Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 75680-75683 [2022-26745]

Download as PDF 75680 Federal Register / Vol. 87, No. 236 / Friday, December 9, 2022 / Notices education; nanomedicine; nanomanufacturing; or other areas of potential interest to the nanotechnology community. The communities of research are not intended to provide any government agency with advice or recommendations; such action is outside of their purview. Registration: Due to space limitations, pre-registration for workshops is required. Workshop registration is on a first-come, first-served basis. Registration information will be available at https://www.nano.gov/getinvolved/research-community/meetingsand-events. Registration for the webinars will open approximately two weeks prior to each event and will be capped at 500 participants or as space limitations dictate. Individuals planning to attend a webinar can find registration information at https://www.nano.gov/ PublicWebinars. Written notices of participation for workshops, webinars, networks, or communities of research should be sent by email to info@ nnco.nano.gov. Meeting Accommodations: Individuals requiring special accommodation to access any of these public events should contact info@ nnco.nano.gov at least 10 business days prior to the meeting so that appropriate arrangements can be made. Dated: December 5, 2022. Rachel Wallace, Deputy General Counsel. BILLING CODE 3270–F2–P [Release No. 34–96447; File No. SR– CboeEDGX–2022–053] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule lotter on DSK11XQN23PROD with NOTICES1 December 5, 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 December 1, 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 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 17:50 Dec 08, 2022 Jkt 259001 Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) 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/) [sic], 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. 1. Purpose SECURITIES AND EXCHANGE COMMISSION 2 17 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change [FR Doc. 2022–26740 Filed 12–8–22; 8:45 am] 1 15 solicit comments on the proposed rule change from interested persons. The Exchange proposes to amend its Fee Schedule applicable to its equities trading platform (‘‘EDGX Equities’’) to (1) define the term ‘‘Step-Up ADV’’, and (2) introduce a new Retail Growth Tier 1 and renumber the existing Retail Growth Tiers. The Exchange proposes to implement these changes effective December 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 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 Securities Exchange Act of 1934 (the ‘‘Act’’), to which market participants may direct their order flow. Based on publicly PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 available information,3 no single registered equities exchange has more than 14% of the market share. Thus, in such a low-concentrated and highly competitive market, no single equities exchange possesses significant pricing power in the execution of order flow. The Exchange in particular operates a ‘‘Maker-Taker’’ model whereby it pays rebates to members that add liquidity and assesses fees to those that remove liquidity. The Exchange’s Fee Schedule sets forth the standard rebates and rates applied per share for orders that provide and remove liquidity, respectively. Additionally, in response to the competitive environment, the Exchange also offers tiered pricing which provides Members opportunities to qualify for higher rebates or reduced fees where certain volume criteria and thresholds are met. Tiered pricing provides an incremental incentive for Members to strive for higher tier levels, which provides increasingly higher benefits or discounts for satisfying increasingly more stringent criteria. The ‘‘definitions’’ section of the Exchange’s Fee Schedule defines various terms used throughout the Fee Schedule. The Exchange proposes to adopt a new definition for the term ‘‘Step-Up ADV’’. Specifically, as proposed ‘‘Step-up ADV’’ means ADV 4 in the relevant baseline months subtracted from current day ADV. Such definition would be referenced in tiers designed to incentivize Members to grow their ADV from the baseline month, such as the proposed Retail Growth Tier 1, as discussed below. Under footnote 2 of the Fee Schedule, the Exchange currently offers various Retail Volume Tiers, which provide an enhanced rebate for Members’ qualifying orders yielding fee codes ZA 5 or ZO.6 Now, the Exchange proposes to adopt a new Retail Growth Tier 1 and renumber the existing Retail Growth Tiers. Specifically, the proposed Retail Growth Tier 1 would provide a rebate of $0.0033 per share to qualifying orders (i.e., orders yielding fee code ZA or ZO) in securities priced at or above 3 See Cboe Global Markets, U.S. Equities Market Volume Summary, Month-to-Date (November 28, 2022), available at https://www.cboe.com/us/ equities/market_statistics/. 4 ‘‘ADV’’ means average daily volume calculated as the number of shares added to, removed from, or routed by, the Exchange, or any combination or subset thereof, per day. ADV is calculated on a monthly basis. 5 Orders yielding fee code ‘‘ZA’’ are retail orders adding liquidity to EDGX. 6 Orders yielding fee code ‘‘ZO’’ are retail orders adding liquidity to EDGX in the pre and post market. E:\FR\FM\09DEN1.SGM 09DEN1 Federal Register / Vol. 87, No. 236 / Friday, December 9, 2022 / Notices $1 7 to Member Participant Identifiers (‘‘MPIDs’’) with a Step-Up ADV from November 2022 greater than or equal to 0.05% of the TCV.8 The proposed Retail Growth Tier 1 is designed to provide Members an opportunity to receive an enhanced rebate by meeting the Retail Growth Tier 1 criteria. Further, overall the Retail Growth Tiers are intended to provide Members an opportunity to receive an enhanced rebate by increasing their retail order flow to the Exchange, which further contributes to a deeper, more liquid market and provides even more execution opportunities for active market participants. Incentivizing an increase in liquidity adding or removing volume, through enhanced rebate opportunities, encourages liquidity adding Members on the Exchange to contribute to a deeper, more liquid market, and liquidity executing Members on the Exchange to increase transactions and take execution opportunities provided by such increased liquidity, together providing for overall enhanced price discovery and price improvement opportunities on the Exchange. As such, increased overall order flow benefits all Members by contributing towards a robust and well-balanced market ecosystem. lotter on DSK11XQN23PROD with NOTICES1 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of section 6(b) of the Act.9 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 10 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. 7 The proposed Retail Growth Tier 1 would provide no enhanced rebate for applicable orders in securities priced under $1. However, orders yielding fee codes ZA and ZO in securities priced under $1 would continue to receive the standard rebate of $0.0003 per share. 8 ‘‘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. 9 15 U.S.C. 78f(b). 10 15 U.S.C. 78f(b)(5). VerDate Sep<11>2014 17:50 Dec 08, 2022 Jkt 259001 Additionally, the Exchange believes the proposed rule change is consistent with the section 6(b)(5) 11 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers as well as section 6(b)(4) 12 as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its Members and other persons using its facilities. 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 proposal to adopt the new Retail Growth Tier 1 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. Additionally, the Exchange notes that relative volume-based incentives and discounts have been widely adopted by exchanges,13 including the Exchange,14 and are reasonable, equitable and nondiscriminatory because they are open to all Members on an equal basis and provide additional benefits or discounts that are reasonably related to (i) the value to an exchange’s market quality and (ii) associated higher levels of market activity, such as higher levels of liquidity provision and/or growth patterns. Competing equity exchanges offer similar tiered pricing structures, including schedules of rebates and fees that apply based upon members achieving certain volume and/or growth thresholds, as well as assess similar fees or rebates for similar types of orders, to that of the Exchange. In particular, the Exchange believes the proposed tier is reasonable because it will be available to all Members and provide all Members with an additional opportunity to receive an enhanced rebate. The Exchange further believes the proposed tier will provide a reasonable means to encourage retail orders flow to the Exchange and to incentivize Members to continue to provide retail volume to the Exchange by offering them an additional opportunity to receive an enhanced rebate on qualifying orders. An overall increase in activity would deepen the Exchange’s liquidity pool, offer 11 Id. 12 15 U.S.C. 78f(b)(4). e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove Volume Tiers. 14 See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/Remove Volume Tiers. 13 See PO 00000 Frm 00096 Fmt 4703 Sfmt 4703 75681 additional cost savings, support the quality of price discovery, promote market transparency and improve market quality, for all investors. The Exchange believes that the proposed change is reasonable as it does not represent a significant departure from the criteria currently offered in the Fee Schedule. Specifically, the proposed new tier has criteria similar to the existing Retail Growth Tiers, albeit with less stringent criteria that applies at the MPID level rather than the Member level. Nonetheless, the Exchange believes that the enhanced rebate under the proposed new tier is commensurate with the criteria and the type of order flow associated with the applicable tier by allowing for MPID level activity to become eligible for the rebate instead of only Member level activity. The Exchange also believes that the proposal represents an equitable allocation of fees and rebates and is not unfairly discriminatory because all Members will be eligible for the proposed new tier and have the opportunity to meet the tier’s criteria and receive the corresponding enhanced 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 the new proposed tier. While the Exchange has no way of predicting with certainty how the proposed changes will impact Member activity, based on the prior months volume, the Exchange anticipates that at least one MPID will be able to satisfy the criteria proposed under the proposed new tier. The Exchange also notes that proposed change will not adversely impact any Member’s ability to qualify for enhanced rebates offered under other tiers. Should a Member not meet the criteria of the new tier, the Member will merely not receive that corresponding enhanced rebate. Finally, the Exchange believes the proposal to define the term ‘‘Step-Up ADV’’ is not designed to permit unfair discrimination between customers, issuers, brokers, or dealers. Specifically, the proposal is intended only to add clarity to the Exchange’s Fee Schedule and involves no substantive change. 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. Rather, as discussed above, the Exchange believes that the proposed changes would E:\FR\FM\09DEN1.SGM 09DEN1 lotter on DSK11XQN23PROD with NOTICES1 75682 Federal Register / Vol. 87, No. 236 / Friday, December 9, 2022 / Notices 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 new tier will apply to all Members equally in that all Members are eligible the tier, 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. The Exchange does not believe the proposed changes burden competition, but rather, enhance competition as it is intended to increase the competitiveness of EDGX by adopting pricing incentives 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 changes 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 14% of the market share.15 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 off15 Supra note 1. VerDate Sep<11>2014 17:50 Dec 08, 2022 Jkt 259001 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.’’ 16 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’. . . .’’.17 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. Finally, the Exchange believes its proposal to add the definition of StepUp ADV will have no impact on competition as it is only intended to add clarity to the Exchange’s Fee Schedule and involves no substantive change. 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 18 and paragraph (f) of Rule 16 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 17 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)). 18 15 U.S.C. 78s(b)(3)(A). PO 00000 Frm 00097 Fmt 4703 Sfmt 4703 19b–4 19 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–2022–053 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–2022–053. 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 19 17 E:\FR\FM\09DEN1.SGM CFR 240.19b–4(f). 09DEN1 Federal Register / Vol. 87, No. 236 / Friday, December 9, 2022 / Notices 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–2022–053, and should be submitted on or before December 30, 2022. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2022–26745 Filed 12–8–22; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meetings Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold an Open Meeting on Wednesday, December 14, 2022 at 10:00 a.m. PLACE: The meeting will be webcast on the Commission’s website at www.sec.gov. STATUS: This meeting will begin at 10:00 a.m. (ET) and will be open to the public via webcast on the Commission’s website at www.sec.gov. MATTERS TO BE CONSIDERED: 1. The Commission will consider whether to adopt amendments to Rule 10b5–1 under the Securities Exchange Act, and new disclosure regarding Rule 10b5–1 trading arrangements and insider trading policies and procedures, as well as amendments regarding the disclosure of the timing of certain equity compensation awards and reporting of gifts on Form 4. 2. The Commission will consider whether to propose rule amendments to update the disclosure required by Rule 605 under Regulation NMS of the Securities Exchange Act of 1934 for order executions in national market system stocks. The proposed rule amendments would expand the scope of entities subject to Rule 605, modify the information required to be reported under the rule, and change how orders are categorized for purposes of the rule. 3. The Commission will consider whether to propose amendments to certain rules under Regulation NMS of the Securities Exchange Act of 1934 to lotter on DSK11XQN23PROD with NOTICES1 TIME AND DATE: adopt variable minimum pricing increments for the quoting and trading of NMS stocks, reduce access fee caps, and enhance the transparency of better priced orders. 4. The Commission will consider whether to propose a new rule under Regulation NMS of the Securities Exchange Act of 1934 titled the Order Competition Rule, which would require certain equity orders of retail investors to be exposed to competition in fair and open auctions before such orders could be executed internally by any trading center that restricts order-by-order competition. 5. The Commission will consider whether to propose new rules under the Securities Exchange Act of 1934 titled Regulation Best Execution, which would establish a best execution standard and require detailed policies and procedures for brokers, dealers, government securities brokers, government securities dealers, and municipal securities dealers and more robust policies and procedures for entities engaging in certain conflicted transactions with retail customers, as well as related review and documentation requirements. CONTACT PERSON FOR MORE INFORMATION: For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact Vanessa A. Countryman from the Office of the Secretary at (202) 551–5400. Authority: 5 U.S.C. 552b. Dated: December 7, 2022. J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2022–26901 Filed 12–7–22; 4:15 pm] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–96448; File No. SR– NYSECHX–2022–29] Self-Regulatory Organizations; NYSE Chicago, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Article 17, Rule 5 December 5, 2022. Pursuant to section 19(b)(1) 1 of the Securities Exchange Act of 1934 (‘‘Act’’) 2 and Rule 19b–4 thereunder,3 notice is hereby given that, on December 1, 2022, the NYSE Chicago, Inc. (‘‘NYSE Chicago’’ or the ‘‘Exchange’’) filed with the Securities and Exchange 1 15 U.S.C. 78s(b)(1). U.S.C. 78a. 3 17 CFR 240.19b–4. 2 15 20 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:50 Dec 08, 2022 Jkt 259001 PO 00000 Frm 00098 Fmt 4703 Sfmt 4703 75683 Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the self-regulatory 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 The Exchange proposes to amend Article 17, Rule 5 to (1) change how Qualified Contingent Trade (‘‘QCT’’) Cross Orders are handled in the Exchange’s Brokerplex® order management system, and (2) make certain non-substantive conforming changes. The proposed rule change is available on the Exchange’s website at www.nyse.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the self-regulatory organization included statements concerning the purpose of, and basis for, the proposed rule change and discussed any comments it received on the proposed rule change. The text of those statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and the Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend Article 17, Rule 5 (Brokerplex) in order to (1) change how QCT Cross Orders are handled in the Exchange’s Brokerplex® order management system, and (2) make certain non-substantive conforming changes. Background and Proposed Rule Change The Exchange provides the Brokerplex order management system for use by Institutional Broker Representatives (‘‘IBRs’’),4 to receive, transmit and hold orders from their customers while seeking execution 4 IBRs are also known as Institutional Brokers or ‘‘IBs’’. The term ‘‘Institutional Broker’’ is defined in Article 1, Rule 1(n) to mean a member of the Exchange who is registered as an Institutional Broker pursuant to the provisions of Article 17 and has satisfied all Exchange requirements to operate as an Institutional Broker on the Exchange. E:\FR\FM\09DEN1.SGM 09DEN1

Agencies

[Federal Register Volume 87, Number 236 (Friday, December 9, 2022)]
[Notices]
[Pages 75680-75683]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-26745]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96447; File No. SR-CboeEDGX-2022-053]


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

December 5, 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 December 1, 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.
---------------------------------------------------------------------------

    \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'') 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/) [sic], at the Exchange's Office of the Secretary, 
and at the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend its Fee Schedule applicable to its 
equities trading platform (``EDGX Equities'') to (1) define the term 
``Step-Up ADV'', and (2) introduce a new Retail Growth Tier 1 and 
renumber the existing Retail Growth Tiers. The Exchange proposes to 
implement these changes effective December 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 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 
Securities Exchange Act of 1934 (the ``Act''), to which market 
participants may direct their order flow. Based on publicly available 
information,\3\ no single registered equities exchange has more than 
14% of the market share. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. The Exchange in 
particular operates a ``Maker-Taker'' model whereby it pays rebates to 
members that add liquidity and assesses fees to those that remove 
liquidity. The Exchange's Fee Schedule sets forth the standard rebates 
and rates applied per share for orders that provide and remove 
liquidity, respectively. Additionally, in response to the competitive 
environment, the Exchange also offers tiered pricing which provides 
Members opportunities to qualify for higher rebates or reduced fees 
where certain volume criteria and thresholds are met. Tiered pricing 
provides an incremental incentive for Members to strive for higher tier 
levels, which provides increasingly higher benefits or discounts for 
satisfying increasingly more stringent criteria.
---------------------------------------------------------------------------

    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (November 28, 2022), available at https://www.cboe.com/us/equities/market_statistics/.
---------------------------------------------------------------------------

    The ``definitions'' section of the Exchange's Fee Schedule defines 
various terms used throughout the Fee Schedule. The Exchange proposes 
to adopt a new definition for the term ``Step-Up ADV''. Specifically, 
as proposed ``Step-up ADV'' means ADV \4\ in the relevant baseline 
months subtracted from current day ADV. Such definition would be 
referenced in tiers designed to incentivize Members to grow their ADV 
from the baseline month, such as the proposed Retail Growth Tier 1, as 
discussed below.
---------------------------------------------------------------------------

    \4\ ``ADV'' means average daily volume calculated as the number 
of shares added to, removed from, or routed by, the Exchange, or any 
combination or subset thereof, per day. ADV is calculated on a 
monthly basis.
---------------------------------------------------------------------------

    Under footnote 2 of the Fee Schedule, the Exchange currently offers 
various Retail Volume Tiers, which provide an enhanced rebate for 
Members' qualifying orders yielding fee codes ZA \5\ or ZO.\6\ Now, the 
Exchange proposes to adopt a new Retail Growth Tier 1 and renumber the 
existing Retail Growth Tiers. Specifically, the proposed Retail Growth 
Tier 1 would provide a rebate of $0.0033 per share to qualifying orders 
(i.e., orders yielding fee code ZA or ZO) in securities priced at or 
above

[[Page 75681]]

$1 \7\ to Member Participant Identifiers (``MPIDs'') with a Step-Up ADV 
from November 2022 greater than or equal to 0.05% of the TCV.\8\ The 
proposed Retail Growth Tier 1 is designed to provide Members an 
opportunity to receive an enhanced rebate by meeting the Retail Growth 
Tier 1 criteria. Further, overall the Retail Growth Tiers are intended 
to provide Members an opportunity to receive an enhanced rebate by 
increasing their retail order flow to the Exchange, which further 
contributes to a deeper, more liquid market and provides even more 
execution opportunities for active market participants. Incentivizing 
an increase in liquidity adding or removing volume, through enhanced 
rebate opportunities, encourages liquidity adding Members on the 
Exchange to contribute to a deeper, more liquid market, and liquidity 
executing Members on the Exchange to increase transactions and take 
execution opportunities provided by such increased liquidity, together 
providing for overall enhanced price discovery and price improvement 
opportunities on the Exchange. As such, increased overall order flow 
benefits all Members by contributing towards a robust and well-balanced 
market ecosystem.
---------------------------------------------------------------------------

    \5\ Orders yielding fee code ``ZA'' are retail orders adding 
liquidity to EDGX.
    \6\ Orders yielding fee code ``ZO'' are retail orders adding 
liquidity to EDGX in the pre and post market.
    \7\ The proposed Retail Growth Tier 1 would provide no enhanced 
rebate for applicable orders in securities priced under $1. However, 
orders yielding fee codes ZA and ZO in securities priced under $1 
would continue to receive the standard rebate of $0.0003 per share.
    \8\ ``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 the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of section 6(b) of the 
Act.\9\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \10\ 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) \11\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers as well as section 6(b)(4) \12\ 
as it is designed to provide for the equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.
    \12\ 15 U.S.C. 78f(b)(4).
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    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 proposal to adopt the 
new Retail Growth Tier 1 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. Additionally, the Exchange notes 
that relative volume-based incentives and discounts have been widely 
adopted by exchanges,\13\ including the Exchange,\14\ and are 
reasonable, equitable and non-discriminatory because they are open to 
all Members on an equal basis and provide additional benefits or 
discounts that are reasonably related to (i) the value to an exchange's 
market quality and (ii) associated higher levels of market activity, 
such as higher levels of liquidity provision and/or growth patterns. 
Competing equity exchanges offer similar tiered pricing structures, 
including schedules of rebates and fees that apply based upon members 
achieving certain volume and/or growth thresholds, as well as assess 
similar fees or rebates for similar types of orders, to that of the 
Exchange.
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    \13\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \14\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
---------------------------------------------------------------------------

    In particular, the Exchange believes the proposed tier is 
reasonable because it will be available to all Members and provide all 
Members with an additional opportunity to receive an enhanced rebate. 
The Exchange further believes the proposed tier will provide a 
reasonable means to encourage retail orders flow to the Exchange and to 
incentivize Members to continue to provide retail volume to the 
Exchange by offering them an additional opportunity to receive an 
enhanced rebate on qualifying orders. An overall increase in activity 
would deepen the Exchange's liquidity pool, offer additional cost 
savings, support the quality of price discovery, promote market 
transparency and improve market quality, for all investors.
    The Exchange believes that the proposed change is reasonable as it 
does not represent a significant departure from the criteria currently 
offered in the Fee Schedule. Specifically, the proposed new tier has 
criteria similar to the existing Retail Growth Tiers, albeit with less 
stringent criteria that applies at the MPID level rather than the 
Member level. Nonetheless, the Exchange believes that the enhanced 
rebate under the proposed new tier is commensurate with the criteria 
and the type of order flow associated with the applicable tier by 
allowing for MPID level activity to become eligible for the rebate 
instead of only Member level activity. The Exchange also believes that 
the proposal represents an equitable allocation of fees and rebates and 
is not unfairly discriminatory because all Members will be eligible for 
the proposed new tier and have the opportunity to meet the tier's 
criteria and receive the corresponding enhanced 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 
the new proposed tier. While the Exchange has no way of predicting with 
certainty how the proposed changes will impact Member activity, based 
on the prior months volume, the Exchange anticipates that at least one 
MPID will be able to satisfy the criteria proposed under the proposed 
new tier. The Exchange also notes that proposed change will not 
adversely impact any Member's ability to qualify for enhanced rebates 
offered under other tiers. Should a Member not meet the criteria of the 
new tier, the Member will merely not receive that corresponding 
enhanced rebate.
    Finally, the Exchange believes the proposal to define the term 
``Step-Up ADV'' is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. Specifically, the proposal is 
intended only to add clarity to the Exchange's Fee Schedule and 
involves no substantive change.

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. Rather, as discussed above, 
the Exchange believes that the proposed changes would

[[Page 75682]]

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 
new tier will apply to all Members equally in that all Members are 
eligible the tier, 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. The Exchange does not believe the 
proposed changes burden competition, but rather, enhance competition as 
it is intended to increase the competitiveness of EDGX by adopting 
pricing incentives 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 changes 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 14% of the market share.\15\ 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.'' \16\ 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'. . . .''.\17\ 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.
---------------------------------------------------------------------------

    \15\ Supra note 1.
    \16\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \17\ 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)).
---------------------------------------------------------------------------

    Finally, the Exchange believes its proposal to add the definition 
of Step-Up ADV will have no impact on competition as it is only 
intended to add clarity to the Exchange's Fee Schedule and involves no 
substantive change.

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 \18\ and paragraph (f) of Rule 19b-4 \19\ 
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.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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-2022-053 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-2022-053. 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

[[Page 75683]]

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-2022-053, and should be submitted on or before December 30, 
2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-26745 Filed 12-8-22; 8:45 am]
BILLING CODE 8011-01-P
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