Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule Related to Physical Port Fees, 47211-47214 [2023-15475]

Download as PDF Federal Register / Vol. 88, No. 139 / Friday, July 21, 2023 / Notices the Exchange. Further, if the changes proposed herein are unattractive to market participants, the Exchange can, and likely will, see a decline in connectivity via 10 Gb physical ports as a result. The Exchange operates in a highly competitive market in which market participants can determine whether or not to connect directly to the Exchange based on the value received compared to the cost of doing so. 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. 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: ddrumheller on DSK120RN23PROD with NOTICES1 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– CboeBZX–2023–047 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–CboeBZX–2023–047. 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 a.m. and 3 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–CboeBZX–2023–047 and should be submitted on or beforeAugust 11, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2023–15477 Filed 7–20–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97929; File No. SR– CboeEDGX–2023–045] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule Related to Physical Port Fees July 17, 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 July 3, 2023, Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX’’) filed with the 20 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 18 15 U.S.C. 78s(b)(3)(A). 19 17 CFR 240.19b 4(f). VerDate Sep<11>2014 19:06 Jul 20, 2023 1 15 Jkt 259001 PO 00000 Frm 00113 Fmt 4703 Sfmt 4703 47211 Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX Options’’) proposes to amend its Fees Schedule. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ options/regulation/rule_filings/edgx/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its fee schedule for its equity options platform (‘‘EDGX Options’’) relating to physical connectivity fees, effective July 3, 2023. By way of background, a physical port is utilized by a Member or non-Member to connect to the Exchange at the data centers where the Exchange’s servers are located. The Exchange currently assesses the following physical connectivity fees for Members and nonMembers on a monthly basis: $2,500 per physical port for a 1 gigabit (‘‘Gb’’) circuit and $7,500 per physical port for a 10 Gb circuit. The Exchange proposes to increase the monthly fee for 10 Gb physical ports from $7,500 to $8,500 per port. The Exchange notes the proposed fee change better enables it to continue to maintain and improve its market E:\FR\FM\21JYN1.SGM 21JYN1 47212 Federal Register / Vol. 88, No. 139 / Friday, July 21, 2023 / Notices technology and services and also notes that the proposed fee amount, even as amended, continues to be in line with, or even lower than, amounts assessed by other exchanges for similar connections.3 The physical ports may also be used to access the Systems for the following affiliate exchanges and only one monthly fee currently (and will continue) to apply per port: the Exchange’s equities platform (EDGX Equities), Cboe BZX Exchange, Inc. (options and equities platforms), Cboe BYX Exchange, Inc., Cboe EDGA Exchange, Inc., and Cboe C2 Exchange, Inc., (‘‘Affiliate Exchanges’’).4 ddrumheller on DSK120RN23PROD with NOTICES1 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of section 6(b) of the Act.5 Specifically, the Exchange believes the proposed rule change is consistent with the section 6(b)(5) 6 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) 7 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange also believes the proposed rule change is consistent with section 6(b)(4) 8 of the Act, which requires that Exchange rules provide for the equitable allocation of reasonable 3 See e.g., The Nasdaq Stock Market LLC (‘‘Nasdaq’’), General 8, Connectivity to the Exchange. Nasdaq and its affiliated exchanges charge a monthly fee of $15,000 for each 10Gb Ultra fiber connection to the respective exchange, which is analogous to the Exchange’s 10Gb physical port. See also New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago Inc., NYSE National, Inc. Connectivity Fee Schedule, which provides that 10 Gb LX LCN Circuits (which are analogous to the Exchange’s 10 Gb physical port) are assessed $22,000 per month, per port. 4 The Affiliate Exchanges are also submitting contemporaneous identical rule filings. 5 15 U.S.C. 78f(b). 6 15 U.S.C. 78f(b)(5). 7 Id. 8 15 U.S.C. 78f(b)(4). VerDate Sep<11>2014 19:06 Jul 20, 2023 Jkt 259001 dues, fees, and other charges among its Members and other persons using its facilities. The Exchange believes the proposed fee change is reasonable as it reflects a moderate increase in physical connectivity fees for 10Gb physical ports. Further, the current 10 Gb physical port fee has remained unchanged since June 2018.9 Since its last increase 5 years ago however, there has been notable inflation. Particularly, the dollar has had an average inflation rate of 3.9% per year between 2018 and today, producing a cumulative price increase of approximately 21.1% inflation since the fee for the 10 Gb physical port was last modified.10 Accordingly, the Exchange believes the proposed fee is reasonable as it represents only an approximate 13% increase from the rates adopted five years ago, notwithstanding the cumulative rate of 21.1%. The Exchange also believes the proposed fee is reasonable as it is still in line with, or even lower than, amounts assessed by other exchanges for similar connections.11 As noted above, the proposed fee is also the same as is concurrently being proposed for its Affiliate Exchanges. Further, Members are able to utilize a single port to connect to any of the Affiliate Exchanges with no additional fee assessed for that same physical port. Particularly, the Exchange believes the proposed monthly per port fee is reasonable, equitable and not unfairly discriminatory as it is assessed only once, even if it connects with another affiliate exchange since only one port is being used and the Exchange does not wish to charge multiple fees for the same port. The Exchange also believes that the proposed fee change is not unfairly discriminatory because it would be assessed uniformly across all market participants that purchase the physical ports. Further, Members and nonMembers will continue to choose the method of connectivity based on their 9 See Securities and Exchange Release No. 83430 (June 14, 2018), 83 FR 28697 (June 20, 2018) (SR– CboeEDGX–2018–017). 10 See https://www.officialdata.org/us/inflation/ 2010?amount=1. 11 See e.g., The Nasdaq Stock Market LLC (‘‘Nasdaq’’), General 8, Connectivity to the Exchange. Nasdaq and its affiliated exchanges charge a monthly fee of $15,000 for each 10Gb Ultra fiber connection to the respective exchange, which is analogous to the Exchange’s 10Gb physical port. See also New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago Inc., NYSE National, Inc. Connectivity Fee Schedule, which provides that 10 Gb LX LCN Circuits (which are analogous to the Exchange’s 10 Gb physical port) are assessed $22,000 per month, per port. PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 specific needs and no broker-dealer is required to become a Member of, let alone connect directly to, the Exchange. There is also no regulatory requirement that any market participant connect to any one particular exchange. Moreover, direct connectivity is not a requirement to participate on the Exchange. The Exchange also believes substitutable products and services are available to market participants, including, among other things, other options exchanges that a market participant may connect to in lieu of the Exchange, indirect connectivity to the Exchange via a thirdparty reseller of connectivity, and/or trading of any options product, such as within the Over-the-Counter (OTC) markets. Indeed, there are currently 16 registered options exchanges that trade options, some of which have similar or lower connectivity fees.12 Based on publicly available information, no single options exchange has more than approximately 19% of the market share.13 Further, low barriers to entry mean that new exchanges may rapidly enter the market and offer additional substitute platforms to further compete with the Exchange and the products it offers. For example, there are 3 exchanges that have been added in the U.S. options markets in the last 5 years (i.e., Nasdaq MRX, LLC, MIAX Pearl, LLC, and MIAX Emerald LLC) and one additional options exchange that is expected to launch in 2023 (i.e., MEMX LLC). As noted above, there is no regulatory requirement that any market participant connect to any one options exchange, nor that any market participant connect at a particular connection speed or act in a particular capacity on the Exchange, or trade any particular product offered on an exchange. Moreover, membership is not a requirement to participate on the Exchange. A market participant may submit orders to the Exchange via a Member broker or a third-party reseller of connectivity. Indeed, the Exchange is unaware of any one options exchange whose membership includes every registered broker-dealer. By way of example, while the Exchange currently has 51 members that trade options, Cboe BZX has 61 members that trade options, and Cboe C2 has 52 Trading Permit Holders (‘‘TPHs’’) (i.e., members). There is also no firm that is a Member of EDGX Options only. Further, based on publicly available information regarding 12 Id. 13 See Cboe Global Markets U.S. Options Market Volume Summary (June 27, 2023), available at https://markets.cboe.com/us/options/market_ statistics/. E:\FR\FM\21JYN1.SGM 21JYN1 Federal Register / Vol. 88, No. 139 / Friday, July 21, 2023 / Notices ddrumheller on DSK120RN23PROD with NOTICES1 a sample of the Exchange’s competitors, NYSE American Options has 71 members,14 and NYSE Arca Options has 69 members,15 MIAX Options has 46 members 16 and MIAX Pearl Options has 40 members.17 Additionally, the Exchange notes that non-Members such as Service Bureaus and Extranets resell exchange connectivity. This indirect connectivity is another viable alternative for market participants to trade on the Exchange without connecting directly to the Exchange (and thus not pay the Exchange’s connectivity fees), which alternative is already being used by nonMembers and further constrains the price that the Exchange is able to charge for connectivity to its Exchange. The Exchange notes that it could, but chooses not to, preclude market participants from reselling its connectivity. The Exchange also chooses not to adopt fees that would be assessed to third-party resellers on a per customer basis (i.e., fee based on number of Members that connect to the Exchange indirectly via the third-party). Indeed, the Exchange does not receive any connectivity revenue when connectivity is resold by a third-party, which often is resold to multiple customers, some of whom are agency broker-dealers that have numerous customers of their own. Accordingly, the vigorous competition among national securities exchanges provides many alternatives for firms to voluntarily decide whether direct connectivity to the Exchange is appropriate and worthwhile, and as noted above, no broker-dealer is required to become a Member of the Exchange, let alone connect directly to it. In the event that a market participant views the Exchange’s proposed fee change as more or less attractive than the competition, that market participant can choose to connect to the Exchange indirectly or may choose not to connect to that exchange and connect instead to one or more of the other 15 options markets. Notwithstanding the foregoing, the Exchange still believes that the proposed fee increase is reasonable, equitably allocated and not unfairly discriminatory, even for market participants that determine to connect directly to the Exchange for business 14 See https://www.nyse.com/markets/americanoptions/membership#directory. 15 See https://www.nyse.com/markets/arcaoptions/membership#directory. 16 See https://www.miaxglobal.com/sites/default/ files/page-files/MIAX_Options_Exchange_ Members_April_2023_04282023.pdf. 17 See https://www.miaxglobal.com/sites/default/ files/page-files/MIAX_Pearl_Exchange_Members_ 01172023_0.pdf. VerDate Sep<11>2014 19:06 Jul 20, 2023 Jkt 259001 purposes, as those business reasons should presumably result in revenue capable of covering the proposed fee. 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. The proposed fee change will not impact intramarket competition because it will apply to all similarly situated Members equally (i.e., all market participants that choose to purchase the 10 Gb physical port). The Exchange’s proposed fee is still lower than some fees for similar connectivity on other exchanges and therefore may stimulate intermarket competition by attracting additional firms to connect to the Exchange or at least should not deter interested participants from connecting directly to the Exchange. Further, if the changes proposed herein are unattractive to market participants, the Exchange can, and likely will, see a decline in connectivity via 10 Gb physical ports as a result. The Exchange operates in a highly competitive market in which market participants can determine whether or not to connect directly to the Exchange based on the value received compared to the cost of doing so. 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. PO 00000 18 15 19 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). Frm 00115 Fmt 4703 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–2023–045 on the subject line. Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange Commission, 100 F Street NE, Washington, DC 20549–1090. All submissions should refer to file number SR-CboeEDGX–2023–045. This file number should be included on the subject line if email is used. To help the Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s internet website (https://www.sec.gov/ rules/sro.shtml). Copies of the submission, all subsequent amendments, all written statements with respect to the proposed rule change that are filed with the Commission, and all written communications relating to the proposed rule change between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for website viewing and printing in the Commission’s Public Reference Room, 100 F Street NE, Washington, DC 20549, on official business days between the hours of 10 a.m. and 3 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–2023–045 and should be submitted on or before August 11, 2023. 20 17 Sfmt 4703 47213 E:\FR\FM\21JYN1.SGM CFR 200.30–3(a)(12). 21JYN1 47214 Federal Register / Vol. 88, No. 139 / Friday, July 21, 2023 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2023–15475 Filed 7–20–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97922; File No. SR– NASDAQ–2023–019] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of a Proposed Rule Change To List and Trade Shares of the Valkyrie Bitcoin Fund Under Nasdaq Rule 5711(d), Commodity-Based Trust Shares July 17, 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 July 3, 2023, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade shares of the Valkyrie Bitcoin Fund (the ‘‘Trust’’) under Nasdaq Rule 5711(d) (‘‘Commodity-Based Trust Shares’’). The shares of the Trust are referred to herein as the ‘‘Shares.’’ ddrumheller on DSK120RN23PROD with NOTICES1 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 15 2 17 U.S.C. 78s(b)(1). CFR 240.19b–4. VerDate Sep<11>2014 19:06 Jul 20, 2023 Jkt 259001 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to list and trade Shares of the Trust under Nasdaq Rule 5711(d), which governs the listing and trading of Commodity-Based Trust Shares on the Exchange.3 Description of the Trust The Shares will be issued by the Trust, a Delaware statutory trust. The Trust will operate pursuant to a trust agreement (the ‘‘Trust Agreement’’) between Valkyrie Digital Assets, LLC (the ‘‘Sponsor’’) and Delaware Trust Company, as the Trust’s trustee (the ‘‘Trustee’’). The Shares will be registered with the Commission by means of the Trust’s registrations statement on Form S–1 (the ‘‘Registration Statement’’).4 Pursuant to the Trust Agreement, the Sponsor will enter into a custodian agreement (the ‘‘Custodian Agreement’’) with a qualified custodian (the ‘‘Custodian’’) to act as custodian for the Trust’s bitcoins. Pursuant to the Custodian Agreement, the Custodian will establish accounts that hold the bitcoins deposited with the Custodian on behalf of the Trust. U.S. Bancorp Fund Services, LLC will act as the transfer agent for the Trust (the ‘‘Transfer Agent’’) and as the administrator of the Trust (the ‘‘Administrator’’) to perform various administrative, accounting and recordkeeping functions on behalf of the Trust. The investment objective of the Trust is for the Shares to reflect the performance of the value of a bitcoin as represented by the CME CF Bitcoin Reference Rate—New York Variant (the ‘‘Index’’), less the Trust’s liabilities and expenses. The purpose of the Trust is to provide investors with a cost-effective and convenient way to invest in bitcoin in a manner that is more efficient and 3 Nasdaq Rule 5711(d)(iv)(A) defines CommodityBased Trust Shares as ‘‘a security (1) that is issued by a trust (‘‘Trust’’) that holds a specified commodity deposited with the Trust; (2) that is issued by such Trust in a specified aggregate minimum number in return for a deposit of a quantity of the underlying commodity; and (3) that, when aggregated in the same specified minimum number, may be redeemed at a holder’s request by such Trust which will deliver to the redeeming holder the quantity of the underlying commodity.’’ 4 See Amendment No. 2 to Registration Statement on Form S–1, dated May 8, 2023 filed with the Commission by the Sponsor on behalf of the Trust (File No. 333–252344). The descriptions of the Trust contained herein are based, in part, on information in the Registration Statement. The Registration Statement in not yet effective and the Shares will not trade on the Exchange until such time that the Registration Statement is effective. PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 convenient than the purchase of a standalone bitcoin, while also mitigating some of the risk by reducing the volatility typically associated with the purchase of stand-alone bitcoin and without the uncertain and often complex requirements relating to acquiring and/or holding bitcoin. The Trust will only hold bitcoin, and will, from time to time, issue Baskets 5 in exchange for deposits of bitcoins and to distribute bitcoins in connection with redemptions of Baskets. The Shares of the Trust represent units of fractional undivided beneficial interest in, and ownership of, the Trust. The bitcoins held by the Custodian on behalf of the Trust will be transferred out of the Bitcoin Account only in the following circumstances: transferred to pay the Sponsor’s Fee, distributed to Authorized Participants or Liquidity Providers, as applicable, in connection with the redemption of Baskets, transferred to be sold on an as-needed basis to pay Additional Trust Expenses, sold on behalf of the Trust in the event the Trust terminates and liquidates its assets or as otherwise required by law or regulation. Custody of the Trust’s Bitcoins The Trust will engage a Custodian to custody the Trust’s bitcoin. The Trust will select a Custodian that is a qualified custodian under the Investment Advisers Act of 1940. Under the Custodian Agreement, the Custodian will be responsible for the safety and security of the Trust’s Bitcoins as well as overseeing the process of deposit, withdrawal, sale and purchase of the Trust’s bitcoins. The Custodian will custody the bitcoin in accordance with the terms of the Custodian Agreement. All bitcoins exist and are stored on the Blockchain, the decentralized transaction ledger of the Bitcoin Network. The Blockchain records most transactions (including mining of new bitcoins) for all bitcoins in existence, and in doing so verifies the location of each bitcoin (or fraction thereof) in a particular digital wallet. The Bitcoin Account will be maintained by the Custodian and cold storage 6 mechanisms will be used for the Vault Account by the Custodian. Each digital wallet of the Trust may be accessed 5A Basket equals a block of 50,000 Shares. term ‘‘cold storage’’ refers to a safeguarding method by which the private keys corresponding to bitcoins stored on a digital wallet are removed from any computers actively connected to the internet. Cold storage of private keys may involve keeping such wallet on a non-networked computer or electronic device or storing the public key and private keys relating to the digital wallet on a storage device (for example, a USB thumb drive) or printed medium (for example, papyrus or paper) and deleting the digital wallet from all computers. 6 The E:\FR\FM\21JYN1.SGM 21JYN1

Agencies

[Federal Register Volume 88, Number 139 (Friday, July 21, 2023)]
[Notices]
[Pages 47211-47214]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-15475]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97929; File No. SR-CboeEDGX-2023-045]


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

July 17, 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 July 3, 2023, Cboe EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
---------------------------------------------------------------------------

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

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

    Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX Options'') 
proposes to amend its Fees Schedule. The text of the proposed rule 
change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

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

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

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

1. Purpose
    The Exchange proposes to amend its fee schedule for its equity 
options platform (``EDGX Options'') relating to physical connectivity 
fees, effective July 3, 2023.
    By way of background, a physical port is utilized by a Member or 
non-Member to connect to the Exchange at the data centers where the 
Exchange's servers are located. The Exchange currently assesses the 
following physical connectivity fees for Members and non-Members on a 
monthly basis: $2,500 per physical port for a 1 gigabit (``Gb'') 
circuit and $7,500 per physical port for a 10 Gb circuit. The Exchange 
proposes to increase the monthly fee for 10 Gb physical ports from 
$7,500 to $8,500 per port. The Exchange notes the proposed fee change 
better enables it to continue to maintain and improve its market

[[Page 47212]]

technology and services and also notes that the proposed fee amount, 
even as amended, continues to be in line with, or even lower than, 
amounts assessed by other exchanges for similar connections.\3\ The 
physical ports may also be used to access the Systems for the following 
affiliate exchanges and only one monthly fee currently (and will 
continue) to apply per port: the Exchange's equities platform (EDGX 
Equities), Cboe BZX Exchange, Inc. (options and equities platforms), 
Cboe BYX Exchange, Inc., Cboe EDGA Exchange, Inc., and Cboe C2 
Exchange, Inc., (``Affiliate Exchanges'').\4\
---------------------------------------------------------------------------

    \3\ See e.g., The Nasdaq Stock Market LLC (``Nasdaq''), General 
8, Connectivity to the Exchange. Nasdaq and its affiliated exchanges 
charge a monthly fee of $15,000 for each 10Gb Ultra fiber connection 
to the respective exchange, which is analogous to the Exchange's 
10Gb physical port. See also New York Stock Exchange LLC, NYSE 
American LLC, NYSE Arca, Inc., NYSE Chicago Inc., NYSE National, 
Inc. Connectivity Fee Schedule, which provides that 10 Gb LX LCN 
Circuits (which are analogous to the Exchange's 10 Gb physical port) 
are assessed $22,000 per month, per port.
    \4\ The Affiliate Exchanges are also submitting contemporaneous 
identical rule filings.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of section 6(b) of the Act.\5\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
section 6(b)(5) \6\ 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) \7\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Exchange also believes the proposed rule 
change is consistent with section 6(b)(4) \8\ of the Act, which 
requires that Exchange rules 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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    \5\ 15 U.S.C. 78f(b).
    \6\ 15 U.S.C. 78f(b)(5).
    \7\ Id.
    \8\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed fee change is reasonable as it 
reflects a moderate increase in physical connectivity fees for 10Gb 
physical ports. Further, the current 10 Gb physical port fee has 
remained unchanged since June 2018.\9\ Since its last increase 5 years 
ago however, there has been notable inflation. Particularly, the dollar 
has had an average inflation rate of 3.9% per year between 2018 and 
today, producing a cumulative price increase of approximately 21.1% 
inflation since the fee for the 10 Gb physical port was last 
modified.\10\ Accordingly, the Exchange believes the proposed fee is 
reasonable as it represents only an approximate 13% increase from the 
rates adopted five years ago, notwithstanding the cumulative rate of 
21.1%.
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    \9\ See Securities and Exchange Release No. 83430 (June 14, 
2018), 83 FR 28697 (June 20, 2018) (SR-CboeEDGX-2018-017).
    \10\ See https://www.officialdata.org/us/inflation/2010?amount=1.
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    The Exchange also believes the proposed fee is reasonable as it is 
still in line with, or even lower than, amounts assessed by other 
exchanges for similar connections.\11\ As noted above, the proposed fee 
is also the same as is concurrently being proposed for its Affiliate 
Exchanges. Further, Members are able to utilize a single port to 
connect to any of the Affiliate Exchanges with no additional fee 
assessed for that same physical port. Particularly, the Exchange 
believes the proposed monthly per port fee is reasonable, equitable and 
not unfairly discriminatory as it is assessed only once, even if it 
connects with another affiliate exchange since only one port is being 
used and the Exchange does not wish to charge multiple fees for the 
same port.
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    \11\ See e.g., The Nasdaq Stock Market LLC (``Nasdaq''), General 
8, Connectivity to the Exchange. Nasdaq and its affiliated exchanges 
charge a monthly fee of $15,000 for each 10Gb Ultra fiber connection 
to the respective exchange, which is analogous to the Exchange's 
10Gb physical port. See also New York Stock Exchange LLC, NYSE 
American LLC, NYSE Arca, Inc., NYSE Chicago Inc., NYSE National, 
Inc. Connectivity Fee Schedule, which provides that 10 Gb LX LCN 
Circuits (which are analogous to the Exchange's 10 Gb physical port) 
are assessed $22,000 per month, per port.
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    The Exchange also believes that the proposed fee change is not 
unfairly discriminatory because it would be assessed uniformly across 
all market participants that purchase the physical ports. Further, 
Members and non-Members will continue to choose the method of 
connectivity based on their specific needs and no broker-dealer is 
required to become a Member of, let alone connect directly to, the 
Exchange. There is also no regulatory requirement that any market 
participant connect to any one particular exchange. Moreover, direct 
connectivity is not a requirement to participate on the Exchange. The 
Exchange also believes substitutable products and services are 
available to market participants, including, among other things, other 
options exchanges that a market participant may connect to in lieu of 
the Exchange, indirect connectivity to the Exchange via a third-party 
reseller of connectivity, and/or trading of any options product, such 
as within the Over-the-Counter (OTC) markets. Indeed, there are 
currently 16 registered options exchanges that trade options, some of 
which have similar or lower connectivity fees.\12\ Based on publicly 
available information, no single options exchange has more than 
approximately 19% of the market share.\13\ Further, low barriers to 
entry mean that new exchanges may rapidly enter the market and offer 
additional substitute platforms to further compete with the Exchange 
and the products it offers. For example, there are 3 exchanges that 
have been added in the U.S. options markets in the last 5 years (i.e., 
Nasdaq MRX, LLC, MIAX Pearl, LLC, and MIAX Emerald LLC) and one 
additional options exchange that is expected to launch in 2023 (i.e., 
MEMX LLC).
---------------------------------------------------------------------------

    \12\ Id.
    \13\ See Cboe Global Markets U.S. Options Market Volume Summary 
(June 27, 2023), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------

    As noted above, there is no regulatory requirement that any market 
participant connect to any one options exchange, nor that any market 
participant connect at a particular connection speed or act in a 
particular capacity on the Exchange, or trade any particular product 
offered on an exchange. Moreover, membership is not a requirement to 
participate on the Exchange. A market participant may submit orders to 
the Exchange via a Member broker or a third-party reseller of 
connectivity. Indeed, the Exchange is unaware of any one options 
exchange whose membership includes every registered broker-dealer. By 
way of example, while the Exchange currently has 51 members that trade 
options, Cboe BZX has 61 members that trade options, and Cboe C2 has 52 
Trading Permit Holders (``TPHs'') (i.e., members). There is also no 
firm that is a Member of EDGX Options only. Further, based on publicly 
available information regarding

[[Page 47213]]

a sample of the Exchange's competitors, NYSE American Options has 71 
members,\14\ and NYSE Arca Options has 69 members,\15\ MIAX Options has 
46 members \16\ and MIAX Pearl Options has 40 members.\17\
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    \14\ See https://www.nyse.com/markets/american-options/membership#directory.
    \15\ See https://www.nyse.com/markets/arca-options/membership#directory.
    \16\ See https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Options_Exchange_Members_April_2023_04282023.pdf.
    \17\ See https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Exchange_Members_01172023_0.pdf.
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    Additionally, the Exchange notes that non-Members such as Service 
Bureaus and Extranets resell exchange connectivity. This indirect 
connectivity is another viable alternative for market participants to 
trade on the Exchange without connecting directly to the Exchange (and 
thus not pay the Exchange's connectivity fees), which alternative is 
already being used by non-Members and further constrains the price that 
the Exchange is able to charge for connectivity to its Exchange. The 
Exchange notes that it could, but chooses not to, preclude market 
participants from reselling its connectivity. The Exchange also chooses 
not to adopt fees that would be assessed to third-party resellers on a 
per customer basis (i.e., fee based on number of Members that connect 
to the Exchange indirectly via the third-party). Indeed, the Exchange 
does not receive any connectivity revenue when connectivity is resold 
by a third-party, which often is resold to multiple customers, some of 
whom are agency broker-dealers that have numerous customers of their 
own.
    Accordingly, the vigorous competition among national securities 
exchanges provides many alternatives for firms to voluntarily decide 
whether direct connectivity to the Exchange is appropriate and 
worthwhile, and as noted above, no broker-dealer is required to become 
a Member of the Exchange, let alone connect directly to it. In the 
event that a market participant views the Exchange's proposed fee 
change as more or less attractive than the competition, that market 
participant can choose to connect to the Exchange indirectly or may 
choose not to connect to that exchange and connect instead to one or 
more of the other 15 options markets. Notwithstanding the foregoing, 
the Exchange still believes that the proposed fee increase is 
reasonable, equitably allocated and not unfairly discriminatory, even 
for market participants that determine to connect directly to the 
Exchange for business purposes, as those business reasons should 
presumably result in revenue capable of covering the proposed fee.

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. The proposed fee change will 
not impact intramarket competition because it will apply to all 
similarly situated Members equally (i.e., all market participants that 
choose to purchase the 10 Gb physical port).
    The Exchange's proposed fee is still lower than some fees for 
similar connectivity on other exchanges and therefore may stimulate 
intermarket competition by attracting additional firms to connect to 
the Exchange or at least should not deter interested participants from 
connecting directly to the Exchange. Further, if the changes proposed 
herein are unattractive to market participants, the Exchange can, and 
likely will, see a decline in connectivity via 10 Gb physical ports as 
a result. The Exchange operates in a highly competitive market in which 
market participants can determine whether or not to connect directly to 
the Exchange based on the value received compared to the cost of doing 
so.

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.
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    \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-2023-045 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to file number SR-CboeEDGX-2023-045. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all 
written statements with respect to the proposed rule change that are 
filed with the Commission, and all written communications relating to 
the proposed rule change between the Commission and any person, other 
than those that may be withheld from the public in accordance with the 
provisions of 5 U.S.C. 552, will be available for website viewing and 
printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 10 
a.m. and 3 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-2023-045 and should 
be submitted on or before August 11, 2023.
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    \20\ 17 CFR 200.30-3(a)(12).


[[Page 47214]]


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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-15475 Filed 7-20-23; 8:45 am]
BILLING CODE 8011-01-P
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