Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 40097-40101 [2021-15812]
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Federal Register / Vol. 86, No. 140 / Monday, July 26, 2021 / Notices
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–PEARL–2021–34, and
should be submitted on or before
August 16, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.35
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–15814 Filed 7–23–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92445; File No. SR–
CboeEDGX–2021–033]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fee Schedule
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July 20, 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 July 13,
2021, Cboe EDGX Exchange, Inc.
(‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
17:10 Jul 23, 2021
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’ or ‘‘EDGX
Equities’’) proposes to amend its 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 standard rate for
securities priced at or above $1.00 that
remove liquidity, (2) remove certain fee
codes in connection with
internalization, (3) adopt a new tier
under each of the Growth Tiers, the
Non-Displayed Step-Up Volume Tier,
and the Remove Volume Tiers, and, as
a result, define the term ‘‘Step-Up
ADAV’’, and (4) eliminate a Remove
Volume Tier and a Retail Volume Tier.3
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
3 The Exchange initially filed the proposed fee
changes July 1, 2021 (SR–CboeEDGX–2021–031).
On July 13, 2021 the Exchange withdrew that filing
and submitted this proposal.
17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
35
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(‘‘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.
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40097
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
16 registered equities exchanges, as well
as a number of alternative trading
systems and other off-exchange venues
that do not have similar self-regulatory
responsibilities under the Exchange Act,
to which market participants may direct
their order flow. Based on publicly
available information,4 no single
registered equities exchange has more
than 16% of 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.
Currently, for orders in securities priced
at or above $1.00, the Exchange
provides a standard rebate of $0.00160
per share for orders that add liquidity
and assesses a fee of $0.00280 per share
for orders that remove liquidity. For
orders in securities priced below $1.00,
the Exchange provides a standard rebate
of $0.00009 per share for orders that add
liquidity and assesses a fee of 0.30% of
total dollar value for orders that remove
liquidity. 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.
Standard Rate: Securities at or Above
$1.00 That Remove Liquidity
As stated above, the Exchange
currently assesses a standard rate of
$0.00280 per share for orders that
remove liquidity in securities priced at
$1.00 or more. The Exchange proposes
to amend the standard rate for orders
that remove liquidity in securities
priced at $1.00 or more from a fee of
$0.00280 per share to $0.00285 per
share and reflects this change in the Fee
Codes and Associated Fee where
applicable (i.e., corresponding to
4 See Cboe Global Markets, U.S. Equities Market
Volume Summary, Month-to-Date (June 23, 2021),
available at https://markets.cboe.com/us/equities/
market_statistics/.
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standard fee codes N, W, 6, BB and ZR).
The Exchange notes that the proposed
standard rate is in line with, yet also
competitive with, rates assessed by
other equities exchanges on orders in
securities priced at $1.00 or more.5
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Eliminate Internalization Fee Codes
The Fee Codes and Associate Fees
section of the Fee Schedule lists all
available fee codes for orders on EDGX.
In particular, current fee code EA is
appended to internalization 6 orders that
add displayed liquidity and current fee
code ER is appended to internalization
orders that remove displayed liquidity.
Orders that yield fee code EA and ER
are assessed a fee of $0.0005 per share
in securities priced at or above $1.00
and 0.15% of the dollar value in
securities priced below $1.00.7 The
Exchange now proposes to eliminate
these fee codes. The Exchange notes that
a majority of other equities exchanges
do not assess different rates for
internalization orders, and therefore, in
order to remain competitive with rates
assessed on orders that add or remove
liquidity on most other equities
exchanges, the Exchange wishes to also
not apply a different rate for such orders
that are internalized. Internalization
orders that add or remove liquidity will
simply yield the applicable existing fee
codes for all other orders that add or
remove liquidity and receive the same
corresponding rates that currently apply
to all other orders that add or remove
liquidity. For example, an
internalization order that adds liquidity
in Tape B securities will yield existing
fee code B and receive the current
corresponding rebate of $0.00160 for
securities priced at or above $1.00 or
$0.00009 for securities priced below a
$1.00. The Exchange also notes that as
a result of the proposed deletion of
these fee codes, the proposed rule
change deletes footnote 7 of the Fee
Schedule, which provides that a
5 See Nasdaq Pricing 7, Section 118(a)(1), which,
for example, assesses a charge of $0.0030 for
member orders that execute against resting
midpoint liquidity, and that that execute in the
Nasdaq Market Center generally, in securities
priced at $1.00 or more; and NYSE American
Equities Price List, NYSE American Trading Fees
and Credits, Section I.A.1.a, Standard Rates, which
assesses a standard rate of $0.0030 per share (unless
member adds ADV of at least 10,000 shares) for
orders in securities priced at or above $1 that
remove liquidity.
6 An internalized trade is a trade where the two
orders inadvertently match against each other and
share the same Market Participant Identifier
(‘‘MPID’’).
7 Additionally, 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. See EDGX Fee Schedule,
Footnote 7.
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Member’s rate for internalization (fee
codes EA or ER) decreases to ‘‘free’’ per
share per side if a Member adds an ADV
of at least 10,000,000 shares.
New Growth, Non-Displayed Step-Up
Volume, and Remove Volume Tier
Under footnote 1 of the Fee Schedule
the Exchange currently offers various
Add/Remove Volume Tiers.
Specifically, the Exchange offers two
Growth Tiers that each provide an
enhanced rebate for Members’
qualifying orders yielding fee codes B,
V, Y, 3 and 4,8 where a Member reaches
certain add volume-based criteria,
including ‘‘growing’’ its volume over a
certain baseline month. For example,
Growth Tier 1 provides an enhanced
rebated of $0.0026 per share on
qualifying orders (i.e., orders yielding
fee code B, V, Y, 3 and 4) where a
Member (1) adds an ADV 9 of greater
than or equal to 0.20% of the TCV,10
and (2) has a Step-Up Add TCV 11 from
March 2019 that is greater than or equal
to 0.10%. The Exchange also offers one
Non-Displayed Step-Up Volume Tiers
that provides an enhanced rebate for
Members’ orders yielding fee codes DM,
HA, MM, and RP,12 where a Member
may receive 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 (1) has a
Step-Up Add TCV from January 2021
greater than or equal to 0.10%, (2) adds
an ADV greater than or equal to 0.50%
of the TCV, and (3) removes an ADV
greater than or equal to 0.75% of the
TCV. Finally, the Exchange also
8 B is appended to orders that add liquidity to
EDGX in Tape B securities, V is appended to order
that add liquidity to EDGX in Tape A securities, Y
is appended to orders that add liquidity to EDGX
in Tape C securities, 3 is appended to orders that
add liquidity to EDGX in pre and post market in
Tape A or C securities, and 4 is appended to orders
that add liquidity to EDGX in pre and post market
in Tape A or C securities. Each is provided the
standard rebate of $0.00160.
9 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.
10 TCV means total consolidated volume
calculated as the volume reported by all exchanges
and trade reporting facilities to a consolidated
transaction reporting plan for the month for which
the fees apply.
11 Step-Up Add TCV means ADAV as a
percentage of TCV in the relevant baseline month
subtracted from current ADAV as a percentage of
TCV.
12 DM is appended to orders that add liquidity
using MidPoint Discretionary order within
discretionary range; HA is appended to nondisplayed orders that add liquidity; MM is
appended to non-displayed orders that add
liquidity using Mid-Point Peg; and RP is appended
to non-displayed orders that add liquidity using
Supplemental Peg. Each is provided a rebate of
$0.00100.
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currently offers two Remove Volume
Tiers. For example, Remove Volume
Tier 1 currently offers a reduced fee of
$0.0027 per share on qualifying orders
yielding fee codes BB, N and W 13 in
securities priced at or above $1.00 and
0.28% of total dollar value on qualifying
orders in securities process below $1.00,
where a Member (1) has an ADAV 14
greater than or equal to 0.25% TCV with
displayed orders that yield fee codes B,
V or Y, or (2) adds Retail Order ADV
(i.e., yielding fee code ZA) greater than
or equal to 0.45% of the TCV.
The Exchange now proposes to adopt
a new Growth Tier 2, a new NonDisplayed Step-Up Volume Tier 2,15 and
a new Remove Volume Tier 1.16 Each
new tier provides the same set of
additional criteria in which Members
may strive to achieve to receive an
enhanced rebate or reduced fee, as
applicable—a Member must (1) add a
Step-Up ADAV from June 2021 greater
than or equal to 0.10% of the TCV, or
add a Step-Up ADAV from June 2021
greater than or equal to 8,000,000, (2)
and have a total remove ADV greater
than or equal to 0.70% of the TCV. The
proposed rule change also adopts a new
definition, under the definitions section
of the Fee Schedule, for the term ‘‘StepUp ADAV’’, as referenced in each of the
proposed new tiers. Specifically, as
proposed ‘‘Step-up ADAV’’ means
ADAV in the relevant baseline month
subtracted from current ADAV.
For achieving the proposed criteria, a
Member will receive a proposed
enhanced rebate of $0.0027 per share on
qualifying orders (i.e., yielding fee codes
B, V, Y, 3 and 4) pursuant to proposed
Growth Tier 2, a proposed enhanced
rebate of $0.0025 per share on
qualifying orders (i.e., yielding fee codes
DM, HA, MM and RP) pursuant to
proposed Non-Displayed Step-Up
Volume Tier 2, and a proposed reduced
fee of $0.00275 per share on qualifying
orders (i.e., yielding fee codes BB, N and
W) in securities priced at or above $1.00
and 0.28% of total dollar value in
13 BB is appended to orders that remove liquidity
from EDGX in Tape B securities, N is appended to
orders that remove liquidity from EDGX in Tape C
securities, and W is appended to orders that remove
liquidity from EDGX in Tape A securities. Each, as
proposed, is assessed a fee of $0.00285.
14 ADAV means average daily added volume
calculated as the number of shares added per day.
ADAV is calculated on a monthly basis.
15 As a result, the proposed rule change updates
the name of the current Non-Displayed Step-Up
Tier to Non-Displayed Step-Up Tier 1.
16 As a result, the proposed rule change updates
the name the current Remove Volume Tier 1 to
Remove Volume Tier 2. Note that current Remove
Volume Tier 3 is being deleted as proposed herein.
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securities priced below $1.00 pursuant
to proposed Remove Volume Tier 1.17
Overall, the new Growth, NonDisplayed Step-Up Volume, and
Remove Volume tiers are designed to
provide Members with an additional
opportunity to receive an enhanced
rebate or reduced fee by increasing their
order flow to the Exchange, which
further contributes to a deeper, more
liquid market and provides even more
execution opportunities for active
market participants. Incentivizing an
increase in both liquidity adding
volume and in liquidity removing
volume, through additional criteria and
enhanced rebate opportunities,
encourages liquidity adding Members
on the Exchange to contribute to a
deeper, more liquid market, and
liquidity executing Members on the
Exchange to increase transactions and
take execution opportunities provided
by such increased liquidity, together
providing for overall enhanced price
discovery and price improvement
opportunities on the Exchange. As such,
increased overall order flow benefits all
Members by contributing towards a
robust and well-balanced market
ecosystem.
Eliminate a Remove Volume Tier and
Retail Volume Tier
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Finally, the Exchange proposes to
eliminate Remove Volume Tier 2 and
Retail Volume Tier 3. Current Remove
Volume Tier 2 provides a reduced fee of
$0.0026 on qualifying orders (i.e.,
yielding fee codes BB, N and W) in
securities priced at or above $1.00 and
0.28% of total dollar value in securities
priced below $1.00, where a Member (1)
has a Step-Up Add TCV from January
2021 greater than or equal to 0.15%, (2)
has an ADAV greater than or equal to
0.08% of the TCV for Non-Displayed
orders that yield fee codes DM, HA, HI,
MM, or RP, and (3) removes an ADV
greater than or equal to 0.75% of the
TCV. Current Retail Volume Tier 3
offers an enhanced rebate of $0.0037 per
share on qualifying orders (i.e., yielding
fee code ZA), where a Member (1) has
a Retail Step-Up Add TCV (i.e., yielding
fee code ZA) from May 2020 greater
than or equal to 0.10%, and (2) removes
an ADV greater than or equal to 0.70%
of the TCV. The Exchange proposes to
eliminate Remove Volume Tier 2 and
17 As a result of the five decimal format of the
proposed reduced fee in proposed Remove Volume
Tier 1, the proposed rule change also updates the
decimal format of the reduced fee that currently
corresponds to Remove Volume Tier 2 (current Tier
1) in order to provide uniformity across the Remove
Volume tiers. This formatting update does not alter
the current reduced fee amount offered under
Remove Volume Tier 2 (current Tier 1).
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Retail Volume Tier 3 as no Members are
currently satisfying the criteria under
these tiers, nor have satisfied such
criteria over the last three months. The
Exchange no longer wishes to, nor is it
required to, maintain such tiers. More
specifically, the proposed rule change
removes these tiers as the Exchange
would rather redirect future resources
and funding into other programs and
tiers intended to incentivize increased
order flow.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,18
in general, and furthers the objectives of
Section 6(b)(4),19 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) 20 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.
As described above, 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.
Regarding the proposed change to the
standard rates, the Exchange believes
that amending the standard rate for
orders that remove liquidity in
securities priced at or above $1.00 is
reasonable because, as stated above, in
order to operate in the highly
competitive equities markets, the
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18 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
20 15 U.S.C. 78f(b)(5).
19 15
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Exchange and its competing exchanges
seek to offer similar pricing structures,
including assessing comparable
standard fees for orders in securities
priced at or above $1.00.21 Thus, the
Exchange believes the proposed
standard rate change is reasonable as it
is generally aligned with and
competitive with the amounts assessed
for the orders in securities at or above
$1.00 on other equities exchanges. The
Exchange also believes that amending
this standard rate amount represents an
equitable allocation of fees and is not
unfairly discriminatory because they
will continue to automatically apply to
all Members’ orders that remove
liquidity in securities at or above $1.00
uniformly.
The Exchange also believes the
proposed rule change to remove fee
codes EA and ER is reasonable as the
Exchange has observed that a majority
of other equities exchanges do not
assess a different rate for internalization
orders that add or remove liquidity, and
therefore, seeks to more competitively
align its rates assessed on orders that
add or remove liquidity with those
assessed on other equities exchanges by
also not applying a different rate for
internalized orders. The Exchange
believes that it is reasonable, equitable
and not unfairly discriminatory to
assess internalization orders that add or
remove liquidity the same existing
corresponding rates currently applied to
orders that add or remove liquidity that
are not internalized. Such current rates
will apply automatically and uniformly
to internalizing orders that add or
remove liquidity as they do today for all
other orders that add or remove
liquidity.
Also, as described above, the
Exchange notes that relative volumebased incentives and discounts have
been widely adopted by exchanges,22
including the Exchange,23 and are
reasonable, equitable and nondiscriminatory because they are open to
all members on an equal basis and
provide additional benefits or discounts
that are reasonably related to (i) the
value to an exchange’s market quality
and (ii) associated higher levels of
market activity, such as higher levels of
liquidity provision and/or growth
patterns. Competing equity exchanges
offer similar tiered pricing structures,
including schedules of rebates and fees
21 See
supra note 5.
generally NYSE Price List, Transaction
Fees; Nasdaq Equity 7, Section 118(a)(1), Fees for
Execution and Routing of Orders in Nasdaq-Listed
Securities; and BZX Equities Fee Schedule,
Footnote 1, Add/Remove Volume Tiers.
23 See EDGX Equities Fee Schedule, Footnote 1,
Add/Remove Volume Tiers.
22 See
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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.
In particular, the Exchange believes
the proposed new Growth, NonDisplayed Step-Up Volume, and
Remove Volume tiers are reasonable
because each new tier will be available
to all Members, as the existing tiers
currently are, and provide all Members
with an additional opportunity to
receive an enhanced rebate or reduced
fee, as applicable. The Exchange further
believes the proposed new Growth,
Non-Displayed Step-Up, and Remove
Volume tiers are a reasonable means to
encourage overall growth in Members’
overall order flow to the Exchange and
to incentivize Members to continue to
provide liquidity adding and liquidity
removing to the Exchange by offering
them an additional opportunity to
receive an enhanced rebate or reduced
fee on qualifying orders than those
opportunities currently under the Add/
Remove Volume Tiers in Footnote 1 of
the Fee Schedule. The Exchange
believes that the proposed tiers will
generally benefit all market participants
by incentivizing continuous liquidity
and thus, deeper more liquid markets as
well as increased execution
opportunities. Indeed, the Exchange
notes that greater add volume order flow
may provide for deeper, more liquid
markets and execution opportunities at
improved prices, and greater remove
volume order flow may increase
transactions on the Exchange, which the
Exchange believes incentivizes liquidity
providers to submit additional liquidity
and execution opportunities. 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 the proposed
rule change to define the term ‘‘Step-Up
ADAV’’ is reasonable as it will clarify
terminology used in the Fee Schedule,
to the benefit of all Members.
Further, the Exchange believes that
the proposed tiers are reasonable as they
do not represent a significant departure
from the criteria or corresponding rates
currently offered in the Fee Schedule,
and that the proposed enhanced rebates
or enhanced fee, as applicable, are
commensurate with the new criteria.
More specifically, the Exchange believes
that the proposed criteria, which is the
same in each new tier, and
corresponding rates are commensurate
with surrounding tiers; in that the
proposed criteria in new Growth Tier 2
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is incrementally more difficult than that
of Growth Tier 1 and thus appropriately
offers a greater incentive, the proposed
criteria in new Remove Volume Tier 1
is incrementally less difficult than that
of Remove Volume Tier 2 (current Tier
1) 24 and thus appropriately offers a
lesser incentive, and the proposed
criteria in new Non-Displayed Step-Up
Volume Tier 2 is about the same in
difficulty as the current Non-Displayed
Step-Up Volume Tier and thus
appropriately offers the same incentive.
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 the new
Growth, Non-Displayed Step-Up
Volume, and Remove Volume tiers and
have the opportunity to meet the tiers’
criteria and receive the applicable
enhanced rebate or reduced fee if such
criteria is met. Without having a view of
activity on other markets and offexchange 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 tiers will impact Member
activity, the Exchange anticipates that at
least five Members will be able to satisfy
the criteria proposed under each of the
three new tiers. The Exchange also notes
that proposed tiers will not adversely
impact any Member’s ability to qualify
for reduced fees or enhanced rebate
offered under other tiers. Should a
Member not meet the proposed new
criteria, the Member will merely not
receive that corresponding enhanced
rebate or reduced fee, as applicable.
Finally, the Exchange believes the
proposed rule change to eliminate
Remove Volume Tier 2 and Retail
Volume Tier 3 is reasonable because the
Exchange is not required to maintain
this tier or provide Members an
opportunity to receive reduced fees or
enhanced rebates. The Exchange
believes the proposal to eliminate these
tiers is also equitable and not unfairly
discriminatory because it applies to all
Members (i.e., the tier will not be
available for any Member). The
Exchange notes that recently no
Members have satisfied the criteria of
Remove Volume Tier 2 nor the criteria
of Retail Volume Tier 3. The Exchange
also notes that the proposed rule change
to remove these two tiers merely results
in Members not receiving a reduced fee
or enhanced rebate, as applicable,
which as noted above, the Exchange is
not required to offer or maintain.
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24 See
supra note 16.
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Sfmt 4703
Furthermore, the proposed rule change
to eliminate both Remove Volume Tier
2 and Retail Volume Tier 3 enables the
Exchange to redirect resources and
funding into other programs and tiers
intended to incentivize increased order
flow.
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 rule change to update the
standard fee applicable to liquidity
removing orders in securities priced at
or above a $1.00 does not impose any
burden on intramarket competition
because the standard rate will continue
to apply automatically and uniformly to
all liquidity removing orders priced at
or above $1.00. Similarly, all Members’
internalizing orders that add or remove
liquidity will no longer yield fee codes
EA or ER, and, instead, will
automatically and uniformly be assessed
the fees already in place for all other
orders generally that add or remove
liquidity. The Exchange also notes that
the proposed new Growth, NonDisplayed Step-Up Volume, Remove
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 or
reduced fee on their qualifying orders if
such criteria is met. Additionally, the
proposed tiers are designed to attract
additional order flow to the Exchange.
The Exchange believes that the new
criteria will incentivize market
participants to direct liquidity adding
and removing order flow to the
Exchange, providing for additional
execution opportunities for market
E:\FR\FM\26JYN1.SGM
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jbell on DSKJLSW7X2PROD with NOTICES
Federal Register / Vol. 86, No. 140 / Monday, July 26, 2021 / Notices
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. Finally, the Exchange
does not believe the proposed rule
change to eliminate a Remove Volume
Tier and Retail Volume Tier will impose
any burden on intramarket competition
because it applies to all Members
uniformly, as in, the tiers will no longer
be available to any Member.
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 16% of the market share.25
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.’’ 26 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 broker25 Supra
note 4.
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
26 See
VerDate Sep<11>2014
17:10 Jul 23, 2021
Jkt 253001
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’ . . . .’’.27 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)
of the Act 28 and paragraph (f) of Rule
19b–4 29 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–
CboeEDGX–2021–033 on the subject
line.
27 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
28 15 U.S.C. 78s(b)(3)(A).
29 17 CFR 240.19b–4(f).
PO 00000
Frm 00112
Fmt 4703
Sfmt 9990
40101
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–2021–033. 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–2021–033, and
should be submitted on or before
August 16, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–15812 Filed 7–23–21; 8:45 am]
BILLING CODE 8011–01–P
30 17
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]]>Agencies
[Federal Register Volume 86, Number 140 (Monday, July 26, 2021)]
[Notices]
[Pages 40097-40101]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-15812]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92445; File No. SR-CboeEDGX-2021-033]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule
July 20, 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 July 13, 2021, Cboe EDGX Exchange, Inc. (``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission
(``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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'' or ``EDGX
Equities'') proposes to amend its 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
standard rate for securities priced at or above $1.00 that remove
liquidity, (2) remove certain fee codes in connection with
internalization, (3) adopt a new tier under each of the Growth Tiers,
the Non-Displayed Step-Up Volume Tier, and the Remove Volume Tiers,
and, as a result, define the term ``Step-Up ADAV'', and (4) eliminate a
Remove Volume Tier and a Retail Volume Tier.\3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed fee changes July
1, 2021 (SR-CboeEDGX-2021-031). On July 13, 2021 the Exchange
withdrew that filing and submitted this proposal.
---------------------------------------------------------------------------
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 registered equities exchanges, as well as a
number of alternative trading systems and other off-exchange venues
that do not have similar self-regulatory responsibilities under the
Exchange Act, to which market participants may direct their order flow.
Based on publicly available information,\4\ no single registered
equities exchange has more than 16% of 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. Currently, for orders in
securities priced at or above $1.00, the Exchange provides a standard
rebate of $0.00160 per share for orders that add liquidity and assesses
a fee of $0.00280 per share for orders that remove liquidity. For
orders in securities priced below $1.00, the Exchange provides a
standard rebate of $0.00009 per share for orders that add liquidity and
assesses a fee of 0.30% of total dollar value for orders that remove
liquidity. 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.
---------------------------------------------------------------------------
\4\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (June 23, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
---------------------------------------------------------------------------
Standard Rate: Securities at or Above $1.00 That Remove Liquidity
As stated above, the Exchange currently assesses a standard rate of
$0.00280 per share for orders that remove liquidity in securities
priced at $1.00 or more. The Exchange proposes to amend the standard
rate for orders that remove liquidity in securities priced at $1.00 or
more from a fee of $0.00280 per share to $0.00285 per share and
reflects this change in the Fee Codes and Associated Fee where
applicable (i.e., corresponding to
[[Page 40098]]
standard fee codes N, W, 6, BB and ZR). The Exchange notes that the
proposed standard rate is in line with, yet also competitive with,
rates assessed by other equities exchanges on orders in securities
priced at $1.00 or more.\5\
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\5\ See Nasdaq Pricing 7, Section 118(a)(1), which, for example,
assesses a charge of $0.0030 for member orders that execute against
resting midpoint liquidity, and that that execute in the Nasdaq
Market Center generally, in securities priced at $1.00 or more; and
NYSE American Equities Price List, NYSE American Trading Fees and
Credits, Section I.A.1.a, Standard Rates, which assesses a standard
rate of $0.0030 per share (unless member adds ADV of at least 10,000
shares) for orders in securities priced at or above $1 that remove
liquidity.
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Eliminate Internalization Fee Codes
The Fee Codes and Associate Fees section of the Fee Schedule lists
all available fee codes for orders on EDGX. In particular, current fee
code EA is appended to internalization \6\ orders that add displayed
liquidity and current fee code ER is appended to internalization orders
that remove displayed liquidity. Orders that yield fee code EA and ER
are assessed a fee of $0.0005 per share in securities priced at or
above $1.00 and 0.15% of the dollar value in securities priced below
$1.00.\7\ The Exchange now proposes to eliminate these fee codes. The
Exchange notes that a majority of other equities exchanges do not
assess different rates for internalization orders, and therefore, in
order to remain competitive with rates assessed on orders that add or
remove liquidity on most other equities exchanges, the Exchange wishes
to also not apply a different rate for such orders that are
internalized. Internalization orders that add or remove liquidity will
simply yield the applicable existing fee codes for all other orders
that add or remove liquidity and receive the same corresponding rates
that currently apply to all other orders that add or remove liquidity.
For example, an internalization order that adds liquidity in Tape B
securities will yield existing fee code B and receive the current
corresponding rebate of $0.00160 for securities priced at or above
$1.00 or $0.00009 for securities priced below a $1.00. The Exchange
also notes that as a result of the proposed deletion of these fee
codes, the proposed rule change deletes footnote 7 of the Fee Schedule,
which provides that a Member's rate for internalization (fee codes EA
or ER) decreases to ``free'' per share per side if a Member adds an ADV
of at least 10,000,000 shares.
---------------------------------------------------------------------------
\6\ An internalized trade is a trade where the two orders
inadvertently match against each other and share the same Market
Participant Identifier (``MPID'').
\7\ Additionally, 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. See EDGX Fee Schedule, Footnote 7.
---------------------------------------------------------------------------
New Growth, Non-Displayed Step-Up Volume, and Remove Volume Tier
Under footnote 1 of the Fee Schedule the Exchange currently offers
various Add/Remove Volume Tiers. Specifically, the Exchange offers two
Growth Tiers that each provide an enhanced rebate for Members'
qualifying orders yielding fee codes B, V, Y, 3 and 4,\8\ where a
Member reaches certain add volume-based criteria, including ``growing''
its volume over a certain baseline month. For example, Growth Tier 1
provides an enhanced rebated of $0.0026 per share on qualifying orders
(i.e., orders yielding fee code B, V, Y, 3 and 4) where a Member (1)
adds an ADV \9\ of greater than or equal to 0.20% of the TCV,\10\ and
(2) has a Step-Up Add TCV \11\ from March 2019 that is greater than or
equal to 0.10%. The Exchange also offers one Non-Displayed Step-Up
Volume Tiers that provides an enhanced rebate for Members' orders
yielding fee codes DM, HA, MM, and RP,\12\ where a Member may receive
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 (1) has a
Step-Up Add TCV from January 2021 greater than or equal to 0.10%, (2)
adds an ADV greater than or equal to 0.50% of the TCV, and (3) removes
an ADV greater than or equal to 0.75% of the TCV. Finally, the Exchange
also currently offers two Remove Volume Tiers. For example, Remove
Volume Tier 1 currently offers a reduced fee of $0.0027 per share on
qualifying orders yielding fee codes BB, N and W \13\ in securities
priced at or above $1.00 and 0.28% of total dollar value on qualifying
orders in securities process below $1.00, where a Member (1) has an
ADAV \14\ greater than or equal to 0.25% TCV with displayed orders that
yield fee codes B, V or Y, or (2) adds Retail Order ADV (i.e., yielding
fee code ZA) greater than or equal to 0.45% of the TCV.
---------------------------------------------------------------------------
\8\ B is appended to orders that add liquidity to EDGX in Tape B
securities, V is appended to order that add liquidity to EDGX in
Tape A securities, Y is appended to orders that add liquidity to
EDGX in Tape C securities, 3 is appended to orders that add
liquidity to EDGX in pre and post market in Tape A or C securities,
and 4 is appended to orders that add liquidity to EDGX in pre and
post market in Tape A or C securities. Each is provided the standard
rebate of $0.00160.
\9\ 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.
\10\ TCV means total consolidated volume calculated as the
volume reported by all exchanges and trade reporting facilities to a
consolidated transaction reporting plan for the month for which the
fees apply.
\11\ Step-Up Add TCV means ADAV as a percentage of TCV in the
relevant baseline month subtracted from current ADAV as a percentage
of TCV.
\12\ DM is appended to orders that add liquidity using MidPoint
Discretionary order within discretionary range; HA is appended to
non-displayed orders that add liquidity; MM is appended to non-
displayed orders that add liquidity using Mid-Point Peg; and RP is
appended to non-displayed orders that add liquidity using
Supplemental Peg. Each is provided a rebate of $0.00100.
\13\ BB is appended to orders that remove liquidity from EDGX in
Tape B securities, N is appended to orders that remove liquidity
from EDGX in Tape C securities, and W is appended to orders that
remove liquidity from EDGX in Tape A securities. Each, as proposed,
is assessed a fee of $0.00285.
\14\ ADAV means average daily added volume calculated as the
number of shares added per day. ADAV is calculated on a monthly
basis.
---------------------------------------------------------------------------
The Exchange now proposes to adopt a new Growth Tier 2, a new Non-
Displayed Step-Up Volume Tier 2,\15\ and a new Remove Volume Tier
1.\16\ Each new tier provides the same set of additional criteria in
which Members may strive to achieve to receive an enhanced rebate or
reduced fee, as applicable--a Member must (1) add a Step-Up ADAV from
June 2021 greater than or equal to 0.10% of the TCV, or add a Step-Up
ADAV from June 2021 greater than or equal to 8,000,000, (2) and have a
total remove ADV greater than or equal to 0.70% of the TCV. The
proposed rule change also adopts a new definition, under the
definitions section of the Fee Schedule, for the term ``Step-Up ADAV'',
as referenced in each of the proposed new tiers. Specifically, as
proposed ``Step-up ADAV'' means ADAV in the relevant baseline month
subtracted from current ADAV.
---------------------------------------------------------------------------
\15\ As a result, the proposed rule change updates the name of
the current Non-Displayed Step-Up Tier to Non-Displayed Step-Up Tier
1.
\16\ As a result, the proposed rule change updates the name the
current Remove Volume Tier 1 to Remove Volume Tier 2. Note that
current Remove Volume Tier 3 is being deleted as proposed herein.
---------------------------------------------------------------------------
For achieving the proposed criteria, a Member will receive a
proposed enhanced rebate of $0.0027 per share on qualifying orders
(i.e., yielding fee codes B, V, Y, 3 and 4) pursuant to proposed Growth
Tier 2, a proposed enhanced rebate of $0.0025 per share on qualifying
orders (i.e., yielding fee codes DM, HA, MM and RP) pursuant to
proposed Non-Displayed Step-Up Volume Tier 2, and a proposed reduced
fee of $0.00275 per share on qualifying orders (i.e., yielding fee
codes BB, N and W) in securities priced at or above $1.00 and 0.28% of
total dollar value in
[[Page 40099]]
securities priced below $1.00 pursuant to proposed Remove Volume Tier
1.\17\
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\17\ As a result of the five decimal format of the proposed
reduced fee in proposed Remove Volume Tier 1, the proposed rule
change also updates the decimal format of the reduced fee that
currently corresponds to Remove Volume Tier 2 (current Tier 1) in
order to provide uniformity across the Remove Volume tiers. This
formatting update does not alter the current reduced fee amount
offered under Remove Volume Tier 2 (current Tier 1).
---------------------------------------------------------------------------
Overall, the new Growth, Non-Displayed Step-Up Volume, and Remove
Volume tiers are designed to provide Members with an additional
opportunity to receive an enhanced rebate or reduced fee by increasing
their order flow to the Exchange, which further contributes to a
deeper, more liquid market and provides even more execution
opportunities for active market participants. Incentivizing an increase
in both liquidity adding volume and in liquidity removing volume,
through additional criteria and enhanced rebate opportunities,
encourages liquidity adding Members on the Exchange to contribute to a
deeper, more liquid market, and liquidity executing Members on the
Exchange to increase transactions and take execution opportunities
provided by such increased liquidity, together providing for overall
enhanced price discovery and price improvement opportunities on the
Exchange. As such, increased overall order flow benefits all Members by
contributing towards a robust and well-balanced market ecosystem.
Eliminate a Remove Volume Tier and Retail Volume Tier
Finally, the Exchange proposes to eliminate Remove Volume Tier 2
and Retail Volume Tier 3. Current Remove Volume Tier 2 provides a
reduced fee of $0.0026 on qualifying orders (i.e., yielding fee codes
BB, N and W) in securities priced at or above $1.00 and 0.28% of total
dollar value in securities priced below $1.00, where a Member (1) has a
Step-Up Add TCV from January 2021 greater than or equal to 0.15%, (2)
has an ADAV greater than or equal to 0.08% of the TCV for Non-Displayed
orders that yield fee codes DM, HA, HI, MM, or RP, and (3) removes an
ADV greater than or equal to 0.75% of the TCV. Current Retail Volume
Tier 3 offers an enhanced rebate of $0.0037 per share on qualifying
orders (i.e., yielding fee code ZA), where a Member (1) has a Retail
Step-Up Add TCV (i.e., yielding fee code ZA) from May 2020 greater than
or equal to 0.10%, and (2) removes an ADV greater than or equal to
0.70% of the TCV. The Exchange proposes to eliminate Remove Volume Tier
2 and Retail Volume Tier 3 as no Members are currently satisfying the
criteria under these tiers, nor have satisfied such criteria over the
last three months. The Exchange no longer wishes to, nor is it required
to, maintain such tiers. More specifically, the proposed rule change
removes these tiers as the Exchange would rather redirect future
resources and funding into other programs and tiers intended to
incentivize increased order flow.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\18\ in general, and
furthers the objectives of Section 6(b)(4),\19\ 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) \20\
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.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f.
\19\ 15 U.S.C. 78f(b)(4).
\20\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
As described above, 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.
Regarding the proposed change to the standard rates, the Exchange
believes that amending the standard rate for orders that remove
liquidity in securities priced at or above $1.00 is reasonable because,
as stated above, in order to operate in the highly competitive equities
markets, the Exchange and its competing exchanges seek to offer similar
pricing structures, including assessing comparable standard fees for
orders in securities priced at or above $1.00.\21\ Thus, the Exchange
believes the proposed standard rate change is reasonable as it is
generally aligned with and competitive with the amounts assessed for
the orders in securities at or above $1.00 on other equities exchanges.
The Exchange also believes that amending this standard rate amount
represents an equitable allocation of fees and is not unfairly
discriminatory because they will continue to automatically apply to all
Members' orders that remove liquidity in securities at or above $1.00
uniformly.
---------------------------------------------------------------------------
\21\ See supra note 5.
---------------------------------------------------------------------------
The Exchange also believes the proposed rule change to remove fee
codes EA and ER is reasonable as the Exchange has observed that a
majority of other equities exchanges do not assess a different rate for
internalization orders that add or remove liquidity, and therefore,
seeks to more competitively align its rates assessed on orders that add
or remove liquidity with those assessed on other equities exchanges by
also not applying a different rate for internalized orders. The
Exchange believes that it is reasonable, equitable and not unfairly
discriminatory to assess internalization orders that add or remove
liquidity the same existing corresponding rates currently applied to
orders that add or remove liquidity that are not internalized. Such
current rates will apply automatically and uniformly to internalizing
orders that add or remove liquidity as they do today for all other
orders that add or remove liquidity.
Also, as described above, the Exchange notes that relative volume-
based incentives and discounts have been widely adopted by
exchanges,\22\ including the Exchange,\23\ and are reasonable,
equitable and non-discriminatory because they are open to all members
on an equal basis and provide additional benefits or discounts that are
reasonably related to (i) the value to an exchange's market quality and
(ii) associated higher levels of market activity, such as higher levels
of liquidity provision and/or growth patterns. Competing equity
exchanges offer similar tiered pricing structures, including schedules
of rebates and fees
[[Page 40100]]
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.
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\22\ See generally NYSE Price List, Transaction Fees; Nasdaq
Equity 7, Section 118(a)(1), Fees for Execution and Routing of
Orders in Nasdaq-Listed Securities; and BZX Equities Fee Schedule,
Footnote 1, Add/Remove Volume Tiers.
\23\ See EDGX Equities Fee Schedule, Footnote 1, Add/Remove
Volume Tiers.
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In particular, the Exchange believes the proposed new Growth, Non-
Displayed Step-Up Volume, and Remove Volume tiers are reasonable
because each new tier will be available to all Members, as the existing
tiers currently are, and provide all Members with an additional
opportunity to receive an enhanced rebate or reduced fee, as
applicable. The Exchange further believes the proposed new Growth, Non-
Displayed Step-Up, and Remove Volume tiers are a reasonable means to
encourage overall growth in Members' overall order flow to the Exchange
and to incentivize Members to continue to provide liquidity adding and
liquidity removing to the Exchange by offering them an additional
opportunity to receive an enhanced rebate or reduced fee on qualifying
orders than those opportunities currently under the Add/Remove Volume
Tiers in Footnote 1 of the Fee Schedule. The Exchange believes that the
proposed tiers will generally benefit all market participants by
incentivizing continuous liquidity and thus, deeper more liquid markets
as well as increased execution opportunities. Indeed, the Exchange
notes that greater add volume order flow may provide for deeper, more
liquid markets and execution opportunities at improved prices, and
greater remove volume order flow may increase transactions on the
Exchange, which the Exchange believes incentivizes liquidity providers
to submit additional liquidity and execution opportunities. 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 the proposed rule change
to define the term ``Step-Up ADAV'' is reasonable as it will clarify
terminology used in the Fee Schedule, to the benefit of all Members.
Further, the Exchange believes that the proposed tiers are
reasonable as they do not represent a significant departure from the
criteria or corresponding rates currently offered in the Fee Schedule,
and that the proposed enhanced rebates or enhanced fee, as applicable,
are commensurate with the new criteria. More specifically, the Exchange
believes that the proposed criteria, which is the same in each new
tier, and corresponding rates are commensurate with surrounding tiers;
in that the proposed criteria in new Growth Tier 2 is incrementally
more difficult than that of Growth Tier 1 and thus appropriately offers
a greater incentive, the proposed criteria in new Remove Volume Tier 1
is incrementally less difficult than that of Remove Volume Tier 2
(current Tier 1) \24\ and thus appropriately offers a lesser incentive,
and the proposed criteria in new Non-Displayed Step-Up Volume Tier 2 is
about the same in difficulty as the current Non-Displayed Step-Up
Volume Tier and thus appropriately offers the same incentive.
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\24\ See supra note 16.
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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 the new Growth,
Non-Displayed Step-Up Volume, and Remove Volume tiers and have the
opportunity to meet the tiers' criteria and receive the applicable
enhanced rebate or reduced fee if such criteria is met. Without having
a view of activity on other markets and off-exchange venues, the
Exchange has no way of knowing whether this proposed rule change would
definitely result in any Members qualifying for the proposed tiers.
While the Exchange has no way of predicting with certainty how the
proposed tiers will impact Member activity, the Exchange anticipates
that at least five Members will be able to satisfy the criteria
proposed under each of the three new tiers. The Exchange also notes
that proposed tiers will not adversely impact any Member's ability to
qualify for reduced fees or enhanced rebate offered under other tiers.
Should a Member not meet the proposed new criteria, the Member will
merely not receive that corresponding enhanced rebate or reduced fee,
as applicable.
Finally, the Exchange believes the proposed rule change to
eliminate Remove Volume Tier 2 and Retail Volume Tier 3 is reasonable
because the Exchange is not required to maintain this tier or provide
Members an opportunity to receive reduced fees or enhanced rebates. The
Exchange believes the proposal to eliminate these tiers is also
equitable and not unfairly discriminatory because it applies to all
Members (i.e., the tier will not be available for any Member). The
Exchange notes that recently no Members have satisfied the criteria of
Remove Volume Tier 2 nor the criteria of Retail Volume Tier 3. The
Exchange also notes that the proposed rule change to remove these two
tiers merely results in Members not receiving a reduced fee or enhanced
rebate, as applicable, which as noted above, the Exchange is not
required to offer or maintain. Furthermore, the proposed rule change to
eliminate both Remove Volume Tier 2 and Retail Volume Tier 3 enables
the Exchange to redirect resources and funding into other programs and
tiers intended to incentivize increased order flow.
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
rule change to update the standard fee applicable to liquidity removing
orders in securities priced at or above a $1.00 does not impose any
burden on intramarket competition because the standard rate will
continue to apply automatically and uniformly to all liquidity removing
orders priced at or above $1.00. Similarly, all Members' internalizing
orders that add or remove liquidity will no longer yield fee codes EA
or ER, and, instead, will automatically and uniformly be assessed the
fees already in place for all other orders generally that add or remove
liquidity. The Exchange also notes that the proposed new Growth, Non-
Displayed Step-Up Volume, Remove 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 or reduced fee on their qualifying orders if such
criteria is met. Additionally, the proposed tiers are designed to
attract additional order flow to the Exchange. The Exchange believes
that the new criteria will incentivize market participants to direct
liquidity adding and removing order flow to the Exchange, providing for
additional execution opportunities for market
[[Page 40101]]
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. Finally, the
Exchange does not believe the proposed rule change to eliminate a
Remove Volume Tier and Retail Volume Tier will impose any burden on
intramarket competition because it applies to all Members uniformly, as
in, the tiers will no longer be available to any Member.
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 16% of the market share.\25\ 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.'' \26\ 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' . . . .''.\27\ 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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\25\ Supra note 4.
\26\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\27\ 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 \28\ and paragraph (f) of Rule 19b-4 \29\
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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\28\ 15 U.S.C. 78s(b)(3)(A).
\29\ 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-CboeEDGX-2021-033 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-2021-033. 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-2021-033, and should be
submitted on or before August 16, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-15812 Filed 7-23-21; 8:45 am]
BILLING CODE 8011-01-P
