0001 per share per side for orders yielding fee code EA or ER to Members that add an ADV of at least 10,000,000 shares. Now, made to the terms of the order with respect to price or side of market and the order does not originate from a trading algorithm or any other computerized methodology. See EDGX Rule 11.21(a)(2). 13 Orders yielding fee code ‘‘ZA’’ are orders routed to a non-exchange destination using the ROUZ routing strategy. 14 ‘‘ADV’’ means average 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. 15 Orders yielding fee code ‘‘EA’’ are internalization orders that add displayed liquidity. 16 Orders yielding fee code ‘‘ER’’ are internalization orders that remove displayed liquidity. PO 00000 Frm 00061 Fmt 4703 Sfmt 4703 27123 the Exchange proposes to eliminate the fee for internalized trades meeting the criteria provided under footnote 7. Specifically, as proposed, footnote 7 would provide that if a Member adds an ADV of at least 10,000,000 shares, then the Member’s rate for internalization (fee codes EA or ER) decreases to Free per share per side, for securities priced at, above, or below $1.00. The Exchange believes the proposal is reasonable as it is designed to incentivize Members (and their customers) to send orders to the Exchange that may otherwise be internalized off exchange, which further contributes to a deeper, more liquid market and provide even more execution opportunities for active market participants at improved prices. This overall increase in activity deepens the Exchange’s liquidity pool, offers additional cost savings, supports the quality of price discovery, promotes market transparency and improves market quality, for all investors. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,17 in general, and furthers the objectives of Section 6(b)(4) and 6(b)(5),18 in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its Members, issuers and other persons using its facilities. 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 changes reflect 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. The Exchange notes that relative volumebased incentives and discounts have been widely adopted by exchanges, including the Exchange, 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. Competing equity exchanges offer similar tiered pricing structures, including schedules of rebates and fees 17 15 18 15 E:\FR\FM\19MYN1.SGM U.S.C. 78f. U.S.C. 78f(b)(4) and (5). 19MYN1 khammond on DSKJM1Z7X2PROD with NOTICES 27124 Federal Register / Vol. 86, No. 95 / Wednesday, May 19, 2021 / Notices 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. The Exchange believes the proposed Non-Displayed Add Volume Tiers are reasonable because each tier continues to be available to all Members and provide Members an opportunity to receive an enhanced rebate, even as modified. Additionally, as noted above, the Exchange operates in a 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 maker-taker exchanges. Competing equity exchanges offer similar tiered pricing structures to that of the Exchange, including schedules of rebates and fees that apply based upon members achieving certain volume thresholds. These competing pricing schedules, moreover, are presently comparable to those that the Exchange provides, including the pricing of comparable tiers. The Exchange also believes that the current enhanced rebates under NonDisplayed Add Volume Tiers 1 through 3 continue to be commensurate with the proposed criteria. That is, the enhanced rebates reasonably reflect the difficulty in achieving the corresponding criteria as amended. Also, the Exchange’s affiliated equities exchange, Cboe BZX Exchange, Inc. (‘‘BZX’’), currently has Non-Displayed Volume Tiers in place, which offer similar enhanced rebates and corresponding criteria.19 Overall, the Exchange believes that the proposed changes to the NonDisplayed Add Volume Tiers, each based on a Member’s liquidity adding orders, will benefit all market participants by incentivizing continuous liquidity and, thus, deeper more liquid markets as well as increased execution opportunities. Particularly, the proposed changes to the Non-Displayed Add Volume Tiers are designed to incentivize non-displayed liquidity, which further contributes to a deeper, more liquid market and provide even more execution opportunities for active market participants at improved prices. This overall increase in activity deepens the Exchange’s liquidity pool, offers additional cost savings, supports the quality of price discovery, promotes market transparency and improves market quality, for all investors. 19 See e.g., Cboe BZX Equities Fee Schedule, Footnote 1, which provides various Non-Displayed Add Volume Tiers. VerDate Sep<11>2014 16:43 May 18, 2021 Jkt 253001 The Exchange also believes that the proposal represents an equitable allocation of fees and rebates and is not unfairly discriminatory because all Members are eligible for Non-Displayed Add Volume Tiers and would have the opportunity to meet the tiers’ criteria and would receive the applicable rebate if such criteria is met. Without having a view of activity on other markets and off-exchange venues, the Exchange has no way of knowing whether this proposed rule change would definitely result in any Members qualifying for the proposed tiers. While the Exchange has no way of predicting with certainty how the proposed tier will impact Member activity, the Exchange anticipates that approximately 2 Members will be able to satisfy Non-Displayed Tier 1, 2 Members will be able to satisfy NonDisplayed Tier 2, and 1 Member will be able to satisfy Non-Displayed Tier 3. The Exchange also notes that proposed tiers will not adversely impact any Member’s ability to qualify for other reduced fee or enhanced rebate tiers. Should a Member not meet the proposed criteria under any of the proposed tiers, the Member will merely not receive that corresponding enhanced rebate. The Exchange believes the proposal to amend Retail Volume Tier 2 is reasonable because the tier, as modified continues to be available to all RMOs and provide RMOs an opportunity to receive an enhanced rebate using less stringent criteria. The Exchange also believes that the proposed enhanced rebate under Retail Volume Tier 2 is reasonable as it’s in line with existing rebates under the Retail Volume Tiers and is commensurate with the proposed amended criteria. That is, the rebate reasonably reflects the difficulty in achieving the corresponding criteria as amended. The Exchange believes that the proposal relating to the Retail Volume Tier 2 also represents an equitable allocation of rebates and is not unfairly discriminatory because all RMOs will continue to be eligible for the Retail Volume Tier. The proposed changes are designed as an incentive to any and all RMOs interested in meeting the tier criteria, as amended, to submit additional adding and/or removing, or Retail, order flow to the Exchange. The Exchange notes that greater add volume order flow provides for deeper, more liquid markets and execution opportunities, and greater remove volume order flow increases transactions on the Exchange, which incentivizes liquidity providers to submit additional liquidity and execution opportunities, thus, providing PO 00000 Frm 00062 Fmt 4703 Sfmt 4703 an overall increase in price discovery and transparency on the Exchange. Also, an increase in Retail Order flow, which orders are generally submitted in smaller sizes, tends to attract Market Makers, as smaller size orders are easier to hedge. Increased Market Maker activity facilitates tighter spreads, signaling an additional corresponding increase in order flow from other market participants, which contributes towards a robust, well-balanced market ecosystem. Increased overall order flow benefits all investors by deepening the Exchange’s liquidity pool, potentially providing even 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. The Exchange also notes all RMOs will continue to have the opportunity to submit the requisite order flow and will receive the applicable enhanced rebate if the tier criteria is met. The Exchange additionally notes that while the Retail Volume Tiers are applicable only to RMOs, the Exchange does not believe this application is discriminatory as the Exchange offers similar rebates to nonRMO order flow.20 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 RMOs qualifying for the proposed amended tier. The Exchange notes that most recently, no Member has satisfied Retail Volume Tier 2. While the Exchange has no way of predicting with certainty how the proposed tier will impact Member activity, the Exchange anticipates that at least three Members will be able to satisfy Retail Volume Tier 2 (as amended). The Exchange also notes that the proposed amended tier will not adversely impact any RMO’s ability to qualify for other rebate tiers. Rather, should an RMO not meet the criteria for Retail Volume Tier 2, as amended, the RMO will merely not receive the corresponding proposed enhanced rebate. Furthermore, the rebates under each Retail Volume Tiers would uniformly apply to all RMOs that meet the required criteria. The Exchange also believes the proposed rule change to remove Retail Volume Tier 4 is reasonable because the Exchange no longer wishes to, nor is it required to, maintain such a tier. 20 Such as the other Add/Remove Volume Tiers under Footnote 1 of the EDGX Fees Schedule which provide opportunities to all Members to submit the requisite order flow to receive an enhanced rebate. E:\FR\FM\19MYN1.SGM 19MYN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 86, No. 95 / Wednesday, May 19, 2021 / Notices Further, the Exchange would rather redirect resources to proposed Retail Volume Tier 2, which is intended to incentivize increased order flow. The Exchange believes that the proposed elimination of Retail Volume Tier 4 is equitable and not unfairly discriminatory as it applies equally to all Members. Additionally, as noted above, the Exchange operates in a 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 maker-taker exchanges. Competing equity exchanges offer similar tiered pricing structures to that of the Exchange, including schedules of rebates and fees that apply based upon members achieving certain volume thresholds. These competing pricing schedules, moreover, are presently comparable to those that the Exchange provides, including the pricing of comparable tiers. The Exchange believes the proposal to eliminate the fee for internalized trades meeting the required volume threshold is reasonable and equitable because the incentive would be available to all Members and Members would not be subject to any fee for such transactions. 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 eliminated fee. While the Exchange has no way of predicting with certainty how the proposed change will impact Member activity, in the most recent month 10 Members satisfied the internalization volume threshold and the Exchange anticipates that approximately 10 Members will continue to be able to satisfy the internalization volume threshold. The Exchange also notes that proposal to eliminate the fee will not adversely impact any Member’s ability to qualify for other reduced fees or enhanced rebate tiers. Should a Member not meet the proposed criteria, the Member will merely not receive the reduced fee. Additionally, as noted above, the Exchange operates in a 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. Furthermore, competing pricing schedules are presently comparable to those that the Exchange provides, including the pricing of internalized VerDate Sep<11>2014 16:43 May 18, 2021 Jkt 253001 trades.21 The Exchange believes the proposal is reasonable as it is designed to incentivize Members (and their customers) to send orders to the Exchange that may otherwise be internalized off exchange, which further contributes to a deeper, more liquid market and provide even more execution opportunities for active market participants at improved prices. This overall increase in activity deepens the Exchange’s liquidity pool, offers additional cost savings, supports the quality of price discovery, promotes market transparency and improves market quality, for all investors. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule changes will impose any burden on competition 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.’’ 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 changes to the NonDisplayed Add Volume Tiers applies to all Members equally in that all Members are eligible for these tiers, have a reasonable opportunity to meet the tiers’ criteria and will receive the enhanced rebates if such criteria is met. Similarly, the proposed changes to the Retail Volume Tiers apply to all RMOs equally in that all RMOs are eligible for those tiers, have a reasonable opportunity to meet the tiers’ criteria and will receive the enhanced rebates if such criteria are met. The proposed change to the internalization rate under footnote 7 also applies to all Members equally in that all Members are eligible for the reduced fee, have a reasonable opportunity to meet the volume 21 See the Investors Exchange LLC (‘‘IEX’’) Fee Schedule, Fee Code Combinations and Associated Fees: ‘‘MIS’’, ‘‘MLS’’, and ‘‘TIS’’. PO 00000 Frm 00063 Fmt 4703 Sfmt 4703 27125 thresholds, and will receive the eliminated fee if such criteria is met. Additionally, the proposed tiers and eliminated fees are designed to attract additional order flow to the Exchange. The Exchange believes that the updated criteria would incentivize market participants to direct liquidity adding and/or removing order flow to the Exchange, bringing with it additional execution opportunities for market participants and improved price transparency. Greater overall order flow, trading opportunities, and pricing transparency benefits all market participants on the Exchange by enhancing market quality and continuing to encourage Members to send orders, thereby contributing towards a robust and well-balanced market ecosystem. Next, the Exchange believes the proposed rule change does not impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. As previously discussed, the Exchange operates in a highly competitive market. Members have numerous alternative venues that they may participate on and direct their order flow, including other equities exchanges, 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 15% of the market share.22 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.’’ 23 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 22 Supra note 3. Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 23 See E:\FR\FM\19MYN1.SGM 19MYN1 27126 Federal Register / Vol. 86, No. 95 / Wednesday, May 19, 2021 / Notices 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’. . . .’’.24 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 has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.25 At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is: (i) Necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. khammond on DSKJM1Z7X2PROD with NOTICES IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CboeEDGX–2021–026 on the subject line. 24 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)). 25 15 U.S.C. 78s(b)(3)(A)(ii). VerDate Sep<11>2014 16:43 May 18, 2021 Jkt 253001 Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–CboeEDGX–2021–026. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549 on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CboeEDGX–2021–026, and should be submitted on or before June 9, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2021–10496 Filed 5–18–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–91895; File No. SR– NYSEArca–2021–39] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To List and Trade Shares of the Putnam Focused Large Cap Growth ETF; Putnam Focused Large Cap Value ETF; Putnam Sustainable Future ETF; and Putnam Sustainable Leaders ETF May 13, 2021. Pursuant to Section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’),2 and Rule 19b–4 thereunder,3 notice is hereby given that on May 11, 2021, NYSE Arca, Inc. (‘‘NYSE Arca’’ or the ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The 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 The Exchange proposes to list and trade shares of the following under NYSE Arca Rule 8.601–E: Putnam Focused Large Cap Growth ETF; Putnam Focused Large Cap Value ETF; Putnam Sustainable Future ETF; and Putnam Sustainable Leaders ETF. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization 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 those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 26 17 PO 00000 CFR 200.30–3(a)(12). Frm 00064 Fmt 4703 Sfmt 4703 E:\FR\FM\19MYN1.SGM 19MYN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 86, Number 95 (Wednesday, May 19, 2021)]
[Notices]
[Pages 27122-27126]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-10496]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91886; File No. SR-CboeEDGX-2021-026]


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

May 13, 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 May 3, 2021, Cboe EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I 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.
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    \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 EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') 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/options/regulation/rule_filings/edgx/), 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 applicable to its 
equities trading platform (``EDGX Equities'') to (1) modify the 
criteria of certain Non-Displayed Add Volume Tiers, (2) modify and 
eliminate certain Retail Volume Tiers, and (3) reduce the rate for 
internalization for Members meeting a certain volume threshold. The 
Exchange proposes to implement the proposed change to its Fee Schedule 
on May 3, 2021.
    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,\3\ no single registered 
equities exchange has more than 15% 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 ``Maker-Taker'' model 
whereby it pays rebates to members that add liquidity and assesses fees 
to those that remove liquidity. The Exchange's Fee Schedule sets forth 
the standard rebates and rates applied per share for orders that 
provide and remove liquidity, respectively. Additionally, in response 
to the competitive environment, the Exchange also 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 an incremental incentive for Members to strive 
for higher tier levels, which provides increasingly higher benefits or 
discounts for satisfying increasingly more stringent criteria.
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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (April 26, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
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Non-Displayed Add Volume Tiers
    Pursuant to footnote 1 of the Fee Schedule, the Exchange offers 
Non-Displayed Add Volume Tiers that provide an enhanced rebate on 
Members' orders yielding fee codes ``DM'',\4\ ``HA'',\5\ ``MM'',\6\ and 
``RP'' \7\ where a Member reaches certain required volume-based 
criteria offered in each tier. Specifically, the criteria for Non-
Displayed Add Volume Tiers 1 through 3 are as follows:
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    \4\ ``DM'' is appended to orders that add liquidity using 
MidPoint Discretionary order within discretionary range.
    \5\ ``HA'' is appended to non-displayed orders that add 
liquidity.
    \6\ ``MM'' is appended to non-displayed orders that add 
liquidity using Mid-Point Peg.
    \7\ ``RP'' is appended to non-displayed orders that add 
liquidity using Supplemental Peg.
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     Tier 1 provides an enhanced rebated of $0.0015 per share 
on qualifying orders (i.e., orders yielding fee code DM, HA, MM or RP) 
where a Member has an ADAV \8\ greater than or equal to 0.01% of TCV 
\9\ for Non-Displayed orders that yield fee codes DM, HA, ``HI'',\10\ 
MM or RP.
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    \8\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day. ADAV is calculated on a monthly 
basis.
    \9\ ``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.
    \10\ ``HI'' is appended to non-displayed orders that receive 
price improvement and add liquidity.
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     Tier 2 provides an enhanced rebated of $0.0022 per share 
on qualifying orders (i.e., orders yielding fee code DM, HA, MM or RP) 
where a Member has an ADAV greater than or equal to 0.05% of TCV for 
Non-Displayed orders that yield fee codes DM, HA, HI, MM or RP.
     Tier 3 provides an enhanced rebated of $0.0025 per share 
on qualifying orders (i.e., orders yielding fee code DM, HA, MM or RP) 
where a Member has an ADAV greater than or equal to 0.10% of TCV for 
Non-Displayed orders that yield fee codes DM, HA, HI, MM or RP.
    Now, the Exchange is proposing to increase the ADAV thresholds for 
Non-Displayed Add Volume Tiers 1 and 2

[[Page 27123]]

and add alternate criteria for Tiers 1 through 3. Specifically, the 
proposed criteria for Non-Displayed Add Volume Tiers 1 through 3 are as 
follows:
     Tier 1 would provide an enhanced rebated of $0.0015 per 
share on qualifying orders (i.e., orders yielding fee code DM, HA, MM 
or RP) where a Member has an ADAV greater than or equal to 0.05% of TCV 
for Non-Displayed orders that yield fee codes DM, HA, HI, MM or RP; or 
a Member has an ADAV greater than or equal to 4,000,000 for Non-
Displayed orders that yield fee codes DM, HA, HI, MM, or RP.
     Tier 2 would provide an enhanced rebated of $0.0022 per 
share on qualifying orders (i.e., orders yielding fee code DM, HA, MM 
or RP) where a Member has an ADAV greater than or equal to 0.08% of TCV 
for Non-Displayed orders that yield fee codes DM, HA, HI, MM or RP; or 
a Member has an ADAV greater than or equal to 7,000,000 for Non-
Displayed orders that yield fee codes DM, HA, HI, MM, or RP.
     Tier 3 would provide an enhanced rebated of $0.0025 per 
share on qualifying orders (i.e., orders yielding fee code DM, HA, MM 
or RP) where a Member has an ADAV greater than or equal to 0.10% of TCV 
for Non-Displayed orders that yield fee codes DM, HA, HI, MM or RP; or 
a Member has an ADAV greater than or equal to 9,000,000 for Non-
Displayed orders that yield fee codes DM, HA, HI, MM, or RP.
    The Exchange notes the Non-Displayed Add Volume Tiers, as modified, 
continue to be available to all Members and provide Members an 
opportunity to receive an enhanced rebate, albeit using more stringent 
criteria. Moreover, the proposed changes are designed to encourage 
Members to increase non-displayed liquidity on the Exchange, which 
further contributes to a deeper, more liquid market and provides even 
more execution opportunities for active market participants at improved 
prices.
Retail Volume Tiers
    Pursuant to footnote 3 of the Fee Schedule, the Exchange currently 
offers Retail Volume Tiers which provide Retail Member Organizations 
(``RMOs'') \11\ an opportunity to receive an enhanced rebate from the 
standard rebate for Retail Orders \12\ that add liquidity (i.e., 
yielding fee code ``ZA'' \13\). Currently, the Retail Volume Tiers 
offer four levels of criteria difficulty and incentive opportunities in 
which RMOs may qualify for enhanced rebates for Retail Orders. The tier 
structure is designed to encourage RMOs to increase their order flow in 
order to receive an enhanced rebate on their liquidity adding orders, 
and the Exchange now proposes to amend existing Retail Volume Tier 2. 
The current Retail Volume Tier 2 provides an enhanced rebate of $0.0036 
per share to Members that add a Retail Order ADV \14\ (i.e., yielding 
fee code ZA) equal to or greater than 0.60% of the TCV. Now, the 
Exchange proposes to increase the rebate to $0.0037 and lessen the 
Retail Order ADV threshold to 0.45%. Thus, the proposed Retail Volume 
Tier 2 would provide an enhanced rebate of $0.0037 per share to Members 
that add a Retail Order ADV (i.e., yielding fee code ZA) equal to or 
greater than 0.45% of the TCV.
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    \11\ A ``Retail Member Organization'' or ``RMO'' is a Member (or 
a division thereof) that has been approved by the Exchange under 
this Rule to submit Retail Orders. See EDGX Rule 11.21(a)(1).
    \12\ A ``Retail Order'' is an agency or riskless principal order 
that meets the criteria of FINRA Rule 5320.03 that originates from a 
natural person and is submitted to the Exchange by a Retail Member 
Organization, provided that no change is made to the terms of the 
order with respect to price or side of market and the order does not 
originate from a trading algorithm or any other computerized 
methodology. See EDGX Rule 11.21(a)(2).
    \13\ Orders yielding fee code ``ZA'' are orders routed to a non-
exchange destination using the ROUZ routing strategy.
    \14\ ``ADV'' means average daily volume calculated as the number 
of shares added to, removed from, or routed by, the Exchange, or any 
combination or subset thereof, per day. ADV is calculated on a 
monthly basis.
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    The Exchange also proposes to eliminate Retail Volume Tier 4 as the 
Exchange no longer wishes to, nor is it required to, maintain such a 
tier. Further, the Exchange would rather redirect resources to proposed 
Retail Volume Tier 2, which is intended to incentivize increased order 
flow.
Internalization Rate
    The Exchange proposes to amend footnote 7, which provides a reduced 
fee for internalization (i.e., orders yielding fee codes ``EA'' \15\ or 
``ER'' \16\). An internalized trade is a trade where the two orders 
inadvertently match against each other and share the same Market 
Participant Identifier (``MPID''). Internalized trades (i.e., orders 
yielding fee codes EA or ER) are charged a standard fee of $0.00050 in 
securities priced at or above $1.00 and 0.15% of the dollar value in 
securities priced below $1.00. Currently, footnote 7 provides a reduced 
fee of $0.0001 per share per side for orders yielding fee code EA or ER 
to Members that add an ADV of at least 10,000,000 shares. Now, the 
Exchange proposes to eliminate the fee for internalized trades meeting 
the criteria provided under footnote 7. Specifically, as proposed, 
footnote 7 would provide that if a Member adds an ADV of at least 
10,000,000 shares, then the Member's rate for internalization (fee 
codes EA or ER) decreases to Free per share per side, for securities 
priced at, above, or below $1.00. The Exchange believes the proposal is 
reasonable as it is designed to incentivize Members (and their 
customers) to send orders to the Exchange that may otherwise be 
internalized off exchange, which further contributes to a deeper, more 
liquid market and provide even more execution opportunities for active 
market participants at improved prices. This overall increase in 
activity deepens the Exchange's liquidity pool, offers additional cost 
savings, supports the quality of price discovery, promotes market 
transparency and improves market quality, for all investors.
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    \15\ Orders yielding fee code ``EA'' are internalization orders 
that add displayed liquidity.
    \16\ Orders yielding fee code ``ER'' are internalization orders 
that remove displayed liquidity.
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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,\17\ in general, and 
furthers the objectives of Section 6(b)(4) and 6(b)(5),\18\ in 
particular, as it is designed to provide for the equitable allocation 
of reasonable dues, fees and other charges among its Members, issuers 
and other persons using its facilities.
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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4) and (5).
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    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 changes reflect 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. The Exchange notes that relative volume-based incentives and 
discounts have been widely adopted by exchanges, including the 
Exchange, 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. Competing equity exchanges offer similar tiered 
pricing structures, including schedules of rebates and fees

[[Page 27124]]

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.
    The Exchange believes the proposed Non-Displayed Add Volume Tiers 
are reasonable because each tier continues to be available to all 
Members and provide Members an opportunity to receive an enhanced 
rebate, even as modified. Additionally, as noted above, the Exchange 
operates in a 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 maker-taker exchanges. Competing equity 
exchanges offer similar tiered pricing structures to that of the 
Exchange, including schedules of rebates and fees that apply based upon 
members achieving certain volume thresholds. These competing pricing 
schedules, moreover, are presently comparable to those that the 
Exchange provides, including the pricing of comparable tiers.
    The Exchange also believes that the current enhanced rebates under 
Non-Displayed Add Volume Tiers 1 through 3 continue to be commensurate 
with the proposed criteria. That is, the enhanced rebates reasonably 
reflect the difficulty in achieving the corresponding criteria as 
amended. Also, the Exchange's affiliated equities exchange, Cboe BZX 
Exchange, Inc. (``BZX''), currently has Non-Displayed Volume Tiers in 
place, which offer similar enhanced rebates and corresponding 
criteria.\19\
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    \19\ See e.g., Cboe BZX Equities Fee Schedule, Footnote 1, which 
provides various Non-Displayed Add Volume Tiers.
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    Overall, the Exchange believes that the proposed changes to the 
Non-Displayed Add Volume Tiers, each based on a Member's liquidity 
adding orders, will benefit all market participants by incentivizing 
continuous liquidity and, thus, deeper more liquid markets as well as 
increased execution opportunities. Particularly, the proposed changes 
to the Non-Displayed Add Volume Tiers are designed to incentivize non-
displayed liquidity, which further contributes to a deeper, more liquid 
market and provide even more execution opportunities for active market 
participants at improved prices. This overall increase in activity 
deepens the Exchange's liquidity pool, offers additional cost savings, 
supports the quality of price discovery, promotes market transparency 
and improves market quality, for all investors.
    The Exchange also believes that the proposal represents an 
equitable allocation of fees and rebates and is not unfairly 
discriminatory because all Members are eligible for Non-Displayed Add 
Volume Tiers and would have the opportunity to meet the tiers' criteria 
and would receive the applicable rebate if such criteria is met. 
Without having a view of activity on other markets and off-exchange 
venues, the Exchange has no way of knowing whether this proposed rule 
change would definitely result in any Members qualifying for the 
proposed tiers. While the Exchange has no way of predicting with 
certainty how the proposed tier will impact Member activity, the 
Exchange anticipates that approximately 2 Members will be able to 
satisfy Non-Displayed Tier 1, 2 Members will be able to satisfy Non-
Displayed Tier 2, and 1 Member will be able to satisfy Non-Displayed 
Tier 3. The Exchange also notes that proposed tiers will not adversely 
impact any Member's ability to qualify for other reduced fee or 
enhanced rebate tiers. Should a Member not meet the proposed criteria 
under any of the proposed tiers, the Member will merely not receive 
that corresponding enhanced rebate.
    The Exchange believes the proposal to amend Retail Volume Tier 2 is 
reasonable because the tier, as modified continues to be available to 
all RMOs and provide RMOs an opportunity to receive an enhanced rebate 
using less stringent criteria. The Exchange also believes that the 
proposed enhanced rebate under Retail Volume Tier 2 is reasonable as 
it's in line with existing rebates under the Retail Volume Tiers and is 
commensurate with the proposed amended criteria. That is, the rebate 
reasonably reflects the difficulty in achieving the corresponding 
criteria as amended.
    The Exchange believes that the proposal relating to the Retail 
Volume Tier 2 also represents an equitable allocation of rebates and is 
not unfairly discriminatory because all RMOs will continue to be 
eligible for the Retail Volume Tier. The proposed changes are designed 
as an incentive to any and all RMOs interested in meeting the tier 
criteria, as amended, to submit additional adding and/or removing, or 
Retail, order flow to the Exchange. The Exchange notes that greater add 
volume order flow provides for deeper, more liquid markets and 
execution opportunities, and greater remove volume order flow increases 
transactions on the Exchange, which incentivizes liquidity providers to 
submit additional liquidity and execution opportunities, thus, 
providing an overall increase in price discovery and transparency on 
the Exchange. Also, an increase in Retail Order flow, which orders are 
generally submitted in smaller sizes, tends to attract Market Makers, 
as smaller size orders are easier to hedge. Increased Market Maker 
activity facilitates tighter spreads, signaling an additional 
corresponding increase in order flow from other market participants, 
which contributes towards a robust, well-balanced market ecosystem. 
Increased overall order flow benefits all investors by deepening the 
Exchange's liquidity pool, potentially providing even 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. The Exchange also notes all RMOs will continue to have the 
opportunity to submit the requisite order flow and will receive the 
applicable enhanced rebate if the tier criteria is met. The Exchange 
additionally notes that while the Retail Volume Tiers are applicable 
only to RMOs, the Exchange does not believe this application is 
discriminatory as the Exchange offers similar rebates to non-RMO order 
flow.\20\
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    \20\ Such as the other Add/Remove Volume Tiers under Footnote 1 
of the EDGX Fees Schedule which provide opportunities to all Members 
to submit the requisite order flow to receive an enhanced rebate.
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    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 RMOs qualifying for the proposed 
amended tier. The Exchange notes that most recently, no Member has 
satisfied Retail Volume Tier 2. While the Exchange has no way of 
predicting with certainty how the proposed tier will impact Member 
activity, the Exchange anticipates that at least three Members will be 
able to satisfy Retail Volume Tier 2 (as amended). The Exchange also 
notes that the proposed amended tier will not adversely impact any 
RMO's ability to qualify for other rebate tiers. Rather, should an RMO 
not meet the criteria for Retail Volume Tier 2, as amended, the RMO 
will merely not receive the corresponding proposed enhanced rebate. 
Furthermore, the rebates under each Retail Volume Tiers would uniformly 
apply to all RMOs that meet the required criteria.
    The Exchange also believes the proposed rule change to remove 
Retail Volume Tier 4 is reasonable because the Exchange no longer 
wishes to, nor is it required to, maintain such a tier.

[[Page 27125]]

Further, the Exchange would rather redirect resources to proposed 
Retail Volume Tier 2, which is intended to incentivize increased order 
flow. The Exchange believes that the proposed elimination of Retail 
Volume Tier 4 is equitable and not unfairly discriminatory as it 
applies equally to all Members. Additionally, as noted above, the 
Exchange operates in a 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 maker-taker exchanges. Competing 
equity exchanges offer similar tiered pricing structures to that of the 
Exchange, including schedules of rebates and fees that apply based upon 
members achieving certain volume thresholds. These competing pricing 
schedules, moreover, are presently comparable to those that the 
Exchange provides, including the pricing of comparable tiers.
    The Exchange believes the proposal to eliminate the fee for 
internalized trades meeting the required volume threshold is reasonable 
and equitable because the incentive would be available to all Members 
and Members would not be subject to any fee for such transactions. 
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 
eliminated fee. While the Exchange has no way of predicting with 
certainty how the proposed change will impact Member activity, in the 
most recent month 10 Members satisfied the internalization volume 
threshold and the Exchange anticipates that approximately 10 Members 
will continue to be able to satisfy the internalization volume 
threshold. The Exchange also notes that proposal to eliminate the fee 
will not adversely impact any Member's ability to qualify for other 
reduced fees or enhanced rebate tiers. Should a Member not meet the 
proposed criteria, the Member will merely not receive the reduced fee.
    Additionally, as noted above, the Exchange operates in a 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. Furthermore, 
competing pricing schedules are presently comparable to those that the 
Exchange provides, including the pricing of internalized trades.\21\ 
The Exchange believes the proposal is reasonable as it is designed to 
incentivize Members (and their customers) to send orders to the 
Exchange that may otherwise be internalized off exchange, which further 
contributes to a deeper, more liquid market and provide even more 
execution opportunities for active market participants at improved 
prices. This overall increase in activity deepens the Exchange's 
liquidity pool, offers additional cost savings, supports the quality of 
price discovery, promotes market transparency and improves market 
quality, for all investors.
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    \21\ See the Investors Exchange LLC (``IEX'') Fee Schedule, Fee 
Code Combinations and Associated Fees: ``MIS'', ``MLS'', and 
``TIS''.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition 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.''
    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 
changes to the Non-Displayed Add Volume Tiers applies to all Members 
equally in that all Members are eligible for these tiers, have a 
reasonable opportunity to meet the tiers' criteria and will receive the 
enhanced rebates if such criteria is met. Similarly, the proposed 
changes to the Retail Volume Tiers apply to all RMOs equally in that 
all RMOs are eligible for those tiers, have a reasonable opportunity to 
meet the tiers' criteria and will receive the enhanced rebates if such 
criteria are met. The proposed change to the internalization rate under 
footnote 7 also applies to all Members equally in that all Members are 
eligible for the reduced fee, have a reasonable opportunity to meet the 
volume thresholds, and will receive the eliminated fee if such criteria 
is met.
    Additionally, the proposed tiers and eliminated fees are designed 
to attract additional order flow to the Exchange. The Exchange believes 
that the updated criteria would incentivize market participants to 
direct liquidity adding and/or removing order flow to the Exchange, 
bringing with it additional execution opportunities for market 
participants and improved price transparency. Greater overall order 
flow, trading opportunities, and pricing transparency benefits all 
market participants on the Exchange by enhancing market quality and 
continuing to encourage Members to send orders, thereby contributing 
towards a robust and well-balanced market ecosystem.
    Next, the Exchange believes the proposed rule change does not 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As previously 
discussed, the Exchange operates in a highly competitive market. 
Members have numerous alternative venues that they may participate on 
and direct their order flow, including other equities exchanges, 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 15% of the market share.\22\ 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.'' \23\ 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

[[Page 27126]]

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'. . . .''.\24\ Accordingly, the Exchange does not believe its 
proposed fee change imposes any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
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    \22\ Supra note 3.
    \23\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \24\ 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 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 has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\25\
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    \25\ 15 U.S.C. 78s(b)(3)(A)(ii).
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    At any time within 60 days of the filing of the proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule 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 [email protected]. Please include 
File Number SR-CboeEDGX-2021-026 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeEDGX-2021-026. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549 on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CboeEDGX-2021-026, and should be 
submitted on or before June 9, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-10496 Filed 5-18-21; 8:45 am]
BILLING CODE 8011-01-P

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