Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 50137-50140 [2022-17434]

Download as PDF Federal Register / Vol. 87, No. 156 / Monday, August 15, 2022 / Notices khammond on DSKJM1Z7X2PROD with NOTICES B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act. The Exchange notes that it operates in a highly competitive market in which market participants can readily favor competing venues if they deem rebates (this includes the related MQMs) or fee levels at a particular venue to be excessive, or rebate opportunities available at other venues to be more favorable. In such an environment, the Exchange must continually adjust its rebates (this includes the related MQMs) and fees to remain competitive with other exchanges and with alternative trading systems that have been exempted from compliance with the statutory standards applicable to exchanges. Because competitors are free to modify their own rebates (this includes the related MQMs) and fees in response, and because market participants may readily adjust their order routing practices, the Exchange believes that the degree to which rebate (this includes the related MQMs) and fee changes in this market may impose any burden on competition is extremely limited. In this instance, the Exchange is proposing to modify certain of the MQMs to qualify for the incentives provided to market makers for participation in the DLP program in an effort to improve the program by providing more targeted measurements to improve and increase market quality in all ETPs. The Exchange uses incentives, such as the rebates of the DLP program, to incentivize market participants to improve the market. The Exchange must, from time to time, assess the effectiveness of incentives (and related MQMs) and adjust them when they are not as effective as the Exchange believes they could be. Moreover, the Exchange is ultimately limited in the amount of rebates it may offer. The proposed amended MQMs are reflective of such an analysis. The Exchange notes that participation in the DLP program is entirely voluntary and, to the extent that registered market makers determine that the MQMs and related rebates are not in line with the level of market-improving behavior the Exchange requires, a DLP may elect to deregister as such with no penalty. The Exchange does not believe that the proposed changes place an unnecessary burden on competition and, in sum, if the changes proposed VerDate Sep<11>2014 17:24 Aug 12, 2022 Jkt 256001 herein are unattractive to market makers, it is likely that the Exchange will lose participation in the DLP program as a result. Thus, the Exchange does not believe that the proposal represents a burden on competition among Exchange members, or that the proposal will impair the ability of members or competing order execution venues to maintain their competitive standing in the financial markets. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others No written comments were either solicited or received. 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 9 and paragraph (f) of Rule 19b–4 10 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: (i) necessary or appropriate in the public interest; (ii) for the protection of investors; or (iii) otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission shall institute proceedings to determine whether the proposed rule should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– NASDAQ–2022–045 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–NASDAQ–2022–045. 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–NASDAQ–2022–045 and should be submitted on or before September 6, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.11 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2022–17433 Filed 8–12–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–95459; File No. SRCboeEDGX–2022–035] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule August 9, 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 August 1, 2022, Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) filed with the Securities and Exchange Commission 11 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 9 15 U.S.C. 78s(b)(3)(A). 10 17 CFR 240.19b–4(f). PO 00000 Frm 00070 Fmt 4703 1 15 Sfmt 4703 50137 E:\FR\FM\15AUN1.SGM 15AUN1 50138 Federal Register / Vol. 87, No. 156 / Monday, August 15, 2022 / Notices (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 Options’’) 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 khammond on DSKJM1Z7X2PROD with NOTICES 1. Purpose The Exchange proposes to amend its Fee Schedule to (1) eliminate the Step Up Mechanism (‘‘SUM’’) Auction Pricing Tier and (2) modify the Automated Improvement Mechanism (‘‘AIM’’) Tier 2, effective August 1, 2022. 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 options venues to which market participants may direct their order flow. Based on publicly available information, no single options exchange has more than 17% of the market share and currently the Exchange represents only VerDate Sep<11>2014 17:24 Aug 12, 2022 Jkt 256001 approximately 7% of the market share.3 Thus, in such a low-concentrated and highly competitive market, no single options exchange, including the Exchange, possesses significant pricing power in the execution of option order flow. The Exchange believes that the ever-shifting market share among the exchanges from month to month demonstrates that market participants can shift order flow or discontinue to reduce use of certain categories of products, in response to fee changes. Accordingly, competitive forces constrain the Exchange’s transaction fees, and market participants can readily trade on competing venues if they deem pricing levels at those other venues to be more favorable. The Exchange’s Fees Schedule sets forth standard rebates and rates applied per contract. For example, the Exchange provides standard rebates ranging from $0.01 up to $0.21 per contract for Customer orders in both Penny and Non-Penny Securities. Additionally, in response to the competitive environment, the Exchange also offers tiered pricing, which provides Members with 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. For example, the Exchange currently offers two tiers related to Customer volume under proposed footnote 9 (Automated Improvement Mechanism (‘‘AIM’’) Tier) applicable to orders yielding fee code ‘‘BC’’, which fee code is appended to Customer Agency orders executed in AIM. Orders yielding fee code BC are currently provided a standard rebate of $0.06 per contract. The AIM Tiers currently provide enhanced rebates between $0.11 and $0.14 per contract for qualifying orders that yield fee code BC where a Member meets the respective tier’s volume threshold. Under AIM Tier 2, a Member will receive an enhanced rebate of $0.14 per contract on such orders where it has an ADV 4 in Customer orders greater than or equal to 0.50% of average OCV.5 3 See Cboe Global Markets U.S. Options Market Monthly Volume Summary (July 27, 2022), available at https://markets.cboe.com/us/options/ market_statistics/. 4 ‘‘ADV’’ means average daily volume calculated as the number of contracts added or removed, combined, per day. ADV is calculated on a monthly basis. See Cboe EDGX Options Exchange Fee Schedule. 5 ‘‘OCV’’ means the total equity and ETF options volume that clears in the Customer range at the Options Clearing Corporation (‘‘OCC’’) for the PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 The Exchange now proposes to reduce the enhanced rebate amount under AIM Tier 2 from $0.14 per contract to $0.12 per contract. The Exchange also offers Members an opportunity to receive an additional rebate under footnote 3 of the Fee Schedule (Step Up Mechanism (‘‘SUM’’) Auction Pricing Tier). Under the SUM Response Tier, the Exchange provides an additional rebate of $0.05 per contract for any order submitted in response to, and executed against, an order subject to the SUM Auction.6 The Exchange no longer wishes to maintain this rebate and proposes to eliminate the SUM Auction Pricing Tier from the Fee Schedule (and eliminate corresponding references to footnote 3 in the Fee Codes and Associated Fees table). Further, 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 the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.7 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 8 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. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 9 requirement that the rules of an exchange not be 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 month for which the fees apply, excluding volume on any day that the Exchange experiences an Exchange System Disruption and on any day with a scheduled early market close. See Cboe EDGX Options Exchange Fee Schedule. 6 Applicable to orders yielding fee codes: NB, NC, NF, NM, NN, NO, NP, NT, PB, PC, PF, PM, PN, PO, PP and PT. 7 15 U.S.C. 78f(b). 8 15 U.S.C. 78f(b)(5). 9 Id. E:\FR\FM\15AUN1.SGM 15AUN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 87, No. 156 / Monday, August 15, 2022 / Notices readily direct order flow to competing venues if they deem fee levels at a particular venue to be excessive or incentives to be insufficient. The proposed rule change reflects a competitive pricing structure designed to incentivize market participants to direct their order flow to the Exchange, which the Exchange believes would enhance market quality to the benefit of all Members. The Exchange believes the proposed reduction in rebate amount under AIM Tier 2 for orders yielding fee code BC is reasonable, equitable, and not unfairly discriminatory. The Exchange believes that the proposed change to AIM Tier 2 is reasonable because it continues to provide an enhanced rebate (albeit at a lower amount), which the Exchange believes is still commensurate with the current criteria. The proposed rule change is equitable and unfairly discriminatory as the amended rebate amount applies uniformly to all Members’ respective qualifying Customer orders. The Exchange believes that AIM Tier 2 continues to benefit all Members by contributing towards a robust and well-balanced market ecosystem. Indeed, the Exchange believes AIM Tier 2 will continue to incentivize increased Customer order flow and overall order flow to the Exchange’s Book, which creates more trading opportunities, which, in turn attracts Market-Makers. A resulting increase in Market-Maker activity may facilitate tighter spreads, which may lead to an additional increase of order flow from other market participants. Increased overall order flow benefits all investors by deepening the Exchange’s liquidity pool, potentially providing even greater execution incentives and opportunities, offering additional flexibility for all investors to enjoy cost savings, supporting the quality of price discovery, promoting market transparency, and improving investor protection. The Exchange believes that eliminating the SUM Auction Pricing Tier under Footnote 3 is reasonable because the Exchange is not required to maintain this program or provide additional rebates. Members may still have other opportunities to obtain enhanced rebates, such as via the Customer Volume Tiers or MarketMaker Volume Tiers.10 The Exchange believes that eliminating the SUM Auction Pricing Tier is equitable and not unfairly discriminatory because it applies uniformly to all Members. The Exchange also notes that the proposed 10 See Cboe EDGX Options Fees Schedule, Footnotes 1 and 2. VerDate Sep<11>2014 17:24 Aug 12, 2022 Jkt 256001 changes will not adversely impact any Member’s ability to otherwise qualify for reduced fees or enhanced rebates offered under other tiers. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. In particular, 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. Indeed, the Exchange notes the proposed change to AIM Tier 2 will apply to all Members equally in that all Members will continue to be eligible for AIM Tier 2, have a reasonable opportunity to meet the tier’s criteria and receive the enhanced rebate (albeit at a slightly lower amount) on their qualifying orders if such criteria is met. Also, as stated above, the proposal to eliminate the SUM Auction Pricing Tier will also apply to all Members, in that, such Tier will not be available for any Member. The Exchange does not believe the proposed changes burden competition as all Members will continue to have an opportunity receive enhanced rebates or reduced fees offered under various tiers, including AIM Tier 2, which tiers are generally designed to increase the competitiveness of EDGX and 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 benefit 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. The Exchange also 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 they may participate on and direct their order flow, including 15 other options exchanges. Additionally, the Exchange represents a small percentage of the overall market. Based on publicly available information, no single options exchange has more than 17% of the market share. Therefore, no exchange possesses significant pricing PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 50139 power in the execution of order flow. Indeed, participants can readily choose to send their orders to other exchanges if they deem fee levels at those other venues to be more favorable. As noted above, the Exchange believes that the proposed fee changes are comparable to that of other exchanges offering similar functionality. Moreover, the Commission has repeatedly expressed its preference for competition over regulatory intervention in determining prices, products, and services in the securities markets. Specifically, in Regulation NMS, the Commission highlighted the importance of market forces in determining prices and SRO revenues and, also, recognized that current regulation of the market system ‘‘has been remarkably successful in promoting market competition in its broader forms that are most important to investors and listed companies.’’ The fact that this market is competitive has also long been recognized by the courts. In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit stated as follows: ‘‘[n]o one disputes that competition for order flow is ‘fierce.’ . . . As the SEC explained, ‘[i]n the U.S. national market system, buyers and sellers of securities, and the brokerdealers that act as their order-routing agents, have a wide range of choices of where to route orders for execution’; [and] ‘no exchange can afford to take its market share percentages for granted’ because ‘no exchange possesses a monopoly, regulatory or otherwise, in the execution of order flow from broker dealers’ . . . .’’. Accordingly, the Exchange does not believe its proposed fee change imposes any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 11 and paragraph (f) of Rule 19b–4 12 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 11 15 12 17 E:\FR\FM\15AUN1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). 15AUN1 50140 Federal Register / Vol. 87, No. 156 / Monday, August 15, 2022 / Notices khammond on DSKJM1Z7X2PROD with NOTICES 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. should refer to File Number SR– CboeEDGX–2022–035, and should be submitted on or before September 6, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.13 J. Matthew DeLesDernier, Deputy Secretary. 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: [FR Doc. 2022–17434 Filed 8–12–22; 8:45 am] 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–2022–035 on the subject line. Self-Regulatory Organizations; LongTerm Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Relating to a Temporary Reduction in the Annual Listing Fee 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–2022–035. 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. 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 VerDate Sep<11>2014 17:24 Aug 12, 2022 Jkt 256001 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–95460; File No. SR–LTSE– 2022–04] August 9, 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 July 27, 2022, Long-Term Stock Exchange, Inc. (‘‘LTSE’’ or the ‘‘Exchange’’) 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 selfregulatory organization. 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 LTSE proposes a rule change to: (i) amend the Annual Listing Fee applicable for Companies renewing their listing for calendar year 2023, and (ii) make a minor clarifying change to the Initial Listing Fee provisions. The text of the proposed rule change is available at the Exchange’s website at https://longtermstockexchange.com/, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement on the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of 13 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b-4. 1 15 PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 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 self-regulatory organization 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 on the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange is filing this proposed rule change to amend Rule 14.601 to reduce the Annual Listing Fee for any listed Company 3 renewing its listing for calendar year 2023 by 40 percent in light of the recent market dislocation. The Initial Listing Fees would remain at their current levels.4 a. Annual Listing Fee Upon listing its Primary Equity Securities on LTSE, a Company is assessed an Initial Listing Fee in accordance with LTSE Rule 14.601(a)(1). The amount of the Initial Listing Fee is set forth in the fee schedule in LTSE Rule 14.601(a)(3) and is based on the market capitalization of the Company when it lists on the Exchange.5 For each subsequent year that a Company remains listed on the Exchange, it is assessed an Annual Listing Fee. The Annual Listing Fee for a Company’s Primary Equity Securities also is based on the Company’s market capitalization. Specifically, the Annual Listing Fee for an upcoming calendar year is calculated on December 1 (or such date of listing if after December 1), and is based on the company’s Form 10–Q and Form 10–K filings over the prior four fiscal quarters. Thus, the Annual Listing Fee is calculated from filings covering the fourth quarter of the prior calendar year and the first three quarters of the current calendar year. Where a Company does not have Form 10–Q and Form 10–K filings for the prior four fiscal quarters, its Annual Listing Fee is calculated in the same manner as its Initial Listing Fee (but not 3 Capitalized terms shall have the meaning provided in the LTSE Rule Book. See e.g., LTSE Rule 14.002(a)(8) [sic] (definition of ‘‘Company’’). 4 A Company that lists on the Exchange is assessed an Initial Listing Fee at the time it lists, which covers the period from date of listing until the end of the calendar year. The Annual Listing Fee is assessed on a Company for remaining listed on the Exchange in a subsequent year. 5 The Initial Listing Fee is prorated based on the number of trading days in the year remaining at the time of a Company’s initial listing. See LTSE Rule 14.601(a)(1)(iv). E:\FR\FM\15AUN1.SGM 15AUN1

Agencies

[Federal Register Volume 87, Number 156 (Monday, August 15, 2022)]
[Notices]
[Pages 50137-50140]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-17434]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95459; File No. SR-CboeEDGX-2022-035]


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

August 9, 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 August 1, 2022, Cboe EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission

[[Page 50138]]

(the ``Commission'') the proposed rule change as described in Items I, 
II, and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX Options'') 
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 to (1) eliminate 
the Step Up Mechanism (``SUM'') Auction Pricing Tier and (2) modify the 
Automated Improvement Mechanism (``AIM'') Tier 2, effective August 1, 
2022.
    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 options venues to which market participants 
may direct their order flow. Based on publicly available information, 
no single options exchange has more than 17% of the market share and 
currently the Exchange represents only approximately 7% of the market 
share.\3\ Thus, in such a low-concentrated and highly competitive 
market, no single options exchange, including the Exchange, possesses 
significant pricing power in the execution of option order flow. The 
Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow or discontinue to reduce use of certain categories of 
products, in response to fee changes. Accordingly, competitive forces 
constrain the Exchange's transaction fees, and market participants can 
readily trade on competing venues if they deem pricing levels at those 
other venues to be more favorable.
---------------------------------------------------------------------------

    \3\ See Cboe Global Markets U.S. Options Market Monthly Volume 
Summary (July 27, 2022), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------

    The Exchange's Fees Schedule sets forth standard rebates and rates 
applied per contract. For example, the Exchange provides standard 
rebates ranging from $0.01 up to $0.21 per contract for Customer orders 
in both Penny and Non-Penny Securities. Additionally, in response to 
the competitive environment, the Exchange also offers tiered pricing, 
which provides Members with 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.
    For example, the Exchange currently offers two tiers related to 
Customer volume under proposed footnote 9 (Automated Improvement 
Mechanism (``AIM'') Tier) applicable to orders yielding fee code 
``BC'', which fee code is appended to Customer Agency orders executed 
in AIM. Orders yielding fee code BC are currently provided a standard 
rebate of $0.06 per contract. The AIM Tiers currently provide enhanced 
rebates between $0.11 and $0.14 per contract for qualifying orders that 
yield fee code BC where a Member meets the respective tier's volume 
threshold. Under AIM Tier 2, a Member will receive an enhanced rebate 
of $0.14 per contract on such orders where it has an ADV \4\ in 
Customer orders greater than or equal to 0.50% of average OCV.\5\ The 
Exchange now proposes to reduce the enhanced rebate amount under AIM 
Tier 2 from $0.14 per contract to $0.12 per contract.
---------------------------------------------------------------------------

    \4\ ``ADV'' means average daily volume calculated as the number 
of contracts added or removed, combined, per day. ADV is calculated 
on a monthly basis. See Cboe EDGX Options Exchange Fee Schedule.
    \5\ ``OCV'' means the total equity and ETF options volume that 
clears in the Customer range at the Options Clearing Corporation 
(``OCC'') for the month for which the fees apply, excluding volume 
on any day that the Exchange experiences an Exchange System 
Disruption and on any day with a scheduled early market close. See 
Cboe EDGX Options Exchange Fee Schedule.
---------------------------------------------------------------------------

    The Exchange also offers Members an opportunity to receive an 
additional rebate under footnote 3 of the Fee Schedule (Step Up 
Mechanism (``SUM'') Auction Pricing Tier). Under the SUM Response Tier, 
the Exchange provides an additional rebate of $0.05 per contract for 
any order submitted in response to, and executed against, an order 
subject to the SUM Auction.\6\ The Exchange no longer wishes to 
maintain this rebate and proposes to eliminate the SUM Auction Pricing 
Tier from the Fee Schedule (and eliminate corresponding references to 
footnote 3 in the Fee Codes and Associated Fees table). Further, the 
Exchange would rather redirect future resources and funding into other 
programs and tiers intended to incentivize increased order flow.
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    \6\ Applicable to orders yielding fee codes: NB, NC, NF, NM, NN, 
NO, NP, NT, PB, PC, PF, PM, PN, PO, PP and PT.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\7\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \8\ 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. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \9\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
---------------------------------------------------------------------------

    As described above, the Exchange operates in a highly competitive 
market in which market participants can

[[Page 50139]]

readily direct order flow to competing venues if they deem fee levels 
at a particular venue to be excessive or incentives to be insufficient. 
The proposed rule change reflects a competitive pricing structure 
designed to incentivize market participants to direct their order flow 
to the Exchange, which the Exchange believes would enhance market 
quality to the benefit of all Members.
    The Exchange believes the proposed reduction in rebate amount under 
AIM Tier 2 for orders yielding fee code BC is reasonable, equitable, 
and not unfairly discriminatory. The Exchange believes that the 
proposed change to AIM Tier 2 is reasonable because it continues to 
provide an enhanced rebate (albeit at a lower amount), which the 
Exchange believes is still commensurate with the current criteria. The 
proposed rule change is equitable and unfairly discriminatory as the 
amended rebate amount applies uniformly to all Members' respective 
qualifying Customer orders. The Exchange believes that AIM Tier 2 
continues to benefit all Members by contributing towards a robust and 
well-balanced market ecosystem. Indeed, the Exchange believes AIM Tier 
2 will continue to incentivize increased Customer order flow and 
overall order flow to the Exchange's Book, which creates more trading 
opportunities, which, in turn attracts Market-Makers. A resulting 
increase in Market-Maker activity may facilitate tighter spreads, which 
may lead to an additional increase of order flow from other market 
participants. Increased overall order flow benefits all investors by 
deepening the Exchange's liquidity pool, potentially providing even 
greater execution incentives and opportunities, offering additional 
flexibility for all investors to enjoy cost savings, supporting the 
quality of price discovery, promoting market transparency, and 
improving investor protection.
    The Exchange believes that eliminating the SUM Auction Pricing Tier 
under Footnote 3 is reasonable because the Exchange is not required to 
maintain this program or provide additional rebates. Members may still 
have other opportunities to obtain enhanced rebates, such as via the 
Customer Volume Tiers or Market-Maker Volume Tiers.\10\ The Exchange 
believes that eliminating the SUM Auction Pricing Tier is equitable and 
not unfairly discriminatory because it applies uniformly to all 
Members. The Exchange also notes that the proposed changes will not 
adversely impact any Member's ability to otherwise qualify for reduced 
fees or enhanced rebates offered under other tiers.
---------------------------------------------------------------------------

    \10\ See Cboe EDGX Options Fees Schedule, Footnotes 1 and 2.
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. In particular, 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. Indeed, the Exchange notes the 
proposed change to AIM Tier 2 will apply to all Members equally in that 
all Members will continue to be eligible for AIM Tier 2, have a 
reasonable opportunity to meet the tier's criteria and receive the 
enhanced rebate (albeit at a slightly lower amount) on their qualifying 
orders if such criteria is met. Also, as stated above, the proposal to 
eliminate the SUM Auction Pricing Tier will also apply to all Members, 
in that, such Tier will not be available for any Member. The Exchange 
does not believe the proposed changes burden competition as all Members 
will continue to have an opportunity receive enhanced rebates or 
reduced fees offered under various tiers, including AIM Tier 2, which 
tiers are generally designed to increase the competitiveness of EDGX 
and 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 benefit 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.
    The Exchange also 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 they may participate on and 
direct their order flow, including 15 other options exchanges. 
Additionally, the Exchange represents a small percentage of the overall 
market. Based on publicly available information, no single options 
exchange has more than 17% of the market share. Therefore, no exchange 
possesses significant pricing power in the execution of order flow. 
Indeed, participants can readily choose to send their orders to other 
exchanges if they deem fee levels at those other venues to be more 
favorable. As noted above, the Exchange believes that the proposed fee 
changes are comparable to that of other exchanges offering similar 
functionality. Moreover, the Commission has repeatedly expressed its 
preference for competition over regulatory intervention in determining 
prices, products, and services in the securities markets. Specifically, 
in Regulation NMS, the Commission highlighted the importance of market 
forces in determining prices and SRO revenues and, also, recognized 
that current regulation of the market system ``has been remarkably 
successful in promoting market competition in its broader forms that 
are most important to investors and listed companies.'' The fact that 
this market is competitive has also long been recognized by the courts. 
In NetCoalition v. Securities and Exchange Commission, the D.C. Circuit 
stated as follows: ``[n]o one disputes that competition for order flow 
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers' . . . .''. Accordingly, the Exchange 
does not believe its proposed fee change imposes any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.

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 \11\ and paragraph (f) of Rule 19b-4 \12\ 
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

[[Page 50140]]

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.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-2022-035 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-2022-035. 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. 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-2022-035, and 
should be submitted on or before September 6, 2022.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-17434 Filed 8-12-22; 8:45 am]
BILLING CODE 8011-01-P
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