Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 32298-32301 [2021-12745]

Download as PDF 32298 Federal Register / Vol. 86, No. 115 / Thursday, June 17, 2021 / Notices lotter on DSK11XQN23PROD with NOTICES1 B. Self-Regulatory Organization’s Statement on Burden on Competition In accordance with Section 6(b)(8) of the Act,17 the Exchange believes that the proposed rule change would not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Instead, as discussed above, the Exchange believes that the proposed changes would encourage the submission of additional liquidity to a public exchange, thereby promoting market depth, price discovery and transparency and enhancing order execution opportunities for member organizations. As a result, the Exchange believes that the proposed change furthers the Commission’s goal in adopting Regulation NMS of fostering integrated competition among orders, which promotes ‘‘more efficient pricing of individual stocks for all types of orders, large and small.’’ 18 Intramarket Competition. The proposed changes are designed to attract additional order flow to the Exchange. The Exchange believes that the proposed changes would continue to incentivize market participants to direct displayed and non-displayed order flow to the Exchange. Greater liquidity benefits all market participants on the Exchange by providing more trading opportunities and encourages member organizations to send orders, thereby contributing to robust levels of liquidity, which benefits all market participants on the Exchange. The current and proposed fees and credits would be available to all similarly situated market participants, and, as such, the proposed change would not impose a disparate burden on competition among market participants on the Exchange. As noted, the proposal would apply to all similarly situated member organizations on the same and equal terms, who would benefit from the changes on the same basis. Accordingly, the proposed change would not impose a disparate burden on competition among market participants on the Exchange. Intermarket Competition. The Exchange operates in a highly competitive market in which market 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. In such an environment, the Exchange must continually adjust its fees and rebates to remain competitive with other exchanges and with offexchange venues. Because competitors 17 15 U.S.C. 78f(b)(8). 18 Regulation NMS, 70 FR at 37498–99. VerDate Sep<11>2014 18:41 Jun 16, 2021 Jkt 253001 are free to modify their own fees and credits in response, and because market participants may readily adjust their order routing practices, the Exchange does not believe its proposed fee change can impose any burden on intermarket competition. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were solicited or received with respect to 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) 19 of the Act and subparagraph (f)(2) of Rule 19b–4 20 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) 21 of the Act to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NYSE–2021–35 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–NYSE–2021–35. 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–NYSE–2021–35, and should be submitted on or before July 8, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.22 Jill M. Peterson, Assistant Secretary. [FR Doc. 2021–12747 Filed 6–16–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92152; File No. SR– CboeEDGA–2021–015] Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule June 11, 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 June 9, 2021, Cboe EDGA Exchange, Inc. (the 19 15 22 17 20 17 1 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 21 15 U.S.C. 78s(b)(2)(B). PO 00000 Frm 00055 Fmt 4703 Sfmt 4703 CFR 200.30–3(a)(12), (59). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. E:\FR\FM\17JNN1.SGM 17JNN1 Federal Register / Vol. 86, No. 115 / Thursday, June 17, 2021 / Notices ‘‘Exchange’’ or ‘‘EDGA’’) 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 Substance of the Proposed Rule Change Cboe EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) is filing with the Securities and Exchange Commission (‘‘Commission’’) a proposed rule change to amend the fee schedule. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/edga/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. lotter on DSK11XQN23PROD with NOTICES1 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 as follows: (1) Decrease the standard liquidity adding rebate, (2) define the term ‘‘Step-Up ADV’’, and (3) rename the existing Remove Volume Tier 1 to Remove Volume Tier 2 and add new Remove Volume Tiers 1 and 3.3 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 3 The Exchange initially filed the proposed fee changes June 1, 2021 (SR–CboeEDGA–2021–014). On June 9, 2021 the Exchange withdrew that filing and submitted this proposal. VerDate Sep<11>2014 18:41 Jun 16, 2021 Jkt 253001 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 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 ‘‘Taker-Maker’’ model whereby it pays credits to Members that remove liquidity and assesses fees to those that add liquidity. The Exchange’s fee schedule sets forth the standard rebates and rates applied per share for orders that remove and provide liquidity, respectively. Particularly, for securities at or above $1.00, the Exchange provides a standard rebate of $0.0018 per share for orders that remove liquidity and assesses a fee of $0.0030 per share for orders that add liquidity. For order priced below $1.00, the Exchange does not assess any fees or provide any rebates for orders that add or remove liquidity. The Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue to reduce use of certain categories of products, in response to fee changes. Accordingly, competitive forces constrain the Exchange’s transaction fees, and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. Additionally, in response to the competitive environment, the Exchange offers tiered pricing which provides Members opportunities to qualify for higher rebates or reduced fees where certain volume criteria and thresholds are met. Tiered pricing provides an incremental incentive for Members to strive for higher tier levels, which provides increasingly higher benefits or discounts for satisfying increasingly more stringent criteria. Standard Liquidity Rebate As stated above, the Exchange currently provides a standard rebate of $0.0018 per share for liquidity removing 4 See Cboe Global Markets, U.S. Equities Market Volume Summary, Month-to-Date (May 24, 2021), available at https://markets.cboe.com/us/equities/ market_statistics/. PO 00000 Frm 00056 Fmt 4703 Sfmt 4703 32299 orders (i.e., those yielding fee codes N,5 W,6 6,7 and BB 8) in securities priced at or above $1.00. Orders in securities priced below $1.00 that remove liquidity are provided no rebate and assessed no fee. The Exchange now proposes to reduce the standard rebate for liquidity removing orders to $0.0016 per share. Although this proposed standard rebate for liquidity removing orders is lower than the current base rebate for such orders, the proposed rebate is in line with or superior to similar rebates for liquidity removing orders in place on other ‘‘Taker-Maker’’ exchanges.9 Definition and Remove Volume Tiers The Exchange proposes to adopt a new definition for the term ‘‘Step-Up ADV’’. Specifically, as proposed ‘‘Stepup ADV’’ means ADV 10 in the relevant baseline month subtracted from current ADV. Such definition would be referenced in the proposed Remove Volume Tier 3, as discussed below. Pursuant to footnote 7 of the fee schedule, the Exchange currently offers a Remove Volume Tier that provides a rebate to Members meeting a certain volume threshold. Specifically, Tier 1 currently provides an opportunity for Members to receive an enhanced rebate of $0.0022 per share for qualifying liquidity removing orders (i.e., yielding fee codes N, W, 6, and BB), where a Member adds or removes an ADV greater than or equal to 0.05% of the TCV.11 Now, the Exchange proposes to rename existing Tier 1 of the Remove Volume Tiers to Tier 2, and add additional Tiers 1 and 3. Specifically, proposed Tier 1 would provide a rebate of $0.0018 per share to Members that add or remove an ADV of greater than or equal to 0.02% of the TCV. Proposed Tier 3 would provide a rebate of $0.0024 to Members that (1) add or remove a Step-Up ADV from May 2021 greater 5 Orders yielding Fee Code ‘‘N’’ are removing liquidity from EDGA (Tape C). 6 Orders yielding Fee Code ‘‘W’’ are removing liquidity from EDGA (Tape A). 7 Orders yielding Fee Code ‘‘6’’ are removing liquidity from EDGA (All Tapes). 8 Orders yielding Fee Code ‘‘BB’’ are removing liquidity from EDGA (Tape B). 9 E.g., Nasdaq BX, Inc. (‘‘BX’’), which operates a ‘‘Taker-Maker’’ model, charges a standard fee of $0.0007 for liquidity removing orders unless certain volume criteria is met, in which case BX provides a rebate ranging from $0.0004 up to $0.0018. 10 ADV means daily volume calculated as the number of shares added to, removed from, or routed by, the Exchange, or any combination or subset thereof, per day. ADV is calculated on a monthly basis. 11 TCV means total consolidated volume calculated as the volume reported by all exchanges and trade reporting facilities to a consolidated transaction reporting plan for the month for which the fees apply. E:\FR\FM\17JNN1.SGM 17JNN1 32300 Federal Register / Vol. 86, No. 115 / Thursday, June 17, 2021 / Notices than or equal to 0.05% of the TCV or add or remove a Step-Up ADV from May 2021 greater than or equal to 3,000,000 shares; and (2) add an ADV greater than or equal to 0.05% or add an ADV of greater than or equal to 3,000,000 shares. The Exchange notes that the Remove Volume Tiers, as modified, will continue to be available to all Members and provide Members an opportunity to receive enhanced rebates. Moreover, the proposed changes are designed to encourage Members to increase both adding and removing liquidity on the Exchange, which further contributes to a deeper, more liquid market and provides even more execution opportunities for active market participants. lotter on DSK11XQN23PROD with NOTICES1 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,12 in general, and furthers the objectives of Section 6(b)(4),13 in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its Members and issuers and other persons using its facilities. The Exchange also believes that the proposed rule change is consistent with the objectives of Section 6(b)(5) 14 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, to foster cooperation and coordination with persons engaged in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest, and, particularly, is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange operates in a highly competitive market in which market participants can readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. The proposed rule change reflects a competitive pricing structure designed to incentivize market participants to direct their order flow to the Exchange, which the Exchange believes would enhance market quality to the benefit of all Members. 12 15 U.S.C. 78f. U.S.C. 78f(b)(4). 14 15 U.S.C. 78f.(b)(5). In particular, the Exchange believes that the proposed amendment to reduce the standard liquidity removing rebate is reasonable because the proposed change represents a modest rebate decrease and Members will continue to receive a rebate on all liquidity removing orders, albeit at a lower amount. The proposed change is also equitable and non-discriminatory as such rebates are equally applicable to all Members of the Exchange. Additionally, the proposed rebates for liquidity removing orders are in-line with rebates offered at other exchanges for similar transactions.15 The Exchange also believes the proposal to define the term ‘‘Step-Up ADV’’ is reasonable as it will clarify terminology used in the fee schedule, to the benefit of all Members. Further, the Exchange believes the proposed changes to the Remove Volume Tiers are reasonable because each tier, as modified, will be available to all Members and provide Members an opportunity to receive an enhanced rebate. The Exchange next notes that relative volume-based 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 discounts that are reasonably related to (i) the value to an exchange’s market quality and (ii) associated with higher levels of market activity, such as higher levels of liquidity provision and/or growth patterns. The Exchange also believes that the proposed and existing rebates under the Remove Volume Tiers are commensurate with the respective proposed and existing criteria. That is, the rebates reasonably reflect the difficulty in achieving the corresponding criteria. The Exchange believes that the changes to the Remove Volume Tiers, 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 Remove Volume Tiers are designed to incentivize both adding and removing 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 13 15 VerDate Sep<11>2014 18:41 Jun 16, 2021 15 Supra Jkt 253001 PO 00000 note 8. Frm 00057 Fmt 4703 Sfmt 4703 market transparency and improves market quality, for all investors. The Exchange also believes that the proposed amendments to the Remove Volume Tiers represent an equitable allocation of rebates and are not unfairly discriminatory because all Members are eligible for the Remove Volume Tiers and would have the opportunity to meet the tiers’ criteria and would receive the proposed rebate if such criteria is met. The Exchange also notes that the proposed changes 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. A number of Members have a reasonable opportunity to satisfy proposed Remove Volume Tiers 1 and 3, which the Exchange believes are less and more stringent than existing Tier 1, respectively. While the Exchange has no way of knowing whether this proposed rule change would definitively result in any particular Member qualifying for the proposed tiers, the Exchange anticipates at least seven Members to compete for and reasonably achieve proposed tier 1 and five Members to compete for and reasonably achieve proposed tier 3. However, the proposed tiers are open to any Member that satisfies the applicable tier’s criteria. The Exchange believes the proposed tiers could provide an incentive for other Members to submit additional liquidity on the Exchange to qualify for the proposed enhanced rebate. As noted above, the Exchange operates in a highly competitive market. The Exchange is only one of 16 equity venues to which market participants may direct their order flow, and it represents a small percentage of the overall market. It is also only one of several taker-maker exchanges. Competing equity exchanges offer similar rates and tiered pricing structures to that of the Exchange, including schedules of rebates and fees that apply based upon members achieving certain volume thresholds. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Particularly, the proposed standard rebate reduction applies to all liquidity removing orders equally, and thus applies to all Members equally. Similarly, all Members have the opportunity to meet the tiers’ criteria and would receive the proposed rebate E:\FR\FM\17JNN1.SGM 17JNN1 lotter on DSK11XQN23PROD with NOTICES1 Federal Register / Vol. 86, No. 115 / Thursday, June 17, 2021 / Notices if such criteria is met. 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 purpose 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.16 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.’’ 17 The fact that this market is competitive has also long been recognized by the courts. In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit stated as follows: ‘‘[N]o one disputes that competition for order flow is ‘fierce.’ . . . As the SEC explained, ‘[i]n the U.S. national market system, buyers and sellers of securities, and the brokerdealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percentages for granted’ because ‘no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’. . . .’’.18 Accordingly, the Exchange does not believe its proposed fee changes imposes any burden on competition that is not necessary or 16 Supra note 3. Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 18 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)). 17 See VerDate Sep<11>2014 18:41 Jun 16, 2021 Jkt 253001 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) of the Act 19 and paragraph (f) of Rule 19b–4 20 thereunder. 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 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 will institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CboeEDGA–2021–015 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to File Number SR–CboeEDGA–2021–015. 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 19 15 20 17 PO 00000 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). Frm 00058 Fmt 4703 amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal office of the Exchange. All comments received will be posted without change. Persons submitting comments are cautioned that we do not redact or edit personal identifying information from comment submissions. You should submit only information that you wish to make available publicly. All submissions should refer to File Number SR–CboeEDGA–2021–015 and should be submitted on or before July 8, 2021. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.21 Jill M. Peterson, Assistant Secretary. [FR Doc. 2021–12745 Filed 6–16–21; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–92154; File No. SR–NYSE– 2020–96] Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Designation of a Longer Period for Commission Action on Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change To Amend Its Rules Establishing Maximum Fee Rates To Be Charged by Member Organizations for Forwarding Proxy and Other Materials to Beneficial Owners June 11, 2021. On December 2, 2020, New York Stock Exchange LLC (‘‘NYSE’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 21 17 1 15 Sfmt 4703 32301 E:\FR\FM\17JNN1.SGM CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 17JNN1

Agencies

[Federal Register Volume 86, Number 115 (Thursday, June 17, 2021)]
[Notices]
[Pages 32298-32301]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-12745]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92152; File No. SR-CboeEDGA-2021-015]


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

June 11, 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 June 9, 2021, Cboe EDGA Exchange, Inc. (the

[[Page 32299]]

``Exchange'' or ``EDGA'') 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.
---------------------------------------------------------------------------

    \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'') is filing 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change to amend the fee schedule. The text of the proposed rule 
change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/edga/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its fee schedule as follows: (1) 
Decrease the standard liquidity adding rebate, (2) define the term 
``Step-Up ADV'', and (3) rename the existing Remove Volume Tier 1 to 
Remove Volume Tier 2 and add new Remove Volume Tiers 1 and 3.\3\
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed fee changes June 
1, 2021 (SR-CboeEDGA-2021-014). On June 9, 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 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 ``Taker-Maker'' model 
whereby it pays credits to Members that remove liquidity and assesses 
fees to those that add liquidity. The Exchange's fee schedule sets 
forth the standard rebates and rates applied per share for orders that 
remove and provide liquidity, respectively. Particularly, for 
securities at or above $1.00, the Exchange provides a standard rebate 
of $0.0018 per share for orders that remove liquidity and assesses a 
fee of $0.0030 per share for orders that add liquidity. For order 
priced below $1.00, the Exchange does not assess any fees or provide 
any rebates for orders that add or remove liquidity. The Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow or discontinue to reduce use of certain categories of products, in 
response to fee changes. Accordingly, competitive forces constrain the 
Exchange's transaction fees, and market participants can readily trade 
on competing venues if they deem pricing levels at those other venues 
to be more favorable.
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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (May 24, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
---------------------------------------------------------------------------

    Additionally, in response to the competitive environment, the 
Exchange offers tiered pricing which provides Members opportunities to 
qualify for higher rebates or reduced fees where certain volume 
criteria and thresholds are met. Tiered pricing provides an incremental 
incentive for Members to strive for higher tier levels, which provides 
increasingly higher benefits or discounts for satisfying increasingly 
more stringent criteria.
Standard Liquidity Rebate
    As stated above, the Exchange currently provides a standard rebate 
of $0.0018 per share for liquidity removing orders (i.e., those 
yielding fee codes N,\5\ W,\6\ 6,\7\ and BB \8\) in securities priced 
at or above $1.00. Orders in securities priced below $1.00 that remove 
liquidity are provided no rebate and assessed no fee. The Exchange now 
proposes to reduce the standard rebate for liquidity removing orders to 
$0.0016 per share. Although this proposed standard rebate for liquidity 
removing orders is lower than the current base rebate for such orders, 
the proposed rebate is in line with or superior to similar rebates for 
liquidity removing orders in place on other ``Taker-Maker'' 
exchanges.\9\
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    \5\ Orders yielding Fee Code ``N'' are removing liquidity from 
EDGA (Tape C).
    \6\ Orders yielding Fee Code ``W'' are removing liquidity from 
EDGA (Tape A).
    \7\ Orders yielding Fee Code ``6'' are removing liquidity from 
EDGA (All Tapes).
    \8\ Orders yielding Fee Code ``BB'' are removing liquidity from 
EDGA (Tape B).
    \9\ E.g., Nasdaq BX, Inc. (``BX''), which operates a ``Taker-
Maker'' model, charges a standard fee of $0.0007 for liquidity 
removing orders unless certain volume criteria is met, in which case 
BX provides a rebate ranging from $0.0004 up to $0.0018.
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Definition and Remove Volume Tiers
    The Exchange proposes to adopt a new definition for the term 
``Step-Up ADV''. Specifically, as proposed ``Step-up ADV'' means ADV 
\10\ in the relevant baseline month subtracted from current ADV. Such 
definition would be referenced in the proposed Remove Volume Tier 3, as 
discussed below.
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    \10\ ADV means daily volume calculated as the number of shares 
added to, removed from, or routed by, the Exchange, or any 
combination or subset thereof, per day. ADV is calculated on a 
monthly basis.
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    Pursuant to footnote 7 of the fee schedule, the Exchange currently 
offers a Remove Volume Tier that provides a rebate to Members meeting a 
certain volume threshold. Specifically, Tier 1 currently provides an 
opportunity for Members to receive an enhanced rebate of $0.0022 per 
share for qualifying liquidity removing orders (i.e., yielding fee 
codes N, W, 6, and BB), where a Member adds or removes an ADV greater 
than or equal to 0.05% of the TCV.\11\ Now, the Exchange proposes to 
rename existing Tier 1 of the Remove Volume Tiers to Tier 2, and add 
additional Tiers 1 and 3. Specifically, proposed Tier 1 would provide a 
rebate of $0.0018 per share to Members that add or remove an ADV of 
greater than or equal to 0.02% of the TCV. Proposed Tier 3 would 
provide a rebate of $0.0024 to Members that (1) add or remove a Step-Up 
ADV from May 2021 greater

[[Page 32300]]

than or equal to 0.05% of the TCV or add or remove a Step-Up ADV from 
May 2021 greater than or equal to 3,000,000 shares; and (2) add an ADV 
greater than or equal to 0.05% or add an ADV of greater than or equal 
to 3,000,000 shares.
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    \11\ TCV means total consolidated volume calculated as the 
volume reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply.
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    The Exchange notes that the Remove Volume Tiers, as modified, will 
continue to be available to all Members and provide Members an 
opportunity to receive enhanced rebates. Moreover, the proposed changes 
are designed to encourage Members to increase both adding and removing 
liquidity on the Exchange, which further contributes to a deeper, more 
liquid market and provides even more execution opportunities for active 
market participants.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\12\ in general, and 
furthers the objectives of Section 6(b)(4),\13\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and issuers and other persons 
using its facilities. The Exchange also believes that the proposed rule 
change is consistent with the objectives of Section 6(b)(5) \14\ 
requirements that the rules of an exchange be designed to prevent 
fraudulent and manipulative acts and practices, to promote just and 
equitable principles of trade, to foster cooperation and coordination 
with persons engaged in regulating, clearing, settling, processing 
information with respect to, and facilitating transactions in 
securities, to remove impediments to and perfect the mechanism of a 
free and open market and a national market system, and, in general, to 
protect investors and the public interest, and, particularly, is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. The proposed rule change 
reflects a competitive pricing structure designed to incentivize market 
participants to direct their order flow to the Exchange, which the 
Exchange believes would enhance market quality to the benefit of all 
Members.
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
    \14\ 15 U.S.C. 78f.(b)(5).
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    In particular, the Exchange believes that the proposed amendment to 
reduce the standard liquidity removing rebate is reasonable because the 
proposed change represents a modest rebate decrease and Members will 
continue to receive a rebate on all liquidity removing orders, albeit 
at a lower amount. The proposed change is also equitable and non-
discriminatory as such rebates are equally applicable to all Members of 
the Exchange. Additionally, the proposed rebates for liquidity removing 
orders are in-line with rebates offered at other exchanges for similar 
transactions.\15\
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    \15\ Supra note 8.
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    The Exchange also believes the proposal to define the term ``Step-
Up ADV'' is reasonable as it will clarify terminology used in the fee 
schedule, to the benefit of all Members. Further, the Exchange believes 
the proposed changes to the Remove Volume Tiers are reasonable because 
each tier, as modified, will be available to all Members and provide 
Members an opportunity to receive an enhanced rebate. The Exchange next 
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 discounts that are 
reasonably related to (i) the value to an exchange's market quality and 
(ii) associated with higher levels of market activity, such as higher 
levels of liquidity provision and/or growth patterns. The Exchange also 
believes that the proposed and existing rebates under the Remove Volume 
Tiers are commensurate with the respective proposed and existing 
criteria. That is, the rebates reasonably reflect the difficulty in 
achieving the corresponding criteria.
    The Exchange believes that the changes to the Remove Volume Tiers, 
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 
Remove Volume Tiers are designed to incentivize both adding and 
removing 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 proposed amendments to the 
Remove Volume Tiers represent an equitable allocation of rebates and 
are not unfairly discriminatory because all Members are eligible for 
the Remove Volume Tiers and would have the opportunity to meet the 
tiers' criteria and would receive the proposed rebate if such criteria 
is met. The Exchange also notes that the proposed changes 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. A number of Members have a 
reasonable opportunity to satisfy proposed Remove Volume Tiers 1 and 3, 
which the Exchange believes are less and more stringent than existing 
Tier 1, respectively. While the Exchange has no way of knowing whether 
this proposed rule change would definitively result in any particular 
Member qualifying for the proposed tiers, the Exchange anticipates at 
least seven Members to compete for and reasonably achieve proposed tier 
1 and five Members to compete for and reasonably achieve proposed tier 
3. However, the proposed tiers are open to any Member that satisfies 
the applicable tier's criteria. The Exchange believes the proposed 
tiers could provide an incentive for other Members to submit additional 
liquidity on the Exchange to qualify for the proposed enhanced rebate.
    As noted above, the Exchange operates in a highly competitive 
market. The Exchange is only one of 16 equity venues to which market 
participants may direct their order flow, and it represents a small 
percentage of the overall market. It is also only one of several taker-
maker exchanges. Competing equity exchanges offer similar rates and 
tiered pricing structures to that of the Exchange, including schedules 
of rebates and fees that apply based upon members achieving certain 
volume thresholds.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
standard rebate reduction applies to all liquidity removing orders 
equally, and thus applies to all Members equally. Similarly, all 
Members have the opportunity to meet the tiers' criteria and would 
receive the proposed rebate

[[Page 32301]]

if such criteria is met. 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 purpose 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.\16\ 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.'' \17\ 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'. . . .''.\18\ Accordingly, the Exchange 
does not believe its proposed fee changes imposes any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \16\ Supra note 3.
    \17\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \18\ 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) of the Act \19\ and paragraph (f) of Rule 19b-4 \20\ 
thereunder. 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 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 will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeEDGA-2021-015 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CboeEDGA-2021-015. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CboeEDGA-2021-015 and should be 
submitted on or before July 8, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2021-12745 Filed 6-16-21; 8:45 am]
BILLING CODE 8011-01-P
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