Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove Proposed Rule Change To Amend the EDGX Equities Fee Schedule To Eliminate and Modify Certain Growth Tiers and Non-Displayed Step-Up Volume Tiers, Modify a Retail Growth Tier, Introduce New Fee Code DX and Modify Fee Code DQ, 28641-28645 [2023-09448]

Download as PDF Federal Register / Vol. 88, No. 86 / Thursday, May 4, 2023 / Notices • Send an email to rule-comments@ sec.gov. Please include File Number SR– CBOE–2023–021 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–CBOE–2023–021. 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. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to File Number SR–CBOE–2023–021 and should be submitted on or before May 25, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Sherry R. Haywood, Assistant Secretary. ddrumheller on DSK120RN23PROD with NOTICES1 [FR Doc. 2023–09447 Filed 5–3–23; 8:45 am] BILLING CODE 8011–01–P 15 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:12 May 03, 2023 Jkt 259001 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97406; File No. SR– CboeEDGX–2023–016] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove Proposed Rule Change To Amend the EDGX Equities Fee Schedule To Eliminate and Modify Certain Growth Tiers and NonDisplayed Step-Up Volume Tiers, Modify a Retail Growth Tier, Introduce New Fee Code DX and Modify Fee Code DQ April 28, 2023. I. Introduction On March 1, 2023, Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Exchange Act’’ or ‘‘Act’’),1 and Rule 19b–4 thereunder,2 a proposed rule change (File Number SR–CboeEDGX– 2023–016) to amend the EDGX Equities Fee Schedule (‘‘Fee Schedule’’) to eliminate and modify certain Growth Tiers and Non-Displayed Step-Up Volume Tiers, modify a Retail Growth Tier, introduce new fee code DX and modify fee code DQ.3 The proposed rule change was immediately effective upon filing with the Commission pursuant to section 19(b)(3)(A) of the Act.4 The proposed rule change was published for comment in the Federal Register on March 9, 2023.5 The Commission has received no comment letters on the proposed rule change. Under section 19(b)(3)(C) of the Act,6 the Commission is hereby: (i) temporarily suspending File Number SR–CboeEDGX–2023–016; and (ii) instituting proceedings to determine whether to approve or disapprove File Number SR– CboeEDGX–2023–016. II. Description of the Proposed Rule Change The Exchange operates a ‘‘MakerTaker’’ model whereby it pays rebates to 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Notice, infra note 5, at 14658. 4 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take effect upon filing with the Commission if it is designated by the exchange as ‘‘establishing or changing a due, fee, or other charge imposed by the self-regulatory organization on any person, whether or not the person is a member of the self-regulatory organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii). 5 See Securities Exchange Act Release No. 97042 (March 3, 2023), 88 FR 14657 (‘‘Notice’’). 6 15 U.S.C. 78s(b)(3)(C). 2 17 PO 00000 Frm 00183 Fmt 4703 Sfmt 4703 28641 Members 7 that add liquidity and assesses fees to those that remove liquidity.8 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.9 According to the Exchange, 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.10 The Exchange proposes to amend its Fee Schedule to eliminate and modify certain Growth Tiers and Non-Displayed Step-Up Volume Tiers, modify a Retail Growth Tier, introduce new fee code DX and modify fee code DQ, which fee changes became effective on March 1, 2023.11 With respect to the Exchange’s Growth Tiers, the Exchange offers five Growth Tiers that each provide an enhanced rebate for Members’ qualifying orders yielding fee codes B, V, Y, 3, and 4, where a Member reaches certain add volume-based criteria, including ‘‘growing’’ its volume over a certain baseline month.12 The Exchange proposes to discontinue Growth Tiers 1–3 and to modify the criteria of Growth Tier 4 and Growth Tier 5 (renumbered to Growth Tier 1 and Growth Tier 2, respectively and referred to herein as ‘‘proposed Growth Tier 1’’ and ‘‘proposed Growth Tier 2’’).13 Specifically, the Exchange proposes to add a third prong to the Required Criteria for proposed Growth Tier 1. As 7 See EDGX Rule 1.5(n). The term ‘‘Member’’ shall mean any registered broker or dealer that has been admitted to membership in the Exchange. A Member will have the status of a ‘‘member’’ of the Exchange as that term is defined in section 3(a)(3) of the Act. Membership may be granted to a sole proprietor, partnership, corporation, limited liability company or other organization which is a registered broker or dealer pursuant to section 15 of the Act, and which has been approved by the Exchange. 8 See Notice, supra note 5, at 14658. 9 Id. 10 Id. 11 See Notice, supra note 5, at 14658. Under footnotes 1 and 2 of the Exchange’s Fee Schedule, the tiered pricing fee table lists the tier, the ‘‘rebate per share to add’’ or the ‘‘fee per share to remove,’’ as applicable, and the ‘‘Required Criteria’’— sometimes referred to as ‘‘prongs’’—that must be met by a Member in order to qualify for the applicable tiered pricing fee. 12 See Notice, supra note 5, at 14658. See also Fee Schedule, Footnotes, 1, Add/Remove Volume Tiers. 13 The Exchange states it is eliminating Growth Tiers 1–3 because no Members have satisfied those Growth Tier criteria within the past six months and the Exchange no longer wishes to, nor is required to, maintain such tiers. The Exchange states that it would rather redirect future resources and funding into other programs and tiers intended to incentivize increased order flow. See Notice, supra note 5, at 14658. E:\FR\FM\04MYN1.SGM 04MYN1 28642 Federal Register / Vol. 88, No. 86 / Thursday, May 4, 2023 / Notices ddrumheller on DSK120RN23PROD with NOTICES1 a result, the Required Criteria for proposed Growth Tier 1 is as follows: • Proposed Growth Tier 1 provides a rebate of $0.0034 per share to qualifying orders (i.e., orders yielding fee codes B, V, Y, 3, or 4) where 1) MPID adds a Step-Up ADAV 14 from October 2021 ≥ 0.12% of the TCV 15 or MPID adds a Step-Up ADAV from October 2021 ≥ 16,000,000; and 2) MPID adds an ADV 16 ≥ 0.30% of TCV or MPID adds an ADV ≥ 35,000,000; and 3) MPID adds an ADAV ≥ 0.30% of TCV with displayed orders that yield fee codes B, V, or Y. In addition, the Exchange proposes to modify proposed Growth Tier 2 by adding a third prong to the Required Criteria. As a result, the Required Criteria for proposed Growth Tier 2 is as follows: • Proposed Growth Tier 2 provides a rebate of $0.0034 per share to qualifying orders (i.e., orders yielding fee codes B, V, Y, 3, or 4) where (1) Member adds a Step-Up ADAV from October 2022 ≥ 0.15% of the TCV or Member adds a Step-Up ADAV from October 2022 ≥ 15,000,000; and (2) Member has a total remove ADV ≥ 0.45% of TCV or Member has a total remove ADV ≥ 45,000,000; and (3) Member adds a Retail Step-Up ADV 17 (i.e., yielding fee codes ZA or ZO) from August 2022 ≥ 0.10% of TCV. The Exchange also offers NonDisplayed Step-Up Volume Tiers under footnote 1 of the Fee Schedule that each provide an enhanced rebate for Members’ qualifying orders yielding fee codes DM, HA, MM, and RP, where a Member reaches certain volume-based criteria offered in each tier.18 The Exchange proposes to discontinue the use of Non-Displayed Step-Up Volume Tiers 1 and 2, and to amend the criteria of current Non-Displayed Step-Up Volume Tier 3 (renumbered to proposed Non-Displayed Step-Up Volume Tier 14 ADAV means average daily added volume calculated as the number of shares added per day ADAV is calculated on a monthly basis. Step-Up ADAV means ADAV in the relevant baseline month subtracted from current ADAV. See Notice, supra note 5, at 14658, n. 9. 15 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. See Notice, supra note 5, at 14658, n. 10. 16 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. See Fee Schedule, Definitions. 17 Step-Up ADV means ADV in the relevant baseline month subtracted from current day ADV. See Fee Schedule, Definitions. 18 See Notice, supra note 5, at 14659. See also Fee Schedule, Footnotes, 1, Add/Remove Volume Tiers. VerDate Sep<11>2014 17:12 May 03, 2023 Jkt 259001 1).19 Specifically, the Exchange proposes to add a third prong to the Required Criteria for proposed NonDisplayed Step-Up Volume Tier 1. As a result, the Required Criteria for proposed Non-Displayed Step-Up Volume Tier 1 is as follows: • Non-Displayed Step-Up Volume Tier 1 provides a rebate of $0.0026 per share to qualifying orders (i.e., orders yielding fee code DM, HA, MM, or RP) where (1) Members adds a Step-Up ADAV from October 2022 ≥ 0.15% of the TCV or Member adds a Step-Up ADAV from October 2022 ≥ 15,000,000; (2) Member has a total remove ADV ≥ 0.45% of TCV or Member has a total remove ADV ≥ 45,000,000; and (3) Member adds a Retail Step-Up ADV (i.e., yielding fee codes ZA or ZO) from August 2022 ≥ 0.10% of TCV. Pursuant to footnote 2 of the Fee Schedule, the Exchange also offers Retail Volume Tiers which provide Retail Member Organizations (‘‘RMOs’’) 20 an opportunity to receive an enhanced rebate from the standard rebate for Retail Orders 21 that add liquidity (i.e., yielding fee code ZA or ZO).22 The Retail Volume Tiers offer three Retail Growth Tiers, where a Member is eligible for an enhanced rebate for qualifying orders (i.e., yielding fee code ZA or ZO) meeting certain add volume-based criteria, including ‘‘growing’’ its volume over a certain baseline month.23 The Exchange proposes to amend the Required Criteria for Retail Growth Tier 3 to add a third prong. As a result, the Required Criteria for Retail Growth Tier 3 is as follows: • Retail Growth Tier 3 provides a rebate of $0.0037 per share to qualifying orders (i.e., orders yielding fee code ZA or ZO) where (1) Member adds a StepUp ADAV from October 2022 ≥ 0.15% 19 Similar to the elimination of Growth Tiers 1 and 2, the Exchange states that it is eliminating Non-Displayed Step-Up Volume Tiers 1 and 2 because no Members have satisfied the criteria within the past six months and the Exchange no longer wishes to, nor is required to, maintain such tiers. The Exchange states that it would rather redirect future resources and funding into other programs and tiers intended to incentivize increased order flow. See Notice, supra note 5, at 14659. 20 See EDGX Rule 11.21(a)(1). A ‘‘Retail Member Organization’’ or ‘‘RMO’’ is a Member (or a division thereof) that has been approved by the Exchange under this Rule to submit Retail Orders. 21 See EDGX Rule 11.21(a)(2). A ‘‘Retail Order’’ is an agency or riskless principal order that meets the criteria of FINRA Rule 5320.03 that originates from a natural person and is submitted to the Exchange by a Retail Member Organization, provided that no change is made to the terms of the order with respect to price or side of market and the order does not originate from a trading algorithm or any other computerized methodology. 22 See Notice, supra note 5, at 14659. See also Fee Schedule, Footnotes, 2, Retail Volume Tiers. 23 See Notice, supra note 5, at 14659. PO 00000 Frm 00184 Fmt 4703 Sfmt 4703 of the TCV or Member adds a Step-Up ADAV from October 2022 ≥ 15,000,000; (2) Member has a total remove ADV ≥ 0.45% of TCV or Member has a total remove ADV ≥ 45,000,000; and (3) Members adds a Retail Step-Up ADV (i.e., yielding fee code ZA or ZO) from August 2022 ≥ 0.10% of TCV. Finally, the Exchange offers fee code DQ, which is appended to Midpoint Discretionary Orders (‘‘MDOs’’) 24 using the Quote Depletion Protection (‘‘QDP’’) 25 order instruction.26 According to the Exchange, QDP is designed to provide enhanced protections to MDOs by tracking significant executions that constitute the best bid or offer on the EDGX Book and enabling Users to avoid potentially unfavorable executions by preventing MDOs entered with the optional QDP instruction from exercising discretion to trade at more aggressive prices when QDP has been triggered.27 MDOs entered with the QDP instruction are appended fee code DQ and assessed a flat fee of $0.00040 per share in securities at or above $1.00 and 0.30% of dollar value for securities priced below $1.00.28 The Exchange proposes to amend fee code DQ to be appended to MDOs entered with a QDP instruction that add liquidity to the Exchange.29 The Exchange also proposes to introduce fee code DX, which would be appended to MDOs with a QDP instruction that remove liquidity from the Exchange.30 Orders appended with fee code DX would be assessed a fee of $0.00060 per share in securities at or above $1.00 and 0.30% of dollar value for securities priced below $1.00.31 III. Suspension of the Proposed Rule Change Pursuant to section 19(b)(3)(C) of the Act,32 at any time within 60 days of the date of filing of an immediately effective proposed rule change pursuant to section 19(b)(1) of the Act,33 the Commission summarily may temporarily suspend the change in the rules of a self-regulatory organization (‘‘SRO’’) if it appears to the Commission that such action is necessary or appropriate in the public interest, for 24 See Exchange Rule 11.8(g). Exchange Rule 11.8(g)(10). 26 See Notice, supra note 5, at 14659. See also Fee Schedule, Footnotes, 1, Add/Remove Volume Tiers. 27 See Notice, supra note 5, at 14659. 28 See Notice, supra note 5, at 14659. See also Fee Schedule, Footnotes, 1, Add/Remove Volume Tiers. 29 See Notice, supra note 5, at 14659. There would be no change to the fee associated with fee code DQ. 30 See Notice, supra note 5, at 14659. 31 Id. 32 15 U.S.C. 78s(b)(3)(C). 33 15 U.S.C. 78s(b)(1). 25 See E:\FR\FM\04MYN1.SGM 04MYN1 ddrumheller on DSK120RN23PROD with NOTICES1 Federal Register / Vol. 88, No. 86 / Thursday, May 4, 2023 / Notices the protection of investors, or otherwise in furtherance of the purposes of the Act. As discussed below, the Commission believes a temporary suspension of the proposed rule change is necessary and appropriate to allow for additional analysis of the proposed rule change’s consistency with the Act and the rules thereunder. In support of the proposal, the Exchange argues that is 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.34 The Exchange believes that its specific proposal 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.35 The Exchange states that the Growth Tiers, Non-Displayed StepUp Volume Tiers, and Retail Volume Tiers are intended to provide Members an opportunity to receive an enhanced rebate by increasing their order flow to the Exchange, which further contributes to a deeper, more liquid market and provides even more execution opportunities for active market participants.36 As such, increased overall order flow benefits all Members by contributing towards a robust and well-balanced market ecosystem, according to the Exchange.37 Additionally, the Exchange notes that relative volume-based incentives and discounts have been widely adopted by exchanges, including the Exchange, and are reasonable, equitable and nondiscriminatory because they are open to all Members on an equal basis and provide additional 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.38 The Exchange states that 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.39 With respect to the proposed amendments to proposed Growth Tiers 34 See Notice, supra note 5, at 14660. 35 Id. 36 See Notice, supra note 5, at 14659. 37 Id. 38 See Notice, supra note 5, at 14660. 39 Id. VerDate Sep<11>2014 17:12 May 03, 2023 Jkt 259001 1 and 2, proposed Non-Displayed StepUp Volume Tier 1, and Retail Growth Tier 3 in particular, the Exchange states that such modifications are reasonable because they will be available to all Members and will provide all Members with an additional opportunity to receive an enhanced rebate.40 The Exchange further believes that these specific modifications also will provide a reasonable means to encourage liquidity adding displayed orders, liquidity adding non-displayed orders, and retail orders, respectively, in Members’ order flow to the Exchange and to incentivize Members to continue to provide liquidity adding volume to the Exchange by offering them an additional opportunity to receive an enhanced rebate on qualifying orders.41 According to the Exchange, an overall increase in activity would deepen the Exchange’s liquidity pool, offers additional cost savings, support the quality of price discovery, promote market transparency and improve market quality, for all investors.42 The Exchange believes that the proposed changes to proposed Growth Tiers 1 and 2, proposed Non-Displayed Step-Up Volume Tier 1, and Retail Growth Tier 3 are reasonable as they do not represent a significant departure from the criteria currently offered in the Fee Schedule.43 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 tiers and have the opportunity to meet the tiers’ criteria and receive the corresponding enhanced rebate if such criteria is met.44 The Exchange also notes that proposed changes will not adversely impact any Member’s ability to qualify for enhanced rebates offered under other tiers; should a Member not meet the proposed new criteria, the Member will merely not receive that corresponding enhanced rebate.45 When exchanges file their proposed rule changes with the Commission, including fee filings like the Exchange’s present proposal, they are required to provide a statement supporting the proposal’s basis under the Act and the rules and regulations thereunder applicable to the exchange.46 The IV. Proceedings To Determine Whether To Approve or Disapprove the Proposed Rule Change In addition to temporarily suspending the proposal, the Commission also 48 15 41 Id. U.S.C. 78f(b)(4). U.S.C. 78f(b)(5). 50 15 U.S.C. 78f(b)(8). 51 See 15 U.S.C. 78f(b)(4), (5), and (8), respectively. 52 For purposes of temporarily suspending the proposed rule change, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). 49 15 42 Id. 43 Id. 44 Id. 45 Id. 46 See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change’’). Frm 00185 instructions to Form 19b–4, on which exchanges file their proposed rule changes, specify that such statement ‘‘should be sufficiently detailed and specific to support a finding that the proposed rule change is consistent with [those] requirements.’’ 47 Section 6 of the Act, including sections 6(b)(4), (5), and (8), requires the rules of an exchange to (1) provide for the equitable allocation of reasonable fees among members, issuers, and other persons using the exchange’s facilities; 48 (2) perfect the mechanism of a free and open market and a national market system, protect investors and the public interest, and not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers; 49 and (3) not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.50 In temporarily suspending the Exchange’s fee change, the Commission intends to further consider whether the proposal, in particular the proposed modifications to certain Growth Tiers, Non-Displayed Step-Up Volume Tiers, and a Retail Growth Tier, is consistent with the statutory requirements applicable to a national securities exchange under the Act. The Commission will consider whether the proposed rule change satisfies the standards under the Act and the rules thereunder requiring, among other things, that an exchange’s rules provide for the equitable allocation of reasonable fees among members, issuers, and other persons using its facilities; not permit unfair discrimination between customers, issuers, brokers or dealers; and do not impose any burden on competition not necessary or appropriate in furtherance of the purposes of the Act.51 Therefore, the Commission finds that it is appropriate in the public interest, for the protection of investors, and otherwise in furtherance of the purposes of the Act, to temporarily suspend the proposed rule change.52 47 Id. 40 Id. PO 00000 28643 Fmt 4703 Sfmt 4703 E:\FR\FM\04MYN1.SGM 04MYN1 28644 Federal Register / Vol. 88, No. 86 / Thursday, May 4, 2023 / Notices ddrumheller on DSK120RN23PROD with NOTICES1 hereby institutes proceedings pursuant to sections 19(b)(3)(C) 53 and 19(b)(2)(B) of the Act 54 to determine whether the proposed rule change should be approved or disapproved. Institution of proceedings does not indicate that the Commission has reached any conclusions with respect to any of the issues involved. Rather, the Commission seeks and encourages interested persons to provide additional comment on the proposed rule change to inform the Commission’s analysis of whether to approve or disapprove the proposed rule change. Pursuant to section 19(b)(2)(B) of the Act,55 the Commission is providing notice of the grounds for possible disapproval under consideration: • Whether the Exchange has demonstrated how the proposal is consistent with section 6(b)(4) of the Act, which requires that the rules of a national securities exchange ‘‘provide for the equitable allocation of reasonable dues, fees, and other charges among its members and issuers and other persons using its facilities;’’ 56 • Whether the Exchange has demonstrated how the proposal is consistent with section 6(b)(5) of the Act, which requires, among other things, that the rules of a national securities exchange be ‘‘designed to perfect the operation of a free and open market and a national market system’’ and ‘‘protect investors and the public interest,’’ and not be ‘‘designed to permit unfair discrimination between customers, issuers, brokers, or dealers;’’ 57 and • Whether the Exchange has demonstrated how the proposal is consistent with section 6(b)(8) of the Act, which requires that the rules of a national securities exchange ‘‘not impose any burden on competition not necessary or appropriate in furtherance of the purposes of [the Act].’’ 58 As discussed in Section III above, the Exchange argues that all Members will 53 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily suspends a proposed rule change, section 19(b)(3)(C) of the Act requires that the Commission institute proceedings under section 19(b)(2)(B) to determine whether a proposed rule change should be approved or disapproved. 54 15 U.S.C. 78s(b)(2)(B). 55 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also provides that proceedings to determine whether to disapprove a proposed rule change must be concluded within 180 days of the date of publication of notice of the filing of the proposed rule change. See id. The time for conclusion of the proceedings may be extended for up to 60 days if the Commission finds good cause for such extension and publishes its reasons for so finding, or if the exchange consents to the longer period. See id. 56 15 U.S.C. 78f(b)(4). 57 15 U.S.C. 78f(b)(5). 58 15 U.S.C. 78f(b)(8). VerDate Sep<11>2014 17:12 May 03, 2023 Jkt 259001 be eligible for the proposed new tiers and have the opportunity to meet the tiers’ criteria. The Exchange further states the proposal provides a reasonable means to incentivize Members to continue to send certain types of order flow to the Exchange. Because the proposed growth and stepup tiers are designed to provide more favorable pricing to Members with volume increases over specified baseline months, questions are raised as to whether the Exchange has satisfied its burden to demonstrate that such tiers will, as the Exchange argues, continue to provide a reasonable means to incentivize Members to send certain types of order flow to the Exchange, in a manner consistent with the Act and the rules thereunder when the specified baseline months remain the same and may continue indefinitely. Under the Commission’s Rules of Practice, the ‘‘burden to demonstrate that a proposed rule change is consistent with the [Act] and the rules and regulations issued thereunder . . . is on the [SRO] that proposed the rule change.’’ 59 The description of a proposed rule change, its purpose and operation, its effect, and a legal analysis of its consistency with applicable requirements must all be sufficiently detailed and specific to support an affirmative Commission finding,60 and any failure of an SRO to provide this information may result in the Commission not having a sufficient basis to make an affirmative finding that a proposed rule change is consistent with the Act and the applicable rules and regulations.61 The Commission is instituting proceedings to allow for additional consideration and comment on the issues raised herein, including as to whether the proposal is consistent with the Act, specifically, with its requirements that the rules of a national securities exchange provide for the equitable allocation of reasonable dues, fees, and other charges among its members, issuers, and other persons using its facilities; are designed to perfect the operation of a free and open market and a national market system, and to protect investors and the public interest; are not designed to permit unfair discrimination between customers, issuers, brokers, or dealers; and do not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act; 62 as well as any 59 17 CFR 201.700(b)(3). id. 61 See id. 62 See 15 U.S.C. 78f(b)(4), (5), and (8). 60 See PO 00000 Frm 00186 Fmt 4703 Sfmt 4703 other provision of the Act, or the rules and regulations thereunder. V. Commission’s Solicitation of Comments The Commission requests written views, data, and arguments with respect to the concerns identified above as well as any other relevant concerns. Such comments should be submitted by May 25, 2023. Rebuttal comments should be submitted by June 8, 2023. Although there do not appear to be any issues relevant to approval or disapproval that would be facilitated by an oral presentation of views, data, and arguments, the Commission will consider, pursuant to Rule 19b–4, any request for an opportunity to make an oral presentation.63 The Commission asks that commenters address the sufficiency and merit of the Exchange’s statements in support of the proposal, in addition to any other comments they may wish to submit about the proposed rule change. Interested persons are invited to submit written data, views, and arguments concerning the proposed rule change, including whether the proposal 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 No. SR– CboeEDGX–2023–016 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–2023–016. 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 63 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the Commission flexibility to determine what type of proceeding—either oral or notice and opportunity for written comments—is appropriate for consideration of a particular proposal by an SRO. See Securities Acts Amendments of 1975, Report of the Senate Committee on Banking, Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975). E:\FR\FM\04MYN1.SGM 04MYN1 Federal Register / Vol. 88, No. 86 / Thursday, May 4, 2023 / Notices 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. Do not include personal identifiable information in submissions; you should submit only information that you wish to make available publicly. We may redact in part or withhold entirely from publication submitted material that is obscene or subject to copyright protection. All submissions should refer to File Number SR–CboeEDGX–2023– 016 and should be submitted on or before May 25, 2023. Rebuttal comments should be submitted by June 8, 2023. VI. Conclusion It is therefore ordered, pursuant to section 19(b)(3)(C) of the Act,64 that File Number SR–CboeEDGX–2023–016 be and hereby is, temporarily suspended. In addition, the Commission is instituting proceedings to determine whether the proposed rule change should be approved or disapproved. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.65 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–09448 Filed 5–3–23; 8:45 am] ddrumheller on DSK120RN23PROD with NOTICES1 BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97403; File No. SR–FINRA– 2023–008] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing of a Proposed Rule Change To Amend FINRA Rules 1015, 9261, 9341, 9524, 9830 and Funding Portal Rule 900 (Code of Procedure) To Permit Hearings Under Those Rules To Be Conducted by Video Conference April 28, 2023. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 26, 2023, the Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. 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 FINRA is proposing to amend FINRA Rules 1015, 9261, 9341, 9524 and 9830 and Funding Portal Rule 900 to allow for video conference hearings before the Office of Hearing Officers (‘‘OHO’’) and the National Adjudicatory Council (‘‘NAC’’) under specified conditions. The text of the proposed rule change is available on FINRA’s website at https://www.finra.org, at the principal office of FINRA 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, FINRA 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. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. 64 15 65 17 U.S.C. 78s(b)(3)(C). CFR 200.30–3(a)(57) and (58). VerDate Sep<11>2014 17:12 May 03, 2023 1 15 2 17 Jkt 259001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00187 Fmt 4703 28645 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose Due to the COVID–19 global health crisis, FINRA administratively postponed in-person hearings for over six months beginning in March of 2020, which resulted in an expanding backlog of cases that could have compromised FINRA’s ability to provide timely adjudicatory processes and fulfill its statutory obligations to protect investors and maintain fair and orderly markets. To address that backlog and mitigate the consequences of a stalled adjudicatory system, FINRA adopted temporary rules that allow OHO and the NAC to order, without a motion, hearings to proceed by video conference based on public health risks related to COVID–19.3 These were extended several times due to the continuing public health risks and logistical challenges related to COVID–19, including whether hearing participants could safely travel and abide by state or local quarantine requirements.4 FINRA is proposing to make the temporary amendments regarding video conference hearings permanent, with some modifications that would allow for the use of video conference for reasons in addition to COVID–19.5 The use of 3 See Securities Exchange Act Release No. 88917 (May 20, 2020), 85 FR 31832 (May 27, 2020) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA–2020–015) and Securities Exchange Act Release No. 89737 (September 2, 2020), 85 FR 55712 (September 9, 2020) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA– 2020–027). 4 See Securities Exchange Act Release No. 90619 (December 9, 2020), 85 FR 81250 (December 15, 2020) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA–2020–042); Securities Exchange Act Release No. 91495 (April 7, 2021), 86 FR 19306 (April 13, 2021) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA– 2021–006); Securities Exchange Act Release No. 92685 (August 17, 2021), 86 FR 47169 (August 23, 2021) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA–2021–019); Securities Exchange Act Release No. 93758 (December 13, 2021), 86 FR 71695 (December 17, 2021) (Notice of Filing and Immediate Effectiveness of File No. SR– FINRA–2021–031); Securities Exchange Act Release No. 94430 (March 16, 2022), 87 FR 16262 (March 22, 2022) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA–2022–004); Securities Exchange Act Release No. 95281 (July 14, 2022), 87 FR 43335 (July 20, 2022) (Notice of Filing and Immediate Effectiveness of File No. SR– FINRA–2022–018); Securities Exchange Act Release No. 96107 (October 19, 2022), 87 FR 64526 (October 25, 2022) (Notice of Filing and Immediate Effectiveness of File No. SR–FINRA–2022–029); and Securities Exchange Act Release No. 96746 (January 25, 2023), 88 FR 6346 (January 31, 2023) (Notice of Filing and Immediate Effectiveness of File No. SR– FINRA–2023–001); see also supra note 3. 5 For ease of reference in this filing, FINRA refers to the pre-pandemic rules as ‘‘original rules’’ and Continued Sfmt 4703 E:\FR\FM\04MYN1.SGM 04MYN1

Agencies

[Federal Register Volume 88, Number 86 (Thursday, May 4, 2023)]
[Notices]
[Pages 28641-28645]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-09448]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97406; File No. SR-CboeEDGX-2023-016]


Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; 
Suspension of and Order Instituting Proceedings To Determine Whether To 
Approve or Disapprove Proposed Rule Change To Amend the EDGX Equities 
Fee Schedule To Eliminate and Modify Certain Growth Tiers and Non-
Displayed Step-Up Volume Tiers, Modify a Retail Growth Tier, Introduce 
New Fee Code DX and Modify Fee Code DQ

April 28, 2023.

I. Introduction

    On March 1, 2023, Cboe EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Exchange Act'' or ``Act''),\1\ and Rule 19b-4 
thereunder,\2\ a proposed rule change (File Number SR-CboeEDGX-2023-
016) to amend the EDGX Equities Fee Schedule (``Fee Schedule'') to 
eliminate and modify certain Growth Tiers and Non-Displayed Step-Up 
Volume Tiers, modify a Retail Growth Tier, introduce new fee code DX 
and modify fee code DQ.\3\ The proposed rule change was immediately 
effective upon filing with the Commission pursuant to section 
19(b)(3)(A) of the Act.\4\ The proposed rule change was published for 
comment in the Federal Register on March 9, 2023.\5\ The Commission has 
received no comment letters on the proposed rule change. Under section 
19(b)(3)(C) of the Act,\6\ the Commission is hereby: (i) temporarily 
suspending File Number SR-CboeEDGX-2023-016; and (ii) instituting 
proceedings to determine whether to approve or disapprove File Number 
SR-CboeEDGX-2023-016.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Notice, infra note 5, at 14658.
    \4\ 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take 
effect upon filing with the Commission if it is designated by the 
exchange as ``establishing or changing a due, fee, or other charge 
imposed by the self-regulatory organization on any person, whether 
or not the person is a member of the self-regulatory organization.'' 
15 U.S.C. 78s(b)(3)(A)(ii).
    \5\ See Securities Exchange Act Release No. 97042 (March 3, 
2023), 88 FR 14657 (``Notice'').
    \6\ 15 U.S.C. 78s(b)(3)(C).
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II. Description of the Proposed Rule Change

    The Exchange operates a ``Maker-Taker'' model whereby it pays 
rebates to Members \7\ that add liquidity and assesses fees to those 
that remove liquidity.\8\ 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.\9\ According 
to the Exchange, 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.\10\
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    \7\ See EDGX Rule 1.5(n). The term ``Member'' shall mean any 
registered broker or dealer that has been admitted to membership in 
the Exchange. A Member will have the status of a ``member'' of the 
Exchange as that term is defined in section 3(a)(3) of the Act. 
Membership may be granted to a sole proprietor, partnership, 
corporation, limited liability company or other organization which 
is a registered broker or dealer pursuant to section 15 of the Act, 
and which has been approved by the Exchange.
    \8\ See Notice, supra note 5, at 14658.
    \9\ Id.
    \10\ Id.
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    The Exchange proposes to amend its Fee Schedule to eliminate and 
modify certain Growth Tiers and Non-Displayed Step-Up Volume Tiers, 
modify a Retail Growth Tier, introduce new fee code DX and modify fee 
code DQ, which fee changes became effective on March 1, 2023.\11\ With 
respect to the Exchange's Growth Tiers, the Exchange offers five Growth 
Tiers that each provide an enhanced rebate for Members' qualifying 
orders yielding fee codes B, V, Y, 3, and 4, where a Member reaches 
certain add volume-based criteria, including ``growing'' its volume 
over a certain baseline month.\12\ The Exchange proposes to discontinue 
Growth Tiers 1-3 and to modify the criteria of Growth Tier 4 and Growth 
Tier 5 (renumbered to Growth Tier 1 and Growth Tier 2, respectively and 
referred to herein as ``proposed Growth Tier 1'' and ``proposed Growth 
Tier 2'').\13\ Specifically, the Exchange proposes to add a third prong 
to the Required Criteria for proposed Growth Tier 1. As

[[Page 28642]]

a result, the Required Criteria for proposed Growth Tier 1 is as 
follows:
---------------------------------------------------------------------------

    \11\ See Notice, supra note 5, at 14658. Under footnotes 1 and 2 
of the Exchange's Fee Schedule, the tiered pricing fee table lists 
the tier, the ``rebate per share to add'' or the ``fee per share to 
remove,'' as applicable, and the ``Required Criteria''--sometimes 
referred to as ``prongs''--that must be met by a Member in order to 
qualify for the applicable tiered pricing fee.
    \12\ See Notice, supra note 5, at 14658. See also Fee Schedule, 
Footnotes, 1, Add/Remove Volume Tiers.
    \13\ The Exchange states it is eliminating Growth Tiers 1-3 
because no Members have satisfied those Growth Tier criteria within 
the past six months and the Exchange no longer wishes to, nor is 
required to, maintain such tiers. The Exchange states that it would 
rather redirect future resources and funding into other programs and 
tiers intended to incentivize increased order flow. See Notice, 
supra note 5, at 14658.
---------------------------------------------------------------------------

     Proposed Growth Tier 1 provides a rebate of $0.0034 per 
share to qualifying orders (i.e., orders yielding fee codes B, V, Y, 3, 
or 4) where 1) MPID adds a Step-Up ADAV \14\ from October 2021 >= 0.12% 
of the TCV \15\ or MPID adds a Step-Up ADAV from October 2021 >= 
16,000,000; and 2) MPID adds an ADV \16\ >= 0.30% of TCV or MPID adds 
an ADV >= 35,000,000; and 3) MPID adds an ADAV >= 0.30% of TCV with 
displayed orders that yield fee codes B, V, or Y.
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    \14\ ADAV means average daily added volume calculated as the 
number of shares added per day ADAV is calculated on a monthly 
basis. Step-Up ADAV means ADAV in the relevant baseline month 
subtracted from current ADAV. See Notice, supra note 5, at 14658, n. 
9.
    \15\ 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. See Notice, supra note 5, at 14658, n. 10.
    \16\ 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. See Fee Schedule, Definitions.
---------------------------------------------------------------------------

    In addition, the Exchange proposes to modify proposed Growth Tier 2 
by adding a third prong to the Required Criteria. As a result, the 
Required Criteria for proposed Growth Tier 2 is as follows:
     Proposed Growth Tier 2 provides a rebate of $0.0034 per 
share to qualifying orders (i.e., orders yielding fee codes B, V, Y, 3, 
or 4) where (1) Member adds a Step-Up ADAV from October 2022 >= 0.15% 
of the TCV or Member adds a Step-Up ADAV from October 2022 >= 
15,000,000; and (2) Member has a total remove ADV >= 0.45% of TCV or 
Member has a total remove ADV >= 45,000,000; and (3) Member adds a 
Retail Step-Up ADV \17\ (i.e., yielding fee codes ZA or ZO) from August 
2022 >= 0.10% of TCV.
---------------------------------------------------------------------------

    \17\ Step-Up ADV means ADV in the relevant baseline month 
subtracted from current day ADV. See Fee Schedule, Definitions.
---------------------------------------------------------------------------

    The Exchange also offers Non-Displayed Step-Up Volume Tiers under 
footnote 1 of the Fee Schedule that each provide an enhanced rebate for 
Members' qualifying orders yielding fee codes DM, HA, MM, and RP, where 
a Member reaches certain volume-based criteria offered in each 
tier.\18\ The Exchange proposes to discontinue the use of Non-Displayed 
Step-Up Volume Tiers 1 and 2, and to amend the criteria of current Non-
Displayed Step-Up Volume Tier 3 (renumbered to proposed Non-Displayed 
Step-Up Volume Tier 1).\19\ Specifically, the Exchange proposes to add 
a third prong to the Required Criteria for proposed Non-Displayed Step-
Up Volume Tier 1. As a result, the Required Criteria for proposed Non-
Displayed Step-Up Volume Tier 1 is as follows:
---------------------------------------------------------------------------

    \18\ See Notice, supra note 5, at 14659. See also Fee Schedule, 
Footnotes, 1, Add/Remove Volume Tiers.
    \19\ Similar to the elimination of Growth Tiers 1 and 2, the 
Exchange states that it is eliminating Non-Displayed Step-Up Volume 
Tiers 1 and 2 because no Members have satisfied the criteria within 
the past six months and the Exchange no longer wishes to, nor is 
required to, maintain such tiers. The Exchange states that it would 
rather redirect future resources and funding into other programs and 
tiers intended to incentivize increased order flow. See Notice, 
supra note 5, at 14659.
---------------------------------------------------------------------------

     Non-Displayed Step-Up Volume Tier 1 provides a rebate of 
$0.0026 per share to qualifying orders (i.e., orders yielding fee code 
DM, HA, MM, or RP) where (1) Members adds a Step-Up ADAV from October 
2022 >= 0.15% of the TCV or Member adds a Step-Up ADAV from October 
2022 >= 15,000,000; (2) Member has a total remove ADV >= 0.45% of TCV 
or Member has a total remove ADV >= 45,000,000; and (3) Member adds a 
Retail Step-Up ADV (i.e., yielding fee codes ZA or ZO) from August 2022 
>= 0.10% of TCV.
    Pursuant to footnote 2 of the Fee Schedule, the Exchange also 
offers Retail Volume Tiers which provide Retail Member Organizations 
(``RMOs'') \20\ an opportunity to receive an enhanced rebate from the 
standard rebate for Retail Orders \21\ that add liquidity (i.e., 
yielding fee code ZA or ZO).\22\ The Retail Volume Tiers offer three 
Retail Growth Tiers, where a Member is eligible for an enhanced rebate 
for qualifying orders (i.e., yielding fee code ZA or ZO) meeting 
certain add volume-based criteria, including ``growing'' its volume 
over a certain baseline month.\23\ The Exchange proposes to amend the 
Required Criteria for Retail Growth Tier 3 to add a third prong. As a 
result, the Required Criteria for Retail Growth Tier 3 is as follows:
---------------------------------------------------------------------------

    \20\ See EDGX Rule 11.21(a)(1). A ``Retail Member Organization'' 
or ``RMO'' is a Member (or a division thereof) that has been 
approved by the Exchange under this Rule to submit Retail Orders.
    \21\ See EDGX Rule 11.21(a)(2). A ``Retail Order'' is an agency 
or riskless principal order that meets the criteria of FINRA Rule 
5320.03 that originates from a natural person and is submitted to 
the Exchange by a Retail Member Organization, provided that no 
change is made to the terms of the order with respect to price or 
side of market and the order does not originate from a trading 
algorithm or any other computerized methodology.
    \22\ See Notice, supra note 5, at 14659. See also Fee Schedule, 
Footnotes, 2, Retail Volume Tiers.
    \23\ See Notice, supra note 5, at 14659.
---------------------------------------------------------------------------

     Retail Growth Tier 3 provides a rebate of $0.0037 per 
share to qualifying orders (i.e., orders yielding fee code ZA or ZO) 
where (1) Member adds a Step-Up ADAV from October 2022 >= 0.15% of the 
TCV or Member adds a Step-Up ADAV from October 2022 >= 15,000,000; (2) 
Member has a total remove ADV >= 0.45% of TCV or Member has a total 
remove ADV >= 45,000,000; and (3) Members adds a Retail Step-Up ADV 
(i.e., yielding fee code ZA or ZO) from August 2022 >= 0.10% of TCV.
    Finally, the Exchange offers fee code DQ, which is appended to 
Midpoint Discretionary Orders (``MDOs'') \24\ using the Quote Depletion 
Protection (``QDP'') \25\ order instruction.\26\ According to the 
Exchange, QDP is designed to provide enhanced protections to MDOs by 
tracking significant executions that constitute the best bid or offer 
on the EDGX Book and enabling Users to avoid potentially unfavorable 
executions by preventing MDOs entered with the optional QDP instruction 
from exercising discretion to trade at more aggressive prices when QDP 
has been triggered.\27\ MDOs entered with the QDP instruction are 
appended fee code DQ and assessed a flat fee of $0.00040 per share in 
securities at or above $1.00 and 0.30% of dollar value for securities 
priced below $1.00.\28\ The Exchange proposes to amend fee code DQ to 
be appended to MDOs entered with a QDP instruction that add liquidity 
to the Exchange.\29\ The Exchange also proposes to introduce fee code 
DX, which would be appended to MDOs with a QDP instruction that remove 
liquidity from the Exchange.\30\ Orders appended with fee code DX would 
be assessed a fee of $0.00060 per share in securities at or above $1.00 
and 0.30% of dollar value for securities priced below $1.00.\31\
---------------------------------------------------------------------------

    \24\ See Exchange Rule 11.8(g).
    \25\ See Exchange Rule 11.8(g)(10).
    \26\ See Notice, supra note 5, at 14659. See also Fee Schedule, 
Footnotes, 1, Add/Remove Volume Tiers.
    \27\ See Notice, supra note 5, at 14659.
    \28\ See Notice, supra note 5, at 14659. See also Fee Schedule, 
Footnotes, 1, Add/Remove Volume Tiers.
    \29\ See Notice, supra note 5, at 14659. There would be no 
change to the fee associated with fee code DQ.
    \30\ See Notice, supra note 5, at 14659.
    \31\ Id.
---------------------------------------------------------------------------

III. Suspension of the Proposed Rule Change

    Pursuant to section 19(b)(3)(C) of the Act,\32\ at any time within 
60 days of the date of filing of an immediately effective proposed rule 
change pursuant to section 19(b)(1) of the Act,\33\ the Commission 
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') if it appears to the Commission that 
such action is necessary or appropriate in the public interest, for

[[Page 28643]]

the protection of investors, or otherwise in furtherance of the 
purposes of the Act. As discussed below, the Commission believes a 
temporary suspension of the proposed rule change is necessary and 
appropriate to allow for additional analysis of the proposed rule 
change's consistency with the Act and the rules thereunder.
---------------------------------------------------------------------------

    \32\ 15 U.S.C. 78s(b)(3)(C).
    \33\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------

    In support of the proposal, the Exchange argues that is 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.\34\ 
The Exchange believes that its specific proposal 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.\35\ The Exchange 
states that the Growth Tiers, Non-Displayed Step-Up Volume Tiers, and 
Retail Volume Tiers are intended to provide Members an opportunity to 
receive an enhanced rebate by increasing their order flow to the 
Exchange, which further contributes to a deeper, more liquid market and 
provides even more execution opportunities for active market 
participants.\36\ As such, increased overall order flow benefits all 
Members by contributing towards a robust and well-balanced market 
ecosystem, according to the Exchange.\37\
---------------------------------------------------------------------------

    \34\ See Notice, supra note 5, at 14660.
    \35\ Id.
    \36\ See Notice, supra note 5, at 14659.
    \37\ Id.
---------------------------------------------------------------------------

    Additionally, the Exchange notes that relative volume-based 
incentives and discounts have been widely adopted by exchanges, 
including the Exchange, and are reasonable, equitable and non-
discriminatory because they are open to all Members on an equal basis 
and provide additional 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.\38\ The Exchange states 
that 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.\39\
---------------------------------------------------------------------------

    \38\ See Notice, supra note 5, at 14660.
    \39\ Id.
---------------------------------------------------------------------------

    With respect to the proposed amendments to proposed Growth Tiers 1 
and 2, proposed Non-Displayed Step-Up Volume Tier 1, and Retail Growth 
Tier 3 in particular, the Exchange states that such modifications are 
reasonable because they will be available to all Members and will 
provide all Members with an additional opportunity to receive an 
enhanced rebate.\40\ The Exchange further believes that these specific 
modifications also will provide a reasonable means to encourage 
liquidity adding displayed orders, liquidity adding non-displayed 
orders, and retail orders, respectively, in Members' order flow to the 
Exchange and to incentivize Members to continue to provide liquidity 
adding volume to the Exchange by offering them an additional 
opportunity to receive an enhanced rebate on qualifying orders.\41\ 
According to the Exchange, an overall increase in activity would deepen 
the Exchange's liquidity pool, offers additional cost savings, support 
the quality of price discovery, promote market transparency and improve 
market quality, for all investors.\42\
---------------------------------------------------------------------------

    \40\ Id.
    \41\ Id.
    \42\ Id.
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes to proposed Growth 
Tiers 1 and 2, proposed Non-Displayed Step-Up Volume Tier 1, and Retail 
Growth Tier 3 are reasonable as they do not represent a significant 
departure from the criteria currently offered in the Fee Schedule.\43\ 
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 tiers and 
have the opportunity to meet the tiers' criteria and receive the 
corresponding enhanced rebate if such criteria is met.\44\ The Exchange 
also notes that proposed changes will not adversely impact any Member's 
ability to qualify for enhanced rebates offered under other tiers; 
should a Member not meet the proposed new criteria, the Member will 
merely not receive that corresponding enhanced rebate.\45\
---------------------------------------------------------------------------

    \43\ Id.
    \44\ Id.
    \45\ Id.
---------------------------------------------------------------------------

    When exchanges file their proposed rule changes with the 
Commission, including fee filings like the Exchange's present proposal, 
they are required to provide a statement supporting the proposal's 
basis under the Act and the rules and regulations thereunder applicable 
to the exchange.\46\ The instructions to Form 19b-4, on which exchanges 
file their proposed rule changes, specify that such statement ``should 
be sufficiently detailed and specific to support a finding that the 
proposed rule change is consistent with [those] requirements.'' \47\
---------------------------------------------------------------------------

    \46\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory 
Organization's Statement of the Purpose of, and Statutory Basis for, 
the Proposed Rule Change'').
    \47\ Id.
---------------------------------------------------------------------------

    Section 6 of the Act, including sections 6(b)(4), (5), and (8), 
requires the rules of an exchange to (1) provide for the equitable 
allocation of reasonable fees among members, issuers, and other persons 
using the exchange's facilities; \48\ (2) perfect the mechanism of a 
free and open market and a national market system, protect investors 
and the public interest, and not be designed to permit unfair 
discrimination between customers, issuers, brokers, or dealers; \49\ 
and (3) not impose any burden on competition not necessary or 
appropriate in furtherance of the purposes of the Act.\50\
---------------------------------------------------------------------------

    \48\ 15 U.S.C. 78f(b)(4).
    \49\ 15 U.S.C. 78f(b)(5).
    \50\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------

    In temporarily suspending the Exchange's fee change, the Commission 
intends to further consider whether the proposal, in particular the 
proposed modifications to certain Growth Tiers, Non-Displayed Step-Up 
Volume Tiers, and a Retail Growth Tier, is consistent with the 
statutory requirements applicable to a national securities exchange 
under the Act. The Commission will consider whether the proposed rule 
change satisfies the standards under the Act and the rules thereunder 
requiring, among other things, that an exchange's rules provide for the 
equitable allocation of reasonable fees among members, issuers, and 
other persons using its facilities; not permit unfair discrimination 
between customers, issuers, brokers or dealers; and do not impose any 
burden on competition not necessary or appropriate in furtherance of 
the purposes of the Act.\51\
---------------------------------------------------------------------------

    \51\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
---------------------------------------------------------------------------

    Therefore, the Commission finds that it is appropriate in the 
public interest, for the protection of investors, and otherwise in 
furtherance of the purposes of the Act, to temporarily suspend the 
proposed rule change.\52\
---------------------------------------------------------------------------

    \52\ For purposes of temporarily suspending the proposed rule 
change, the Commission has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

IV. Proceedings To Determine Whether To Approve or Disapprove the 
Proposed Rule Change

    In addition to temporarily suspending the proposal, the Commission 
also

[[Page 28644]]

hereby institutes proceedings pursuant to sections 19(b)(3)(C) \53\ and 
19(b)(2)(B) of the Act \54\ to determine whether the proposed rule 
change should be approved or disapproved. Institution of proceedings 
does not indicate that the Commission has reached any conclusions with 
respect to any of the issues involved. Rather, the Commission seeks and 
encourages interested persons to provide additional comment on the 
proposed rule change to inform the Commission's analysis of whether to 
approve or disapprove the proposed rule change.
---------------------------------------------------------------------------

    \53\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily 
suspends a proposed rule change, section 19(b)(3)(C) of the Act 
requires that the Commission institute proceedings under section 
19(b)(2)(B) to determine whether a proposed rule change should be 
approved or disapproved.
    \54\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

    Pursuant to section 19(b)(2)(B) of the Act,\55\ the Commission is 
providing notice of the grounds for possible disapproval under 
consideration:
---------------------------------------------------------------------------

    \55\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also 
provides that proceedings to determine whether to disapprove a 
proposed rule change must be concluded within 180 days of the date 
of publication of notice of the filing of the proposed rule change. 
See id. The time for conclusion of the proceedings may be extended 
for up to 60 days if the Commission finds good cause for such 
extension and publishes its reasons for so finding, or if the 
exchange consents to the longer period. See id.
---------------------------------------------------------------------------

     Whether the Exchange has demonstrated how the proposal is 
consistent with section 6(b)(4) of the Act, which requires that the 
rules of a national securities exchange ``provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
members and issuers and other persons using its facilities;'' \56\
---------------------------------------------------------------------------

    \56\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

     Whether the Exchange has demonstrated how the proposal is 
consistent with section 6(b)(5) of the Act, which requires, among other 
things, that the rules of a national securities exchange be ``designed 
to perfect the operation of a free and open market and a national 
market system'' and ``protect investors and the public interest,'' and 
not be ``designed to permit unfair discrimination between customers, 
issuers, brokers, or dealers;'' \57\ and
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    \57\ 15 U.S.C. 78f(b)(5).
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     Whether the Exchange has demonstrated how the proposal is 
consistent with section 6(b)(8) of the Act, which requires that the 
rules of a national securities exchange ``not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of [the Act].'' \58\
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    \58\ 15 U.S.C. 78f(b)(8).
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    As discussed in Section III above, the Exchange argues that all 
Members will be eligible for the proposed new tiers and have the 
opportunity to meet the tiers' criteria. The Exchange further states 
the proposal provides a reasonable means to incentivize Members to 
continue to send certain types of order flow to the Exchange. Because 
the proposed growth and step-up tiers are designed to provide more 
favorable pricing to Members with volume increases over specified 
baseline months, questions are raised as to whether the Exchange has 
satisfied its burden to demonstrate that such tiers will, as the 
Exchange argues, continue to provide a reasonable means to incentivize 
Members to send certain types of order flow to the Exchange, in a 
manner consistent with the Act and the rules thereunder when the 
specified baseline months remain the same and may continue 
indefinitely.
    Under the Commission's Rules of Practice, the ``burden to 
demonstrate that a proposed rule change is consistent with the [Act] 
and the rules and regulations issued thereunder . . . is on the [SRO] 
that proposed the rule change.'' \59\ The description of a proposed 
rule change, its purpose and operation, its effect, and a legal 
analysis of its consistency with applicable requirements must all be 
sufficiently detailed and specific to support an affirmative Commission 
finding,\60\ and any failure of an SRO to provide this information may 
result in the Commission not having a sufficient basis to make an 
affirmative finding that a proposed rule change is consistent with the 
Act and the applicable rules and regulations.\61\
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    \59\ 17 CFR 201.700(b)(3).
    \60\ See id.
    \61\ See id.
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    The Commission is instituting proceedings to allow for additional 
consideration and comment on the issues raised herein, including as to 
whether the proposal is consistent with the Act, specifically, with its 
requirements that the rules of a national securities exchange provide 
for the equitable allocation of reasonable dues, fees, and other 
charges among its members, issuers, and other persons using its 
facilities; are designed to perfect the operation of a free and open 
market and a national market system, and to protect investors and the 
public interest; are not designed to permit unfair discrimination 
between customers, issuers, brokers, or dealers; and do not impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act; \62\ as well as any other 
provision of the Act, or the rules and regulations thereunder.
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    \62\ See 15 U.S.C. 78f(b)(4), (5), and (8).
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V. Commission's Solicitation of Comments

    The Commission requests written views, data, and arguments with 
respect to the concerns identified above as well as any other relevant 
concerns. Such comments should be submitted by May 25, 2023. Rebuttal 
comments should be submitted by June 8, 2023. Although there do not 
appear to be any issues relevant to approval or disapproval that would 
be facilitated by an oral presentation of views, data, and arguments, 
the Commission will consider, pursuant to Rule 19b-4, any request for 
an opportunity to make an oral presentation.\63\
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    \63\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the 
Commission flexibility to determine what type of proceeding--either 
oral or notice and opportunity for written comments--is appropriate 
for consideration of a particular proposal by an SRO. See Securities 
Acts Amendments of 1975, Report of the Senate Committee on Banking, 
Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th 
Cong., 1st Sess. 30 (1975).
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    The Commission asks that commenters address the sufficiency and 
merit of the Exchange's statements in support of the proposal, in 
addition to any other comments they may wish to submit about the 
proposed rule change.
    Interested persons are invited to submit written data, views, and 
arguments concerning the proposed rule change, including whether the 
proposal 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 No. SR-CboeEDGX-2023-016 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-2023-016. 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

[[Page 28645]]

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. Do not include 
personal identifiable information in submissions; you should submit 
only information that you wish to make available publicly. We may 
redact in part or withhold entirely from publication submitted material 
that is obscene or subject to copyright protection. All submissions 
should refer to File Number SR-CboeEDGX-2023-016 and should be 
submitted on or before May 25, 2023. Rebuttal comments should be 
submitted by June 8, 2023.

VI. Conclusion

    It is therefore ordered, pursuant to section 19(b)(3)(C) of the 
Act,\64\ that File Number SR-CboeEDGX-2023-016 be and hereby is, 
temporarily suspended. In addition, the Commission is instituting 
proceedings to determine whether the proposed rule change should be 
approved or disapproved.
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    \64\ 15 U.S.C. 78s(b)(3)(C).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\65\
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    \65\ 17 CFR 200.30-3(a)(57) and (58).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-09448 Filed 5-3-23; 8:45 am]
BILLING CODE 8011-01-P
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