Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend its Fee Schedule, 16296-16299 [2022-05986]
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Federal Register / Vol. 87, No. 55 / Tuesday, March 22, 2022 / Notices
By the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.154
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–05980 Filed 3–21–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94437; File No. SR–
CboeEDGX–2022–013]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend its
Fee Schedule
March 16, 2022.
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 March 9,
2022, Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) 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 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.
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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
154 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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’’) as
follows: (1) Amend fee code ZM so that
it applies to applicable orders with a
time-in-force of Good ‘til Extended Day
(‘‘GTX’’); and (2) modify the criteria of
Growth Tier 2. The Exchange proposes
to implement these changes effective
March 1, 2022.3
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
16 registered equities exchanges, as well
as a number of alternative trading
systems and other off-exchange venues
that do not have similar self-regulatory
responsibilities under the Exchange Act,
to which market participants may direct
their order flow. Based on publicly
available information,4 no single
registered equities exchange has more
than 17% 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 $0.0030 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
3 The Exchange initially filed the proposed fee
changes on March 1, 2022 (SR–CboeEDGX–2022–
009). On March 9, 2022, the Exchange withdrew
that filing and submitted this proposal.
4 See Cboe Global Markets, U.S. Equities Market
Volume Summary, Month-to-Date (February 27,
2022), available at https://markets.cboe.com/us/
equities/market_statistics/.
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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.
As noted under the Fee Codes and
Associated Fees section of the Fee
Schedule, fee code ZM is appended to
retail orders with a time-in-force of
Day 5/Regular Hours Only (‘‘RHO’’) 6
that remove liquidity on arrival and
provides a fee/rebate of free. Now the
Exchange proposes to amend fee code
ZM so that is appended to retail with a
time-in-force of Day/RHO or GTX 7 that
remove liquidity on arrival. Currently,
retail orders with a time-in-force of GTX
that remove liquidity upon arrival are
appended fee code ZR which are
assessed a fee of $0.00300 per share in
securities at or above $1.00 and 0.30%
of dollar value to securities below $1.00.
Therefore, the proposal would decrease
the fee associated with retail orders with
a time-in-force of GTX that remove
liquidity upon arrival by $0.00300.
Further, the Growth Volume Tiers
Volume Tiers set forth in footnote 1 of
the Fee Schedule (Add/Remove Volume
Tiers) provide Members an opportunity
for qualifying orders (i.e., orders
yielding fee code B,8 V,9 Y,10 3 11 or 4 12)
to receive an enhanced rebate and are
designed to encourage growth in order
flow by providing specific criteria in
which Members must increase their
relative liquidity each month over a
predetermined baseline. Growth Tier 2,
for example, provides an opportunity
for qualifying orders (i.e., orders
yielding fee code B, V, Y, 3 or 4) to
receive an enhanced rebate of $0.0027
per share to Members that (1) add a
Step-Up ADAV 13 from June 2021
greater than or equal to 0.10% of the
TCV 14 or Members that add a Step-Up
5 See
Exchange Rule 11.6(q)(2)
Exchange Rule 11.6(q)(6).
7 See Exchange Rule 11.6(q)(5).
8 Orders yielding Fee Code ‘‘B’’ are orders adding
liquidity to EDGX (Tape B).
9 Orders yielding Fee Code ‘‘V’’ are orders adding
liquidity to EDGX (Tape A).
10 Orders yielding Fee Code ‘‘Y’’ are orders
adding liquidity to EDGX (Tape C).
11 Orders yielding Fee Code ‘‘3’’ are orders adding
liquidity to EDGX in the pre and post market (Tapes
A or C).
12 Orders yielding Fee Code ‘‘4’’ are orders adding
liquidity to EDGX in the pre and post market (Tape
B).
13 ‘‘Step-Up ADAV’’ means ADAV in the relevant
baseline month subtracted from current ADAV.
14 ‘‘TCV’’ means total consolidated volume
calculated as the volume reported by all exchanges
6 See
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Federal Register / Vol. 87, No. 55 / Tuesday, March 22, 2022 / Notices
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ADAV from June 2021 equal to or
greater than 8 million shares; and (2)
Members that have a total remove ADV
equal to or greater than 0.70% of TCV.
The Exchange now proposes to modify
the criteria in the second prong of
Growth Tier 2 to require that Members
(i) have a total remove ADV equal to or
greater than 0.70% of TCV, or
alternatively, (ii) have a total remove
ADV equal to or greater than 60,000,000
shares.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the
Securities and Exchange Act of 1933
(the ‘‘Act’’),15 in general, and furthers
the objectives of Section 6(b)(4),16 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) 17 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 amendment
to fee code ZM, the Exchange notes that
the competition for retail order flow is
particularly intense, especially as it
relates to exchange versus off-exchange
and trade reporting facilities to a consolidated
transaction reporting plan for the month for which
the fees apply.
15 15 U.S.C. 78f.
16 15 U.S.C. 78f(b)(4).
17 15 U.S.C. 78f.(b)(5).
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venues, as prominent retail brokerages
tend to route a majority of their limit
orders to off-exchange venues.18
Accordingly, competitive forces compel
the Exchange to use exchange
transaction fees and credits, particularly
as they relate to competing for retail
order flow, because market participants
can readily trade on competing venues
if they deem pricing levels at those
other venues to be more favorable.
The Exchange believes that its
proposed change to amend fee code ZM
is reasonable, equitable and not unfairly
discriminatory. First, the Exchange
notes that the current fee applied to
retail orders with a time-in-force of GTX
that remove liquidity upon arrival is
$0.00300 per share in securities at or
above $1.00 and 0.30% of dollar value
to securities below $1.00. Therefore, the
proposal would decrease the fee
associated with retail orders with a
time-in-force of GTX that remove
liquidity upon arrival. Second, while
the proposed fee/rebate applies only to
retail orders, the Exchange does not
believe this application is
discriminatory as the Exchange offers
similar rebates or reduced fees to nonretail order flow. The Exchange notes
that, like all other fee codes, ZM and the
accompanying fee (which is free) will be
automatically and uniformly applied to
all Members’ qualifying orders as
applicable.
The Exchange believes its proposal to
amend the criteria of the Growth Tier 2
is reasonable because the tier is and will
continue to be available to all Members
and provides Members an alternative
opportunity to meet the required criteria
in order to receive an enhanced rebate.
The Exchange 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 proposed amendment to
Growth Tier 2 is designed to give
Members an alternative opportunity to
meet the second prong of the required
criteria, and therefore the tier may be
more easily achieved by Members. The
Exchange believes that the existing
rebates under Growth Tier 2 continues
to be commensurate with the proposed
18 See Securities Exchange Release No. 86375
(July 15, 2019), 84 FR 34960 (SRCboeEDGX–2019–
045).
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criteria. That is, the rebate reasonably
reflects the difficulty in achieving the
corresponding criteria as amended.
The Exchange believes that the
changes Growth Tier 2 will benefit all
market participants by incentivizing
continuous liquidity and, thus, deeper
more liquid markets as well as increased
execution opportunities. Particularly,
the proposal is designed to incentivize
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 amendment to the Growth
Tier 2 represents an equitable allocation
of rebates and are not unfairly
discriminatory because all Members are
eligible for the tiers and would have the
opportunity to meet the tier’s criteria
and would receive the proposed rebate
if such criteria is met. Without having
a view of activity on other markets and
off-exchange venues, the Exchange has
no way of knowing whether this
proposed rule change would definitely
result in any Members qualifying for the
tier. While the Exchange has no way of
predicting with certainty how the
proposed tier will impact Member
activity, based on trading activity on the
Exchange during the prior month, the
Exchange anticipates that at least one
Member will be able to compete for and
reach the proposed criteria in Growth
Tier 2. The Exchange also notes that
proposed change 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 the tier, as
amended, the Member will merely not
receive the corresponding 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 maker-taker 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.
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Federal Register / Vol. 87, No. 55 / Tuesday, March 22, 2022 / Notices
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 changes 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 changes further 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 changes do not impose any burden
on intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Particularly,
the proposed tier change will apply to
Members equally in that all Members
are eligible for Growth Tier 2, have a
reasonable opportunity to meet the tier’s
criteria and will receive the enhanced
rebate on their qualifying orders if such
criteria is met. Further, the fee code ZM
is and will continue to be available to
all Members equally. The Exchange
does not believe the proposed changes
burdens competition, but rather,
enhances competition as it is intended
to increase the competitiveness of EDGX
by amending an existing pricing
incentive in order to attract order flow
and incentivize participants to increase
their participation on the Exchange,
providing for additional execution
opportunities for market participants
and improved price transparency.
Greater overall order flow, trading
opportunities, and pricing transparency
benefits all market participants on the
Exchange by enhancing market quality
and continuing to encourage Members
to send orders, thereby contributing
towards a robust and well-balanced
market ecosystem.
Next, the Exchange believes the
proposed rule change does not impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
As previously discussed, the Exchange
operates in a highly competitive market.
Members have numerous alternative
venues that they may participate on and
direct their order flow, including other
equities exchanges, off-exchange
venues, and alternative trading systems.
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Additionally, the Exchange represents a
small percentage of the overall market.
Based on publicly available information,
no single equities exchange has more
than 17% of the market share.19
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.’’ 20 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’. . . .’’.21 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.
19 Supra
note 4.
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
21 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)).
20 See
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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 22 and paragraph (f) of Rule
19b–4 23 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–2022–013 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-2022–013. 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
22 15
23 17
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U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
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Federal Register / Vol. 87, No. 55 / Tuesday, March 22, 2022 / Notices
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–2022–013 and
should be submitted on or before April
12, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–05986 Filed 3–21–22; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–94434; File No. SR–BX–
2022–005]
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Extend the MarketWide Circuit Breaker Pilot to April 18,
2022
March 16, 2022.
lotter on DSK11XQN23PROD with NOTICES1
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on March 10,
2022, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission (‘‘SEC’’ or
‘‘Commission’’) the proposed rule
change as described in Items I and II,
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to extend the
pilot related to the market-wide circuit
breaker in Equity 4, Rule 4121 to the
close of business on April 18, 2022.
The text of the proposed rule change
is available on the Exchange’s website at
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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 extend the
pilot related to the market-wide circuit
breaker in Equity 4, Rule 4121 to the
close of business on April 18, 2022.
SECURITIES AND EXCHANGE
COMMISSION
24 17
https://listingcenter.nasdaq.com/
rulebook/bx/rules, at the principal office
of the Exchange, and at the
Commission’s Public Reference Room.
Background
The market-wide circuit breaker
(‘‘MWCB’’) rules, including the
Exchange’s Rule 4121 under Equity 4,
provide an important, automatic
mechanism that is invoked to promote
stability and investor confidence during
periods of significant stress when cash
equities securities experience extreme
market-wide declines. The MWCB rules
are designed to slow the effects of
extreme price declines through
coordinated trading halts across both
cash equity and equity options
securities markets.
The cash equities rules governing
MWCBs were first adopted in 1988 and,
in 2012, all U.S. cash equity exchanges
and FINRA amended their cash equities
uniform rules on a pilot basis (the ‘‘Pilot
Rules,’’ i.e., Equity 4, Rule 4121).3 The
Pilot Rules currently provide for trading
halts in all cash equity securities during
a severe market decline as measured by
a single-day decline in the S&P 500
Index (‘‘SPX’’).4 Under the Pilot Rules,
3 See Securities Exchange Act Release No. 67090
(May 31, 2012), 77 FR 33531 (June 6, 2012) (SR–
BATS–2011–038; SR–BYX–2011–025; SR–BX–
2011–068; SR–CBOE–2011–087; SR–C2–2011–024;
SR–CHX–2011–30; SR–EDGA–2011–31; SR–EDGX–
2011–30; SR–FINRA–2011–054; SR–ISE–2011–61;
SR–NASDAQ–2011–131; SR–NSX–2011–11; SR–
NYSE–2011–48; SR–NYSEAmex–2011–73; SR–
NYSEArca–2011–68; SR–Phlx–2011–129) (‘‘Pilot
Rules Approval Order’’).
4 The rules of the equity options exchanges
similarly provide for a halt in trading if the cash
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16299
a market-wide trading halt will be
triggered if SPX declines in price by
specified percentages from the prior
day’s closing price of that index. The
triggers are set at three circuit breaker
thresholds: 7% (Level 1), 13% (Level 2),
and 20% (Level 3). A market decline
that triggers a Level 1 or Level 2 halt
after 9:30 a.m. and before 3:25 p.m.
would halt market-wide trading for 15
minutes, while a similar market decline
at or after 3:25 p.m. would not halt
market-wide trading. (Level 1 and Level
2 halts may occur only once a day.) A
market decline that triggers a Level 3
halt at any time during the trading day
would halt market-wide trading for the
remainder of the trading day.
The Commission approved the Pilot
Rules, the term of which was to
coincide with the pilot period for the
Plan to Address Extraordinary Market
Volatility Pursuant to Rule 608 of
Regulation NMS (the ‘‘LULD Plan’’),5
including any extensions to the pilot
period for the LULD Plan.6 In April
2019, the Commission approved an
amendment to the LULD Plan for it to
operate on a permanent, rather than
pilot, basis.7 In light of the proposal to
make the LULD Plan permanent, the
Exchange amended Equity 4, Rule 4121
to untie the pilot’s effectiveness from
that of the LULD Plan and to extend the
pilot’s effectiveness to the close of
business on October 18, 2019.8 The
Exchange subsequently filed to extend
the Pilot Rules’ effectiveness for an
additional year to the close of business
on October 18, 2020,9 and later, on
October 18, 2021.10 The Exchange last
extended the pilot to the close of
business on March 18, 2022.11
The Exchange now proposes to amend
Equity 4, Rule 4121 to extend the pilot
equities exchanges invoke a MWCB Halt. See, e.g.,
Options 3, Section 9(e).
5 See Securities Exchange Act Release No. 67091
(May 31, 2012), 77 FR 33498 (June 6, 2012). The
LULD Plan provides a mechanism to address
extraordinary market volatility in individual
securities.
6 See Securities Exchange Act Release Nos. 67090
(May 31, 2012), 77 FR 33531 (June 6, 2012) (SR–
BX–2011–068) (Approval Order); and 68815
(February 1, 2013), 78 FR 9752 (February 11, 2013)
(SR–BX–2013–009) (Notice of Filing and Immediate
Effectiveness of Proposed Rule Change to Delay the
Operative Date).
7 See Securities Exchange Act Release No. 85623
(April 11, 2019), 84 FR 16086 (April 17, 2019).
8 See Securities Exchange Act Release No. 85585
(April 10, 2019), 84 FR 15643 (April 16, 2019) (SR–
BX–2019–008).
9 See Securities Exchange Act Release No. 87208
(October 3, 2019), 84 FR 54213 (October 9, 2019)
(SR–BX–2019–034).
10 See Securities Exchange Act Release No. 90145
(October 9, 2020), 85 FR 65462 (October 15, 2020)
(SR–BX–2020–029).
11 See Securities Exchange Act Release No. 93287
(October 12, 2021), 86 FR 57712 (October 18, 2021)
(SR–BX–2021–045).
E:\FR\FM\22MRN1.SGM
22MRN1
]]>Agencies
[Federal Register Volume 87, Number 55 (Tuesday, March 22, 2022)]
[Notices]
[Pages 16296-16299]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05986]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94437; File No. SR-CboeEDGX-2022-013]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend its Fee Schedule
March 16, 2022.
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 March 9, 2022, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') 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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'' 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'') as follows: (1) Amend fee
code ZM so that it applies to applicable orders with a time-in-force of
Good `til Extended Day (``GTX''); and (2) modify the criteria of Growth
Tier 2. The Exchange proposes to implement these changes effective
March 1, 2022.\3\
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\3\ The Exchange initially filed the proposed fee changes on
March 1, 2022 (SR-CboeEDGX-2022-009). On March 9, 2022, the Exchange
withdrew that filing and submitted this proposal.
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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 17% 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 $0.0030 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.
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\4\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (February 27, 2022), available at https://markets.cboe.com/us/equities/market_statistics/.
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As noted under the Fee Codes and Associated Fees section of the Fee
Schedule, fee code ZM is appended to retail orders with a time-in-force
of Day \5\/Regular Hours Only (``RHO'') \6\ that remove liquidity on
arrival and provides a fee/rebate of free. Now the Exchange proposes to
amend fee code ZM so that is appended to retail with a time-in-force of
Day/RHO or GTX \7\ that remove liquidity on arrival. Currently, retail
orders with a time-in-force of GTX that remove liquidity upon arrival
are appended fee code ZR which are assessed a fee of $0.00300 per share
in securities at or above $1.00 and 0.30% of dollar value to securities
below $1.00. Therefore, the proposal would decrease the fee associated
with retail orders with a time-in-force of GTX that remove liquidity
upon arrival by $0.00300.
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\5\ See Exchange Rule 11.6(q)(2)
\6\ See Exchange Rule 11.6(q)(6).
\7\ See Exchange Rule 11.6(q)(5).
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Further, the Growth Volume Tiers Volume Tiers set forth in footnote
1 of the Fee Schedule (Add/Remove Volume Tiers) provide Members an
opportunity for qualifying orders (i.e., orders yielding fee code B,\8\
V,\9\ Y,\10\ 3 \11\ or 4 \12\) to receive an enhanced rebate and are
designed to encourage growth in order flow by providing specific
criteria in which Members must increase their relative liquidity each
month over a predetermined baseline. Growth Tier 2, for example,
provides an opportunity for qualifying orders (i.e., orders yielding
fee code B, V, Y, 3 or 4) to receive an enhanced rebate of $0.0027 per
share to Members that (1) add a Step-Up ADAV \13\ from June 2021
greater than or equal to 0.10% of the TCV \14\ or Members that add a
Step-Up
[[Page 16297]]
ADAV from June 2021 equal to or greater than 8 million shares; and (2)
Members that have a total remove ADV equal to or greater than 0.70% of
TCV. The Exchange now proposes to modify the criteria in the second
prong of Growth Tier 2 to require that Members (i) have a total remove
ADV equal to or greater than 0.70% of TCV, or alternatively, (ii) have
a total remove ADV equal to or greater than 60,000,000 shares.
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\8\ Orders yielding Fee Code ``B'' are orders adding liquidity
to EDGX (Tape B).
\9\ Orders yielding Fee Code ``V'' are orders adding liquidity
to EDGX (Tape A).
\10\ Orders yielding Fee Code ``Y'' are orders adding liquidity
to EDGX (Tape C).
\11\ Orders yielding Fee Code ``3'' are orders adding liquidity
to EDGX in the pre and post market (Tapes A or C).
\12\ Orders yielding Fee Code ``4'' are orders adding liquidity
to EDGX in the pre and post market (Tape B).
\13\ ``Step-Up ADAV'' means ADAV in the relevant baseline month
subtracted from current ADAV.
\14\ ``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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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Securities and Exchange Act of
1933 (the ``Act''),\15\ in general, and furthers the objectives of
Section 6(b)(4),\16\ 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) \17\ 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.
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\15\ 15 U.S.C. 78f.
\16\ 15 U.S.C. 78f(b)(4).
\17\ 15 U.S.C. 78f.(b)(5).
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Regarding the proposed amendment to fee code ZM, the Exchange notes
that the competition for retail order flow is particularly intense,
especially as it relates to exchange versus off-exchange venues, as
prominent retail brokerages tend to route a majority of their limit
orders to off-exchange venues.\18\ Accordingly, competitive forces
compel the Exchange to use exchange transaction fees and credits,
particularly as they relate to competing for retail order flow, because
market participants can readily trade on competing venues if they deem
pricing levels at those other venues to be more favorable.
---------------------------------------------------------------------------
\18\ See Securities Exchange Release No. 86375 (July 15, 2019),
84 FR 34960 (SRCboeEDGX-2019-045).
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The Exchange believes that its proposed change to amend fee code ZM
is reasonable, equitable and not unfairly discriminatory. First, the
Exchange notes that the current fee applied to retail orders with a
time-in-force of GTX that remove liquidity upon arrival is $0.00300 per
share in securities at or above $1.00 and 0.30% of dollar value to
securities below $1.00. Therefore, the proposal would decrease the fee
associated with retail orders with a time-in-force of GTX that remove
liquidity upon arrival. Second, while the proposed fee/rebate applies
only to retail orders, the Exchange does not believe this application
is discriminatory as the Exchange offers similar rebates or reduced
fees to non-retail order flow. The Exchange notes that, like all other
fee codes, ZM and the accompanying fee (which is free) will be
automatically and uniformly applied to all Members' qualifying orders
as applicable.
The Exchange believes its proposal to amend the criteria of the
Growth Tier 2 is reasonable because the tier is and will continue to be
available to all Members and provides Members an alternative
opportunity to meet the required criteria in order to receive an
enhanced rebate. The Exchange notes that relative volume-based
incentives and discounts have been widely adopted by exchanges,
including the Exchange, and are reasonable, equitable, and non-
discriminatory because they are open to all Members on an equal basis
and provide additional 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 proposed amendment to Growth Tier 2 is
designed to give Members an alternative opportunity to meet the second
prong of the required criteria, and therefore the tier may be more
easily achieved by Members. The Exchange believes that the existing
rebates under Growth Tier 2 continues to be commensurate with the
proposed criteria. That is, the rebate reasonably reflects the
difficulty in achieving the corresponding criteria as amended.
The Exchange believes that the changes Growth Tier 2 will benefit
all market participants by incentivizing continuous liquidity and,
thus, deeper more liquid markets as well as increased execution
opportunities. Particularly, the proposal is designed to incentivize
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 amendment to the
Growth Tier 2 represents an equitable allocation of rebates and are not
unfairly discriminatory because all Members are eligible for the tiers
and would have the opportunity to meet the tier's criteria and would
receive the proposed rebate if such criteria is met. Without having a
view of activity on other markets and off-exchange venues, the Exchange
has no way of knowing whether this proposed rule change would
definitely result in any Members qualifying for the tier. While the
Exchange has no way of predicting with certainty how the proposed tier
will impact Member activity, based on trading activity on the Exchange
during the prior month, the Exchange anticipates that at least one
Member will be able to compete for and reach the proposed criteria in
Growth Tier 2. The Exchange also notes that proposed change 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 the tier, as amended, the Member will merely not receive
the corresponding 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 maker-
taker 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.
[[Page 16298]]
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 changes 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 changes
further 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 changes do not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the proposed
tier change will apply to Members equally in that all Members are
eligible for Growth Tier 2, have a reasonable opportunity to meet the
tier's criteria and will receive the enhanced rebate on their
qualifying orders if such criteria is met. Further, the fee code ZM is
and will continue to be available to all Members equally. The Exchange
does not believe the proposed changes burdens competition, but rather,
enhances competition as it is intended to increase the competitiveness
of EDGX by amending an existing pricing incentive in order to attract
order flow and incentivize participants to increase their participation
on the Exchange, providing for additional execution opportunities for
market participants and improved price transparency. Greater overall
order flow, trading opportunities, and pricing transparency benefits
all market participants on the Exchange by enhancing market quality and
continuing to encourage Members to send orders, thereby contributing
towards a robust and well-balanced market ecosystem.
Next, the Exchange believes the proposed rule change does not
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As previously
discussed, the Exchange operates in a highly competitive market.
Members have numerous alternative venues that they may participate on
and direct their order flow, including other equities exchanges, off-
exchange venues, and alternative trading systems. Additionally, the
Exchange represents a small percentage of the overall market. Based on
publicly available information, no single equities exchange has more
than 17% of the market share.\19\ 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.'' \20\ 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'. . . .''.\21\ 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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\19\ Supra note 4.
\20\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\21\ 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 \22\ and paragraph (f) of Rule 19b-4 \23\
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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\22\ 15 U.S.C. 78s(b)(3)(A).
\23\ 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-2022-013 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-2022-013. 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
[[Page 16299]]
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-2022-013 and should
be submitted on or before April 12, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-05986 Filed 3-21-22; 8:45 am]
BILLING CODE 8011-01-P
