Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend its Fee Schedule, 66070-66073 [2023-20807]

Download as PDF 66070 Federal Register / Vol. 88, No. 185 / Tuesday, September 26, 2023 / Notices A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98449; File No. SR– CboeEDGX–2023–059] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend its Fee Schedule September 20, 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 September 11, 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. lotter on DSK11XQN23PROD 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 18:18 Sep 25, 2023 Jkt 259001 1. Purpose The Exchange proposes to amend its Fee Schedule applicable to its equities trading platform (‘‘EDGX Equities’’) by adopting a new Cross Asset Tier. The Exchange proposes to implement these changes effective September 1, 2023.3 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,4 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.5 For orders in securities priced below $1.00, the Exchange provides a standard rebate 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.6 Additionally, in response to the competitive environment, the Exchange also offers tiered pricing which provides Members 3 The Exchange initially filed the proposed fee change on August 31, 2023 (SR–CboeEDGX–2023– 055). On September 11, 2023, the Exchange withdrew that proposal and submitted this proposal. 4 See Cboe Global Markets, U.S. Equities Market Volume Summary, Month-to-Date (August 24, 2023), available at https://www.cboe.com/us/ equities/market_statistics/. 5 See EDGX Equities Fee Schedule, Standard Rates. 6 Id. PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 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. Under footnote 1 of the Fee Schedule, the Exchange currently offers various Add/Remove Volume Tiers that provide enhanced rebates for orders yielding fee codes B,7 V,8 Y,9 3,10 and 4.11 The Exchange now proposes to introduce a new tier under footnote 1 titled Cross Asset Tier, which is designed to incentivize Members to achieve certain levels of participation on both the Exchange’s equities and options platform (‘‘EDGX Options’’). The proposed criteria is as follows: • The Cross Asset Tier provides a rebate of $0.0029 per share for securities priced above $1.00 for qualifying orders (i.e., orders yielding fee codes B, V, Y, 3, or 4) where (1) Member has a StepUp Tape B & C ADAV 12 from July 2023 ≥ 4,000,000; and (2) Member has a Market Maker Add 13 on EDGX Options ≥ 2,000,000 in SPY. The proposed Cross Asset Tier is intended to provide an additional manner to incentive Members to add displayed liquidity in Tape B and Tape C securities on the Exchange while also increasing participation in SPY on EDGX Options. The Exchange believes the addition of the Cross Asset Tier will incentivize Members to grow their 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. Additionally, the Exchange notes that the proposed Cross Asset Tier will expire no later than January 31, 2024, 7 Fee code B is appended to orders that add liquidity to EDGX in Tape B securities. 8 Fee code V is appended to orders that add liquidity to EDGX in Tape A securities. 9 Fee code Y is appended to orders that add liquidity to EDGX in Tape C securities. 10 Fee code 3 is appended to orders that add liquidity to EDGX in Tape A or Tape C securities during the pre and post market. 11 Fee code 4 is appended to orders that add liquidity to EDGX in Tape B securities during the pre and post market. 12 Step-Up Tape B & C ADAV means ADAV in Tape B and Tape C securities in the relevant baseline month subtracted from current ADAV. ADAV means average daily volume calculated as the number of shares added per day. ADAV is calculated on a monthly basis. 13 Market Maker Add means any order for the account of a registered Market Maker on EDGX Options appended with fee code NM or PM. See EDGX Options Fee Schedule, Footnote 2. E:\FR\FM\26SEN1.SGM 26SEN1 Federal Register / Vol. 88, No. 185 / Tuesday, September 26, 2023 / Notices which the Exchange will indicate on the Exchange’s fee schedule. Growth Tiers in general are designed to provide Members with additional opportunities to receive enhanced rebates by increasing their order flow to the Exchange, which further contributes to a deeper, more liquid market and provides even more execution opportunities for active market participants. Like other Growth Tiers on the Exchange,14 the proposed Cross Asset Tier is designed to give members an additional opportunity to receive an enhanced rebate for orders meeting the applicable criteria. Increased overall order flow benefits all Members by contributing towards a robust and wellbalanced market ecosystem. lotter on DSK11XQN23PROD with NOTICES1 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of section 6(b) of the Act.15 Specifically, the Exchange believes the proposed rule change is consistent with the section 6(b)(5) 16 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) 17 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) 18 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 14 See EDGX Equities Fee Schedule, Footnote 1, Add/Remove Volume Tiers. 15 15 U.S.C. 78f(b). 16 15 U.S.C. 78f(b)(5). 17 Id. 18 15 U.S.C. 78f(b)(4) VerDate Sep<11>2014 18:18 Sep 25, 2023 Jkt 259001 introduce a Cross Asset Tier 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 volumebased incentives and discounts have been widely adopted by exchanges,19 including the Exchange,20 and are reasonable, equitable and nondiscriminatory because they are open to all Members on an equal basis and provide additional benefits or discounts that are reasonably related to (i) the value to an exchange’s market quality and (ii) associated higher levels of market activity, such as higher levels of liquidity provision and/or growth patterns. Competing equity exchanges offer similar tiered pricing structures, including schedules of rebates and fees that apply based upon members achieving certain volume and/or growth thresholds, as well as assess similar fees or rebates for similar types of orders, to that of the Exchange.21 In particular, the Exchange believes its proposal to introduce a Cross Asset Tier 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. The Exchange further believes the proposed Cross Asset Tier 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. The Exchange believes that the proposed Cross Asset Tier represents an equitable allocation of fees and rebates and is not unfairly discriminatory because all Members will be eligible for the proposed tier and have the opportunity to meet the tier’s criteria and receive the corresponding enhanced rebate if such criteria is met. To the extent a Member participates on EDGX 19 See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove Volume Tiers. 20 See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/Remove Volume Tiers. 21 See e.g., MIAX Pearl Options Fee Schedule, Transaction Rebates/Fees; The Nasdaq Options Market LLC (‘‘NOM’’) Pricing Schedule, Options 7, Section 2. PO 00000 Frm 00126 Fmt 4703 Sfmt 4703 66071 Equities but not on EDGX Options, the Exchange continues to believe that its proposal represents an equitable allocation of fees and rebates and is not unfairly discriminatory with respect to such Member based on the overall benefit to the Exchange resulting from the success of its options platform. Particularly, the Exchange believes that additional such success allows the Exchange to continue to provide and potentially expand its existing incentive programs to the benefit of all participants on the Exchange, regardless of whether they participate on EDGX Options or not. Without having a view of activity on other markets and offexchange 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 the proposed criteria for the proposed Cross Asset Tier. 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 for the proposed Cross Asset Tier, the Member will merely not receive that corresponding enhanced rebate. 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 Cross Asset Tier will apply to all Members equally in that all E:\FR\FM\26SEN1.SGM 26SEN1 lotter on DSK11XQN23PROD with NOTICES1 66072 Federal Register / Vol. 88, No. 185 / Tuesday, September 26, 2023 / Notices Members are eligible for the tier, have a reasonable opportunity to meet the tier’s criteria and will receive the enhanced rebate on their qualifying orders if such criteria is met. The Exchange does not believe the proposed changes burden competition, but rather, enhances competition as it is intended to increase the competitiveness of EDGX by adopting pricing incentives in order to attract order flow and incentivize participants to increase their participation on the Exchange, providing for additional execution opportunities for market participants and improved price transparency. Additionally, the Exchange believes that the proposed criteria based on SPY options volume applicable to EDGX Options Market Makers will provide an additional incentive to those Market Makers that concentrate their trading activity in SPY options to send additional SPY orders, which in turn provides additional liquidity in the market. Greater overall order flow, trading opportunities, and pricing transparency benefits all market participants on the Exchange, as well as its affiliate options 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.22 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 22 Supra note 2. VerDate Sep<11>2014 18:18 Sep 25, 2023 Jkt 259001 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.’’ 23 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’. . . .’’.24 Accordingly, the Exchange does not believe its proposed fee change imposes any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to section 19(b)(3)(A) of the Act 25 and paragraph (f) of Rule 19b–4 26 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. 23 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 24 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)). 25 15 U.S.C. 78s(b)(3)(A). 26 17 CFR 240.19b–4(f). PO 00000 Frm 00127 Fmt 4703 Sfmt 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–2023–059 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–2023–059. 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–2023–059 and should be submitted on or before October 17, 2023. E:\FR\FM\26SEN1.SGM 26SEN1 Federal Register / Vol. 88, No. 185 / Tuesday, September 26, 2023 / Notices For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–20807 Filed 9–25–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–813, OMB Control No. 3235–0765] lotter on DSK11XQN23PROD with NOTICES1 Proposed Collection; Comment Request; Extension: Rule 498A Upon Written Request, Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736. Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (‘‘Paperwork Reduction Act’’) (44 U.S.C. 3501–3520), the Securities and Exchange Commission (the ‘‘Commission’’) is soliciting comments on the collections of information summarized below. The Commission plans to submit this existing collection of information to the Office of Management and Budget for extension and approval. Rule 498A under the Securities Act permits a person to satisfy its prospectus delivery obligations under Section 5(b)(2) of the Securities Act for a contract by: (1) sending or giving to new investors key information contained in a variable contract statutory prospectus in the form of an initial summary prospectus; (2) sending or giving to existing investors each year a brief description of certain changes to the contract, and a subset of the information in the initial summary prospectus, in the form of an updating summary prospectus; and (3) providing the statutory prospectus and other materials online. Rule 498A considers a person to have met its prospectus delivery obligations for any portfolio companies associated with a variable contract if the portfolio company prospectuses are posted online. Under the rule, a registrant (or the financial intermediary distributing the variable contract) relying on the rule must send the variable contract statutory prospectus (that statutory prospectus must be filed as part of registration statement on Form N–3, N–4, or N–6, as applicable) and other materials to an investor in paper or electronic format upon request. 27 17 Based on current EDGAR data, 82% of variable contracts that filed annual updates to their registration statements filed at least one summary prospectus under rule 498A. In the aggregate, the Commission staff estimates the total annual hour burden to comply with Rule 498A to be 7,634 hours, at an internal time cost equivalent of $2,337,471, and a total annual external cost burden of $9,094,866. The estimate of average burden hours is made solely for the purposes of the Paperwork Reduction Act. The estimate is based on communications with industry representatives, and is not derived from a comprehensive or even a representative survey or study. Responses will not be kept confidential. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information unless it displays a currently valid OMB control number. Written comments are invited on: (a) whether the proposed collection of information is necessary for the proper performance of the functions of the Commission, including whether the information shall have practical utility; (b) the accuracy of the Commission’s estimate of the burden of the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted by November 27, 2023. An agency may not conduct or sponsor, and a person is not required to respond to, a collection of information under the PRA unless it displays a currently valid OMB control number. Please direct your written comments to: David Bottom, Acting Director/Chief Information Officer, Securities and Exchange Commission, c/o John Pezzullo, 100 F Street NE, Washington, DC 20549 or send an email to: PRA_ Mailbox@sec.gov. Dated: September 21, 2023. Sherry R. Haywood, Assistant Secretary. [FR Doc. 2023–20906 Filed 9–25–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–98455; File No. SR–CBOE– 2023–019] Self-Regulatory Organizations; Cboe Exchange, Inc.; Order Granting Approval of a Proposed Rule Change To Make Permanent the Operation of Its Pilot Program That Allows the Exchange To List P.M.-Settled Third Friday-of-the-Month Mini-SPX Index (‘‘XSP’’) Options and Mini-Russell 2000 Index (‘‘MRUT’’) Options Series September 20, 2023. I. Introduction On April 19, 2023, Cboe Exchange, Inc. (‘‘Exchange’’ or ‘‘Cboe Options’’) filed with the Securities and Exchange Commission (‘‘Commission’’), pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b-4 thereunder,2 a proposed rule change to make permanent the operation of its pilot program (‘‘Program’’) that permits the Exchange to list p.m.-settled third Friday-of-themonth XSP and MRUT options (‘‘p.m.settled XSP’’ and ‘‘p.m.-settled MRUT,’’ respectively, and collectively, the ‘‘Pilot Products’’). The proposed rule change was published for comment in the Federal Register on April 28, 2023.3 On June 9, 2023, pursuant to section 19(b)(2) of the Act,4 the Commission designated a longer period within which to approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether to disapprove the proposed rule change.5 On July 27, 2023, the Commission instituted proceedings to determine whether to approve or disapprove the proposed rule change.6 The Commission did not receive any comment letters and is approving the proposed rule change. II. Background When cash-settled 7 index options were first introduced in the 1980s, they 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 See Securities Exchange Act Release No. 97366 (April 24, 2023), 88 FR 26359 (‘‘Notice’’). 4 15 U.S.C. 78s(b)(2). 5 See Securities Exchange Act Release No. 97678, 88 FR 39285 (June 15, 2023). The Commission designated July 27, 2023, as the date by which the Commission shall approve or disapprove, or institute proceedings to determine whether to approve or disapprove, the proposed rule change. 6 See Securities Exchange Act Release No. 98005, 88 FR 50943 (August 2, 2023). 7 The seller of a ‘‘cash-settled’’ index option pays out the cash value of the applicable index on expiration or exercise. A ‘‘physical delivery’’ option, like equity and ETF options, involves the 2 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 18:18 Sep 25, 2023 66073 Continued Jkt 259001 PO 00000 Frm 00128 Fmt 4703 Sfmt 4703 E:\FR\FM\26SEN1.SGM 26SEN1

Agencies

[Federal Register Volume 88, Number 185 (Tuesday, September 26, 2023)]
[Notices]
[Pages 66070-66073]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20807]



[[Page 66070]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98449; File No. SR-CboeEDGX-2023-059]


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

September 20, 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 September 11, 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'') by adopting a new Cross 
Asset Tier. The Exchange proposes to implement these changes effective 
September 1, 2023.\3\
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    \3\ The Exchange initially filed the proposed fee change on 
August 31, 2023 (SR-CboeEDGX-2023-055). On September 11, 2023, the 
Exchange withdrew that proposal and submitted this proposal.
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    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,\4\ 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.\5\ For orders in securities 
priced below $1.00, the Exchange provides a standard rebate 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.\6\ 
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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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (August 24, 2023), available at https://www.cboe.com/us/equities/market_statistics/.
    \5\ See EDGX Equities Fee Schedule, Standard Rates.
    \6\ Id.
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    Under footnote 1 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers that provide enhanced rebates for 
orders yielding fee codes B,\7\ V,\8\ Y,\9\ 3,\10\ and 4.\11\ The 
Exchange now proposes to introduce a new tier under footnote 1 titled 
Cross Asset Tier, which is designed to incentivize Members to achieve 
certain levels of participation on both the Exchange's equities and 
options platform (``EDGX Options''). The proposed criteria is as 
follows:
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    \7\ Fee code B is appended to orders that add liquidity to EDGX 
in Tape B securities.
    \8\ Fee code V is appended to orders that add liquidity to EDGX 
in Tape A securities.
    \9\ Fee code Y is appended to orders that add liquidity to EDGX 
in Tape C securities.
    \10\ Fee code 3 is appended to orders that add liquidity to EDGX 
in Tape A or Tape C securities during the pre and post market.
    \11\ Fee code 4 is appended to orders that add liquidity to EDGX 
in Tape B securities during the pre and post market.
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     The Cross Asset Tier provides a rebate of $0.0029 per 
share for securities priced above $1.00 for qualifying orders (i.e., 
orders yielding fee codes B, V, Y, 3, or 4) where (1) Member has a 
Step-Up Tape B & C ADAV \12\ from July 2023 >= 4,000,000; and (2) 
Member has a Market Maker Add \13\ on EDGX Options >= 2,000,000 in SPY.
---------------------------------------------------------------------------

    \12\ Step-Up Tape B & C ADAV means ADAV in Tape B and Tape C 
securities in the relevant baseline month subtracted from current 
ADAV. ADAV means average daily volume calculated as the number of 
shares added per day. ADAV is calculated on a monthly basis.
    \13\ Market Maker Add means any order for the account of a 
registered Market Maker on EDGX Options appended with fee code NM or 
PM. See EDGX Options Fee Schedule, Footnote 2.
---------------------------------------------------------------------------

    The proposed Cross Asset Tier is intended to provide an additional 
manner to incentive Members to add displayed liquidity in Tape B and 
Tape C securities on the Exchange while also increasing participation 
in SPY on EDGX Options. The Exchange believes the addition of the Cross 
Asset Tier will incentivize Members to grow their 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.
    Additionally, the Exchange notes that the proposed Cross Asset Tier 
will expire no later than January 31, 2024,

[[Page 66071]]

which the Exchange will indicate on the Exchange's fee schedule. Growth 
Tiers in general are designed to provide Members with additional 
opportunities to receive enhanced rebates by increasing their order 
flow to the Exchange, which further contributes to a deeper, more 
liquid market and provides even more execution opportunities for active 
market participants. Like other Growth Tiers on the Exchange,\14\ the 
proposed Cross Asset Tier is designed to give members an additional 
opportunity to receive an enhanced rebate for orders meeting the 
applicable criteria. Increased overall order flow benefits all Members 
by contributing towards a robust and well-balanced market ecosystem.
---------------------------------------------------------------------------

    \14\ See EDGX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
---------------------------------------------------------------------------

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.\15\ Specifically, the Exchange believes the proposed rule change 
is consistent with the section 6(b)(5) \16\ 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) \17\ 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) \18\ 
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.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ Id.
    \18\ 15 U.S.C. 78f(b)(4)
---------------------------------------------------------------------------

    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 introduce a Cross Asset Tier 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,\19\ including the Exchange,\20\ and 
are reasonable, equitable and non-discriminatory because they are open 
to all Members on an equal basis and provide additional benefits or 
discounts that are reasonably related to (i) the value to an exchange's 
market quality and (ii) associated higher levels of market activity, 
such as higher levels of liquidity provision and/or growth patterns. 
Competing equity exchanges offer similar tiered pricing structures, 
including schedules of rebates and fees that apply based upon members 
achieving certain volume and/or growth thresholds, as well as assess 
similar fees or rebates for similar types of orders, to that of the 
Exchange.\21\
---------------------------------------------------------------------------

    \19\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \20\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
    \21\ See e.g., MIAX Pearl Options Fee Schedule, Transaction 
Rebates/Fees; The Nasdaq Options Market LLC (``NOM'') Pricing 
Schedule, Options 7, Section 2.
---------------------------------------------------------------------------

    In particular, the Exchange believes its proposal to introduce a 
Cross Asset Tier 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. The Exchange further 
believes the proposed Cross Asset Tier 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.
    The Exchange believes that the proposed Cross Asset Tier represents 
an equitable allocation of fees and rebates and is not unfairly 
discriminatory because all Members will be eligible for the proposed 
tier and have the opportunity to meet the tier's criteria and receive 
the corresponding enhanced rebate if such criteria is met. To the 
extent a Member participates on EDGX Equities but not on EDGX Options, 
the Exchange continues to believe that its proposal represents an 
equitable allocation of fees and rebates and is not unfairly 
discriminatory with respect to such Member based on the overall benefit 
to the Exchange resulting from the success of its options platform. 
Particularly, the Exchange believes that additional such success allows 
the Exchange to continue to provide and potentially expand its existing 
incentive programs to the benefit of all participants on the Exchange, 
regardless of whether they participate on EDGX Options or not. 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 the proposed criteria for the proposed Cross Asset Tier. 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 for the proposed Cross Asset Tier, the Member will merely not 
receive that corresponding enhanced rebate.

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 
Cross Asset Tier will apply to all Members equally in that all

[[Page 66072]]

Members are eligible for the tier, have a reasonable opportunity to 
meet the tier's criteria and will receive the enhanced rebate on their 
qualifying orders if such criteria is met. The Exchange does not 
believe the proposed changes burden competition, but rather, enhances 
competition as it is intended to increase the competitiveness of EDGX 
by adopting pricing incentives in order to attract order flow and 
incentivize participants to increase their participation on the 
Exchange, providing for additional execution opportunities for market 
participants and improved price transparency. Additionally, the 
Exchange believes that the proposed criteria based on SPY options 
volume applicable to EDGX Options Market Makers will provide an 
additional incentive to those Market Makers that concentrate their 
trading activity in SPY options to send additional SPY orders, which in 
turn provides additional liquidity in the market. Greater overall order 
flow, trading opportunities, and pricing transparency benefits all 
market participants on the Exchange, as well as its affiliate options 
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.\22\ Therefore, no exchange possesses 
significant pricing power in the execution of order flow. Indeed, 
participants can readily choose to send their orders to other exchange 
and off-exchange venues if they deem fee levels at those other venues 
to be more favorable. Moreover, the Commission has repeatedly expressed 
its preference for competition over regulatory intervention in 
determining prices, products, and services in the securities markets. 
Specifically, in Regulation NMS, the Commission highlighted the 
importance of market forces in determining prices and SRO revenues and, 
also, recognized that current regulation of the market system ``has 
been remarkably successful in promoting market competition in its 
broader forms that are most important to investors and listed 
companies.'' \23\ 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'. . . .''.\24\ 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.
---------------------------------------------------------------------------

    \22\ Supra note 2.
    \23\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \24\ 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)).
---------------------------------------------------------------------------

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 \25\ and paragraph (f) of Rule 19b-4 \26\ 
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.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 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-2023-059 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-2023-059. 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-2023-059 and should 
be submitted on or before October 17, 2023.


[[Page 66073]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-20807 Filed 9-25-23; 8:45 am]
BILLING CODE 8011-01-P
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