Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 56891-56894 [2023-17862]
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Federal Register / Vol. 88, No. 160 / Monday, August 21, 2023 / Notices
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examination, litigation, or regulatory
matters.
CONTACT PERSON FOR MORE INFORMATION:
For further information; please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Authority: 5 U.S.C. 552b.
Dated: August 17, 2023.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2023–18014 Filed 8–17–23; 11:15 am]
Sarah Sullivan,
Attorney, Ethics & Legal Compliance.
BILLING CODE 8011–01–P
[FR Doc. 2023–17865 Filed 8–18–23; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
BILLING CODE 7710–12–P
[Release No. 34–98137; File No. SR–
CboeEDGX–2023–051]
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meetings
2:00 p.m. on Thursday,
August 24, 2023.
PLACE: The meeting will be held via
remote means and/or at the
Commission’s headquarters, 100 F
Street NE, Washington, DC 20549.
STATUS: This meeting will be closed to
the public.
MATTERS TO BE CONSIDERED:
Commissioners, Counsel to the
Commissioners, the Secretary to the
Commission, and recording secretaries
will attend the closed meeting. Certain
staff members who have an interest in
the matters also may be present.
In the event that the time, date, or
location of this meeting changes, an
announcement of the change, along with
the new time, date, and/or place of the
meeting will be posted on the
Commission’s website at https://
www.sec.gov.
The General Counsel of the
Commission, or her designee, has
certified that, in her opinion, one or
more of the exemptions set forth in 5
U.S.C. 552b(c)(3), (5), (6), (7), (8), 9(B)
and (10) and 17 CFR 200.402(a)(3),
(a)(5), (a)(6), (a)(7), (a)(8), (a)(9)(ii) and
(a)(10), permit consideration of the
scheduled matters at the closed meeting.
The subject matter of the closed
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Institution and settlement of
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Resolution of litigation claims; and
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Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fee Schedule
August 15, 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 August 1,
2023, Cboe EDGX Exchange, Inc.
(‘‘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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) proposes to
amend its Fee Schedule. The text of the
proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
options/regulation/rule_filings/edgx/),
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
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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56891
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
Fee Schedule applicable to its equities
trading platform (‘‘EDGX Equities’’) as
follows: (1) by modifying the criteria of
Add Volume Tier 6; and (4) modifying
the rates associated with Remove
Volume Tier 1. The Exchange proposes
to implement these changes effective
August 1, 2023.
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
16 registered equities exchanges, as well
as a number of alternative trading
systems and other off-exchange venues
that do not have similar self-regulatory
responsibilities under the Securities
Exchange Act of 1934 (the ‘‘Act’’), to
which market participants may direct
their order flow. Based on publicly
available information,3 no single
registered equities exchange has more
than 14% of the market share. Thus, in
such a low-concentrated and highly
competitive market, no single equities
exchange possesses significant pricing
power in the execution of order flow.
The Exchange in particular operates a
‘‘Maker-Taker’’ model whereby it pays
rebates to members that add liquidity
and assesses fees to those that remove
liquidity. The Exchange’s Fee Schedule
sets forth the standard rebates and rates
applied per share for orders that provide
and remove liquidity, respectively.
Currently, for orders in securities priced
at or above $1.00, the Exchange
provides a standard rebate of $0.00160
per share for orders that add liquidity
and assesses a fee of $0.0030 per share
for orders that remove liquidity.4 For
orders in securities priced below $1.00,
the Exchange provides a standard rebate
3 See Cboe Global Markets, U.S. Equities Market
Volume Summary, Month-to-Date (July 24, 2023),
available at https://www.cboe.com/us/equities/_
statistics/.
4 See EDGX Equities Fee Schedule, Standard
Rates.
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of $0.00009 per share for orders that add
liquidity and assesses a fee of 0.30% of
the total dollar value for orders that
remove liquidity.5 Additionally, in
response to the competitive
environment, the Exchange also offers
tiered pricing which provides Members
opportunities to qualify for higher
rebates or reduced fees where certain
volume criteria and thresholds are met.
Tiered pricing provides an incremental
incentive for Members to strive for
higher tier levels, which provides
increasingly higher benefits or discounts
for satisfying increasingly more
stringent criteria.
Add Volume Tiers
Under footnote 1 of the Fee Schedule,
the Exchange currently offers various
Add/Remove Volume Tiers. In
particular, the Exchange offers six Add
Volume Tiers that each provide an
enhanced rebate for Members’
qualifying orders yielding fee codes B,6
V,7 Y,8 3,9 and 4,10 where a Member
reaches certain add volume-based
criteria. The Exchange is proposing to
modify the criteria associated with Add
Volume Tier 6. Currently, the criteria for
Add Volume Tier 6 is as follows:
• Add Volume Tier 6 provides a
rebate of $0.0034 per share for securities
priced above $1.00 to qualifying orders
(i.e., orders yielding fee B, V, Y, 3, or 4)
where (1) MPID adds an ADV 11
(excluding fee codes ZA 12 or ZO 13) ≥
37,500,000; and (2) MPID has a QDP
ADV (i.e., yielding fee codes DQ 14 and
DX 15) ≥8,000,000.
The proposed criteria for Add Volume
Tier 6 is as follows:
• Add Volume Tier 6 provides a
rebate of $0.0033 per share for securities
priced above $1.00 to qualifying orders
(i.e., orders yielding fee B, V, Y, 3, or 4)
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5 Id.
6 Fee code B is appended to orders adding
liquidity to EDGX in Tape B securities.
7 Fee code V is appended to orders adding
liquidity to EDGX in Tape A securities.
8 Fee code Y is appended to orders adding
liquidity to EDGX in Tape C securities.
9 Fee code 3 is appended to orders adding
liquidity to EDGX in the pre and post market in
Tapes A or C securities.
10 Fee code 4 is appended to orders adding
liquidity to EDGX in the pre and post market in
Tape B securities.
11 ‘‘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.
12 Fee code ZA is appended to Retail Orders that
add liquidity.
13 Fee code ZO is appended to Retail orders that
adds liquidity during the pre- and post-market.
14 Fee code DQ is appended to orders using the
QDP order type that add liquidity to EDGX.
15 Fee code DX is appended to orders using the
QDP order type that remove liquidity from EDGX.
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where (1) MPID adds an ADV
(excluding fee codes ZA or ZO) ≥
27,500,000; and (2) MPID has a QDP
ADV (i.e., yielding fee codes DQ and
DX) ≥ 3,500,000.
The Exchange believes that the
proposed modifications to Add Volume
Tier 6 continue to incentivize Members
to add volume on the Exchange, thereby
contributing to a deeper and more liquid
market, which benefits all market
participants and provides greater
execution opportunities on the
Exchange. The Exchange further
believes the lower proposed rebate
associated with Add Volume Tier 6
provides a rebate commensurate with
the difficulty of meeting the revised
criteria associated with the tier.
Remove Volume Tiers
In addition to the Add/Remove
Volume Tiers offered under footnote 1,
the Exchange also offers three Remove
Volume Tiers that each assess a reduced
fee for Members’ qualifying orders
yielding fee codes BB,16 N 17 and W,18
where a Member reaches certain add
volume-based criteria. Currently,
Members who satisfy the criteria of
Remove Volume Tier 1 are assessed a
reduced fee of $0.00285 for securities
priced above $1.00 and a reduced fee of
0.28% of total dollar value for securities
priced at or below $1.00. The Exchange
now proposes to revise the fees
associated with Remove Volume Tier 1.
As proposed, Members who satisfy the
criteria of Remove Volume Tier 1 will
be assessed a reduced fee of $0.0029 for
securities priced above $1.00 and a
reduced fee of 0.29% of total dollar
value for securities priced at or below
$1.00. The Exchange does not propose
to revise the fees associated with
Remove Volume Tiers 2 or 3. The
purpose of increasing the reduced fee
associated with Remove Volume Tier 1
is for business and competitive reasons,
as the Exchange believes that increasing
such fee as proposed would decrease
the Exchange’s expenditures with
respect to transaction pricing in a
manner that is still consistent with the
Exchange’s overall pricing philosophy
of encouraging added liquidity. The
Exchange notes that despite the modest
increase of the fee associated with
Remove Volume Tier 1, the reduced fee
remains competitive and continues to be
16 Fee code BB is appended to orders that remove
liquidity from EDGX in Tape B securities.
17 Fee code N is appended to orders that remove
liquidity from EDGX in Tape C securities.
18 Fee code W is appended to orders that remove
liquidity from EDGX in Tape A securities.
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in-line with the reduced fee assessed
under Remove Volume Tiers 2 and 3.19
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.20 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 21 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) 22 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers as
well as Section 6(b)(4) 23 as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its Members and
other persons using its facilities.
As described above, the Exchange
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. The
Exchange believes that its proposal to
modify the criteria of Add Volume Tier
6 reflects a competitive pricing structure
designed to incentivize market
participants to direct their order flow to
the Exchange, which the Exchange
believes would enhance market quality
to the benefit of all Members.
Additionally, the Exchange notes that
relative volume-based incentives and
discounts have been widely adopted by
exchanges,24 including the Exchange,25
and are reasonable, equitable and nondiscriminatory because they are open to
all Members on an equal basis and
19 See e.g., EDGX Equities Fee Schedule, Footnote
1, Add/Remove Volume Tiers.
20 15 U.S.C. 78f(b).
21 15 U.S.C. 78f(b)(5).
22 Id.
23 15 U.S.C. 78f(b)(4).
24 See e.g., BZX Equities Fee Schedule, Footnote
1, Add/Remove Volume Tiers.
25 See e.g., EDGX Equities Fee Schedule, Footnote
1, Add/Remove Volume Tiers.
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Federal Register / Vol. 88, No. 160 / Monday, August 21, 2023 / Notices
provide additional benefits or discounts
that are reasonably related to (i) the
value to an exchange’s market quality
and (ii) associated higher levels of
market activity, such as higher levels of
liquidity provision and/or growth
patterns. Competing equity exchanges
offer similar tiered pricing structures,
including schedules of rebates and fees
that apply based upon members
achieving certain volume and/or growth
thresholds, as well as assess similar fees
or rebates for similar types of orders, to
that of the Exchange.
In particular, the Exchange believes
its proposal to modify the criteria of
Add Volume Tier 6 is reasonable
because the revised tier will be available
to all Members and provide all Members
with an additional opportunity to
receive an enhanced rebate or a reduced
fee. The Exchange further believes the
proposed modifications to Add Volume
Tier 6 will provide a reasonable means
to encourage liquidity adding displayed
orders 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. 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.
In addition, the Exchange believes
that its proposal to increase the reduced
fee assessed to Members that satisfy the
criteria of Remove Volume Tier 1 is
reasonable, equitable, and consistent
with the Act because such change is
designed to decrease the Exchange’s
expenditures with respect to transaction
pricing in order to offset some of the
costs associated with the Exchange’s
current pricing structure, which
provides various rebates for liquidityadding orders, and the Exchange’s
operations generally, in a manner that is
consistent with the Exchange’s overall
pricing philosophy of encouraging
added liquidity. The proposed increased
reduced fee ($0.0029 per share for
securities priced above $1.00 and 0.29%
of total dollar value for securities priced
at or below $1.00) is reasonable and
appropriate because it represents only a
modest increase from the current
reduced fee ($0.00285 per share for
securities priced above $1.00 and 0.28%
of total dollar value for securities priced
at or below $1.00) and remains
competitive with the reduced fees
offered under Remove Volume Tiers 2
and 3. The Exchange further believes
that the proposed increase to the
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reduced fee associated with Remove
Volume Tier 1 is not unfairly
discriminatory because it applies to all
Members equally, in that all Members
will receive the reduced fee upon
satisfying the criteria of Remove Volume
Tier 1.
The Exchange believes that the
proposed changes to Add Volume Tier
6 are reasonable as they do not represent
a significant departure from the criteria
currently offered in the Fee Schedule.
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 revised
tiers and have the opportunity to meet
the tiers’ criteria and receive the
corresponding enhanced rebate or
reduced fee if such criteria is met.
Without having a view of activity on
other markets and off-exchange venues,
the Exchange has no way of knowing
whether this proposed rule change
would definitely result in any Members
qualifying the new proposed tiers.
While the Exchange has no way of
predicting with certainty how the
proposed changes will impact Member
activity, based on the prior months
volume, the Exchange anticipates that at
least one Member will be able to satisfy
proposed Add Volume Tier 6, and at
least two Members will be able to satisfy
Remove Volume Tier 1. The Exchange
also notes that proposed changes will
not adversely impact any Member’s
ability to qualify for enhanced rebates or
reduced fees offered under other tiers.
Should a Member not meet the
proposed new criteria, the Member will
merely not receive that corresponding
enhanced rebate or reduced 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. Rather, as
discussed above, the Exchange believes
that the proposed changes would
encourage the submission of additional
order flow to a public exchange, thereby
promoting market depth, execution
incentives and enhanced execution
opportunities, as well as price discovery
and transparency for all Members. As a
result, the Exchange believes that the
proposed changes further the
Commission’s goal in adopting
Regulation NMS of fostering
competition among orders, which
promotes ‘‘more efficient pricing of
individual stocks for all types of orders,
large and small.’’
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56893
The Exchange believes the proposed
rule changes do not impose any burden
on intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Particularly,
the proposed changes to the Exchange’s
Add Volume Tier 6 and Remove
Volume Tier 1 will apply to all
Members equally in that all Members
are eligible for each of the Tiers, have
a reasonable opportunity to meet the
Tiers’ criteria and will receive the
enhanced rebate or reduced fee on their
qualifying orders if such criteria is met.
The Exchange does not believe the
proposed changes burden competition,
but rather, enhances competition as it is
intended to increase the
competitiveness of EDGX by amending
an existing pricing incentive and
adopting pricing incentives in order to
attract order flow and incentivize
participants to increase their
participation on the Exchange,
providing for additional execution
opportunities for market participants
and improved price transparency.
Greater overall order flow, trading
opportunities, and pricing transparency
benefits all market participants on the
Exchange by enhancing market quality
and continuing to encourage Members
to send orders, thereby contributing
towards a robust and well-balanced
market ecosystem.
Next, the Exchange believes the
proposed rule changes does not impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
As previously discussed, the Exchange
operates in a highly competitive market.
Members have numerous alternative
venues that they may participate on and
direct their order flow, including other
equities exchanges, off-exchange
venues, and alternative trading systems.
Additionally, the Exchange represents a
small percentage of the overall market.
Based on publicly available information,
no single equities exchange has more
than 14% of the market share.26
Therefore, no exchange possesses
significant pricing power in the
execution of order flow. Indeed,
participants can readily choose to send
their orders to other exchange and offexchange venues if they deem fee levels
at those other venues to be more
favorable. Moreover, the Commission
has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Specifically, in Regulation
NMS, the Commission highlighted the
importance of market forces in
26 Supra
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determining prices and SRO revenues
and, also, recognized that current
regulation of the market system ‘‘has
been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 27 The
fact that this market is competitive has
also long been recognized by the courts.
In NetCoalition v. Securities and
Exchange Commission, the D.C. Circuit
stated as follows: ‘‘[n]o one disputes
that competition for order flow is
‘fierce.’ . . . As the SEC explained, ‘[i]n
the U.S. national market system, buyers
and sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
[and] ‘no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’.28 Accordingly, the
Exchange does not believe its proposed
fee change imposes any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 29 and paragraph (f) of Rule
19b–4 30 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.
27 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
28 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
29 15 U.S.C. 78s(b)(3)(A).
30 17 CFR 240.19b–4(f).
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IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
CboeEDGX–2023–051 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–2023–051. 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–2023–051 and should be
submitted on or before September 11,
2023.
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–17862 Filed 8–18–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
Sunshine Act Meeting
Notice is hereby given,
pursuant to the provisions of the
Government in the Sunshine Act, Public
Law 94–409, that the Securities and
Exchange Commission will hold an
Open Meeting on Wednesday, August
23, 2023 at 10:00 a.m.
TIME AND DATE:
The meeting will be webcast on
the Commission’s website at
www.sec.gov.
PLACE:
This meeting will begin at 10:00
a.m. (ET) and will be open to the public
via webcast on the Commission’s
website at www.sec.gov.
STATUS:
MATTERS TO BE CONSIDERED:
1. The Commission will consider
whether to adopt rule amendments to
narrow an exemption from the
requirement under the Securities
Exchange Act of 1934 that any
Commission-registered broker-dealer
become a member of a national
securities association if it effects
securities transactions elsewhere than
an exchange where it is a member.
2. The Commission will consider
whether to adopt rules and amendments
under the Investment Advisers Act of
1940 (‘‘Advisers Act’’) for private fund
advisers and whether to adopt
amendments to the compliance rule
under the Advisers Act.
CONTACT PERSON FOR MORE INFORMATION:
For further information and to ascertain
what, if any, matters have been added,
deleted or postponed, please contact
Vanessa A. Countryman from the Office
of the Secretary at (202) 551–5400.
Authority: 5 U.S.C. 552b.
Dated: August 16, 2023.
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–17996 Filed 8–17–23; 11:15 am]
BILLING CODE 8011–01–P
31 17
E:\FR\FM\21AUN1.SGM
CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 88, Number 160 (Monday, August 21, 2023)]
[Notices]
[Pages 56891-56894]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-17862]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-98137; File No. SR-CboeEDGX-2023-051]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule
August 15, 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 August 1, 2023, Cboe EDGX Exchange, Inc. (``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.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to
amend its Fee Schedule. The text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fee Schedule applicable to its
equities trading platform (``EDGX Equities'') as follows: (1) by
modifying the criteria of Add Volume Tier 6; and (4) modifying the
rates associated with Remove Volume Tier 1. The Exchange proposes to
implement these changes effective August 1, 2023.
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 registered equities exchanges, as well as a
number of alternative trading systems and other off-exchange venues
that do not have similar self-regulatory responsibilities under the
Securities Exchange Act of 1934 (the ``Act''), to which market
participants may direct their order flow. Based on publicly available
information,\3\ no single registered equities exchange has more than
14% of the market share. Thus, in such a low-concentrated and highly
competitive market, no single equities exchange possesses significant
pricing power in the execution of order flow. The Exchange in
particular operates a ``Maker-Taker'' model whereby it pays rebates to
members that add liquidity and assesses fees to those that remove
liquidity. The Exchange's Fee Schedule sets forth the standard rebates
and rates applied per share for orders that provide and remove
liquidity, respectively. Currently, for orders in securities priced at
or above $1.00, the Exchange provides a standard rebate of $0.00160 per
share for orders that add liquidity and assesses a fee of $0.0030 per
share for orders that remove liquidity.\4\ For orders in securities
priced below $1.00, the Exchange provides a standard rebate
[[Page 56892]]
of $0.00009 per share for orders that add liquidity and assesses a fee
of 0.30% of the total dollar value for orders that remove liquidity.\5\
Additionally, in response to the competitive environment, the Exchange
also offers tiered pricing which provides Members opportunities to
qualify for higher rebates or reduced fees where certain volume
criteria and thresholds are met. Tiered pricing provides an incremental
incentive for Members to strive for higher tier levels, which provides
increasingly higher benefits or discounts for satisfying increasingly
more stringent criteria.
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\3\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (July 24, 2023), available at https://www.cboe.com/us/equities/_statistics/.
\4\ See EDGX Equities Fee Schedule, Standard Rates.
\5\ Id.
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Add Volume Tiers
Under footnote 1 of the Fee Schedule, the Exchange currently offers
various Add/Remove Volume Tiers. In particular, the Exchange offers six
Add Volume Tiers that each provide an enhanced rebate for Members'
qualifying orders yielding fee codes B,\6\ V,\7\ Y,\8\ 3,\9\ and 4,\10\
where a Member reaches certain add volume-based criteria. The Exchange
is proposing to modify the criteria associated with Add Volume Tier 6.
Currently, the criteria for Add Volume Tier 6 is as follows:
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\6\ Fee code B is appended to orders adding liquidity to EDGX in
Tape B securities.
\7\ Fee code V is appended to orders adding liquidity to EDGX in
Tape A securities.
\8\ Fee code Y is appended to orders adding liquidity to EDGX in
Tape C securities.
\9\ Fee code 3 is appended to orders adding liquidity to EDGX in
the pre and post market in Tapes A or C securities.
\10\ Fee code 4 is appended to orders adding liquidity to EDGX
in the pre and post market in Tape B securities.
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Add Volume Tier 6 provides a rebate of $0.0034 per share
for securities priced above $1.00 to qualifying orders (i.e., orders
yielding fee B, V, Y, 3, or 4) where (1) MPID adds an ADV \11\
(excluding fee codes ZA \12\ or ZO \13\) >= 37,500,000; and (2) MPID
has a QDP ADV (i.e., yielding fee codes DQ \14\ and DX \15\)
>=8,000,000.
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\11\ ``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.
\12\ Fee code ZA is appended to Retail Orders that add
liquidity.
\13\ Fee code ZO is appended to Retail orders that adds
liquidity during the pre- and post-market.
\14\ Fee code DQ is appended to orders using the QDP order type
that add liquidity to EDGX.
\15\ Fee code DX is appended to orders using the QDP order type
that remove liquidity from EDGX.
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The proposed criteria for Add Volume Tier 6 is as follows:
Add Volume Tier 6 provides a rebate of $0.0033 per share
for securities priced above $1.00 to qualifying orders (i.e., orders
yielding fee B, V, Y, 3, or 4) where (1) MPID adds an ADV (excluding
fee codes ZA or ZO) >= 27,500,000; and (2) MPID has a QDP ADV (i.e.,
yielding fee codes DQ and DX) >= 3,500,000.
The Exchange believes that the proposed modifications to Add Volume
Tier 6 continue to incentivize Members to add volume on the Exchange,
thereby contributing to a deeper and more liquid market, which benefits
all market participants and provides greater execution opportunities on
the Exchange. The Exchange further believes the lower proposed rebate
associated with Add Volume Tier 6 provides a rebate commensurate with
the difficulty of meeting the revised criteria associated with the
tier.
Remove Volume Tiers
In addition to the Add/Remove Volume Tiers offered under footnote
1, the Exchange also offers three Remove Volume Tiers that each assess
a reduced fee for Members' qualifying orders yielding fee codes BB,\16\
N \17\ and W,\18\ where a Member reaches certain add volume-based
criteria. Currently, Members who satisfy the criteria of Remove Volume
Tier 1 are assessed a reduced fee of $0.00285 for securities priced
above $1.00 and a reduced fee of 0.28% of total dollar value for
securities priced at or below $1.00. The Exchange now proposes to
revise the fees associated with Remove Volume Tier 1. As proposed,
Members who satisfy the criteria of Remove Volume Tier 1 will be
assessed a reduced fee of $0.0029 for securities priced above $1.00 and
a reduced fee of 0.29% of total dollar value for securities priced at
or below $1.00. The Exchange does not propose to revise the fees
associated with Remove Volume Tiers 2 or 3. The purpose of increasing
the reduced fee associated with Remove Volume Tier 1 is for business
and competitive reasons, as the Exchange believes that increasing such
fee as proposed would decrease the Exchange's expenditures with respect
to transaction pricing in a manner that is still consistent with the
Exchange's overall pricing philosophy of encouraging added liquidity.
The Exchange notes that despite the modest increase of the fee
associated with Remove Volume Tier 1, the reduced fee remains
competitive and continues to be in-line with the reduced fee assessed
under Remove Volume Tiers 2 and 3.\19\
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\16\ Fee code BB is appended to orders that remove liquidity
from EDGX in Tape B securities.
\17\ Fee code N is appended to orders that remove liquidity from
EDGX in Tape C securities.
\18\ Fee code W is appended to orders that remove liquidity from
EDGX in Tape A securities.
\19\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\20\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \21\ 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) \22\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \23\
as it is designed to provide for the equitable allocation of reasonable
dues, fees and other charges among its Members and other persons using
its facilities.
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\20\ 15 U.S.C. 78f(b).
\21\ 15 U.S.C. 78f(b)(5).
\22\ Id.
\23\ 15 U.S.C. 78f(b)(4).
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As described above, the Exchange operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. The Exchange believes that
its proposal to modify the criteria of Add Volume Tier 6 reflects a
competitive pricing structure designed to incentivize market
participants to direct their order flow to the Exchange, which the
Exchange believes would enhance market quality to the benefit of all
Members. Additionally, the Exchange notes that relative volume-based
incentives and discounts have been widely adopted by exchanges,\24\
including the Exchange,\25\ and are reasonable, equitable and non-
discriminatory because they are open to all Members on an equal basis
and
[[Page 56893]]
provide additional benefits or discounts that are reasonably related to
(i) the value to an exchange's market quality and (ii) associated
higher levels of market activity, such as higher levels of liquidity
provision and/or growth patterns. Competing equity exchanges offer
similar tiered pricing structures, including schedules of rebates and
fees that apply based upon members achieving certain volume and/or
growth thresholds, as well as assess similar fees or rebates for
similar types of orders, to that of the Exchange.
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\24\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove
Volume Tiers.
\25\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
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In particular, the Exchange believes its proposal to modify the
criteria of Add Volume Tier 6 is reasonable because the revised tier
will be available to all Members and provide all Members with an
additional opportunity to receive an enhanced rebate or a reduced fee.
The Exchange further believes the proposed modifications to Add Volume
Tier 6 will provide a reasonable means to encourage liquidity adding
displayed orders 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. 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.
In addition, the Exchange believes that its proposal to increase
the reduced fee assessed to Members that satisfy the criteria of Remove
Volume Tier 1 is reasonable, equitable, and consistent with the Act
because such change is designed to decrease the Exchange's expenditures
with respect to transaction pricing in order to offset some of the
costs associated with the Exchange's current pricing structure, which
provides various rebates for liquidity-adding orders, and the
Exchange's operations generally, in a manner that is consistent with
the Exchange's overall pricing philosophy of encouraging added
liquidity. The proposed increased reduced fee ($0.0029 per share for
securities priced above $1.00 and 0.29% of total dollar value for
securities priced at or below $1.00) is reasonable and appropriate
because it represents only a modest increase from the current reduced
fee ($0.00285 per share for securities priced above $1.00 and 0.28% of
total dollar value for securities priced at or below $1.00) and remains
competitive with the reduced fees offered under Remove Volume Tiers 2
and 3. The Exchange further believes that the proposed increase to the
reduced fee associated with Remove Volume Tier 1 is not unfairly
discriminatory because it applies to all Members equally, in that all
Members will receive the reduced fee upon satisfying the criteria of
Remove Volume Tier 1.
The Exchange believes that the proposed changes to Add Volume Tier
6 are reasonable as they do not represent a significant departure from
the criteria currently offered in the Fee Schedule. 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 revised tiers and have the opportunity to meet the
tiers' criteria and receive the corresponding enhanced rebate or
reduced fee if such criteria is met. Without having a view of activity
on other markets and off-exchange venues, the Exchange has no way of
knowing whether this proposed rule change would definitely result in
any Members qualifying the new proposed tiers. While the Exchange has
no way of predicting with certainty how the proposed changes will
impact Member activity, based on the prior months volume, the Exchange
anticipates that at least one Member will be able to satisfy proposed
Add Volume Tier 6, and at least two Members will be able to satisfy
Remove Volume Tier 1. The Exchange also notes that proposed changes
will not adversely impact any Member's ability to qualify for enhanced
rebates or reduced fees offered under other tiers. Should a Member not
meet the proposed new criteria, the Member will merely not receive that
corresponding enhanced rebate or reduced 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. Rather, as discussed above,
the Exchange believes that the proposed changes would encourage the
submission of additional order flow to a public exchange, thereby
promoting market depth, execution incentives and enhanced execution
opportunities, as well as price discovery and transparency for all
Members. As a result, the Exchange believes that the proposed changes
further the Commission's goal in adopting Regulation NMS of fostering
competition among orders, which promotes ``more efficient pricing of
individual stocks for all types of orders, large and small.''
The Exchange believes the proposed rule changes do not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the proposed
changes to the Exchange's Add Volume Tier 6 and Remove Volume Tier 1
will apply to all Members equally in that all Members are eligible for
each of the Tiers, have a reasonable opportunity to meet the Tiers'
criteria and will receive the enhanced rebate or reduced fee on their
qualifying orders if such criteria is met. The Exchange does not
believe the proposed changes burden competition, but rather, enhances
competition as it is intended to increase the competitiveness of EDGX
by amending an existing pricing incentive and adopting pricing
incentives in order to attract order flow and incentivize participants
to increase their participation on the Exchange, providing for
additional execution opportunities for market participants and improved
price transparency. Greater overall order flow, trading opportunities,
and pricing transparency benefits all market participants on the
Exchange by enhancing market quality and continuing to encourage
Members to send orders, thereby contributing towards a robust and well-
balanced market ecosystem.
Next, the Exchange believes the proposed rule changes does not
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As previously
discussed, the Exchange operates in a highly competitive market.
Members have numerous alternative venues that they may participate on
and direct their order flow, including other equities exchanges, off-
exchange venues, and alternative trading systems. Additionally, the
Exchange represents a small percentage of the overall market. Based on
publicly available information, no single equities exchange has more
than 14% of the market share.\26\ Therefore, no exchange possesses
significant pricing power in the execution of order flow. Indeed,
participants can readily choose to send their orders to other exchange
and off-exchange venues if they deem fee levels at those other venues
to be more favorable. Moreover, the Commission has repeatedly expressed
its preference for competition over regulatory intervention in
determining prices, products, and services in the securities markets.
Specifically, in Regulation NMS, the Commission highlighted the
importance of market forces in
[[Page 56894]]
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \27\ The fact that this
market is competitive has also long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated as follows: ``[n]o one disputes that competition for order flow
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .''.\28\ Accordingly, the Exchange
does not believe its proposed fee change imposes any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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\26\ Supra note 4.
\27\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\28\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \29\ and paragraph (f) of Rule 19b-4 \30\
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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\29\ 15 U.S.C. 78s(b)(3)(A).
\30\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-CboeEDGX-2023-051 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-2023-051.
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-2023-051 and
should be submitted on or before September 11, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
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\31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-17862 Filed 8-18-23; 8:45 am]
BILLING CODE 8011-01-P
