Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 2659-2661 [2024-00640]
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Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Notices
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99304; File No. SR–FINRA–
2023–010]
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Notice of Designation
of a Longer Period for Commission
Action on Proceedings To Determine
Whether To Approve or Disapprove a
Proposed Rule Change To Provide
Relief Relating to Specified Option
Transactions Under FINRA Rule 4210
(Margin Requirements)
January 9, 2024.
On June 30, 2023, the Financial
Industry Regulatory Authority, Inc.
(‘‘FINRA’’) filed with the Securities and
Exchange Commission (‘‘SEC’’ or
‘‘Commission’’), pursuant to Section
19(b)(1) of the Securities and Exchange
Act of 1934 (‘‘Exchange Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend FINRA Rule 4210
(Margin Requirements) to provide
margin relief for specified index option
transactions, known as ‘‘protected
options,’’ and to make other minor
conforming revisions with regard to the
margin relief. The proposed rule change
was published for comment in the
Federal Register on July 19, 2023.3
On August 31, 2023, FINRA extended
the time period in which the
Commission must approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to approve or
disapprove the proposed rule change to
October 17, 2023.4 On September 28,
2023, the Commission instituted
proceedings to determine whether to
approve or disapprove the proposed
rule change.5
Section 19(b)(2) of the Exchange Act 6
provides that, after initiating
proceedings, the Commission shall issue
an order approving or disapproving the
proposed rule change not later than 180
days after the date of publication of
notice of filing of the proposed rule
change. The Commission may extend
the period for issuing an order
approving or disapproving the proposed
rule change, however, by not more than
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Exchange Act Release No. 97898 (Jul. 13,
2023), 88 FR 46204.
4 See Letter from Adam Arkel, Associate General
Counsel, FINRA, to Sheila Swartz, Division of
Trading and Markets, Commission (Aug. 31, 2023).
5 See Exchange Act Release No. 34–98628 (Sep.
28, 2023), 88 FR 68855 (Oct. 4, 2023). All comments
received on the proposed rule change are available
at https://www.sec.gov/comments/sr-finra-2023010/srfinra2023010.htm.
6 15 U.S.C. 78s(b)(2).
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60 days if the Commission determines
that a longer period is appropriate and
publishes reasons for such
determination. The proposed rule
change was published for notice and
comment in the Federal Register on July
19, 2023.7 The 180th day after
publication of the proposed rule change
is January 15, 2024. The Commission is
extending the time period for approving
or disapproving the proposed rule
change for an additional 60 days.
The Commission finds it appropriate
to designate a longer period within
which to issue an order approving or
disapproving the proposed rule change
so that it has sufficient time to consider
the proposed rule change and the issues
raised therein. Accordingly, the
Commission, pursuant to Section
19(b)(2) of the Exchange Act,8
designates March 15, 2024, as the date
by which the Commission shall either
approve or disapprove the proposed
rule change (File No. SR–FINRA–2023–
010).
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.9
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–00631 Filed 1–12–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99302; File No. SR–
CboeEDGX–2024–001]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fee Schedule
January 9, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January 2,
2024, Cboe EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
7 See
supra note 3 and accompanying text.
U.S.C. 78s(b)(2).
9 17 CFR 200.30–3(a)(57).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
8 15
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2659
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, effective January 2, 2024.
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 17 options
venues to which market participants
may direct their order flow. Based on
publicly available information, no single
options exchange has more than 12% of
the market share.3 Thus, in such a lowconcentrated and highly competitive
market, no single options exchange,
including the Exchange, possesses
significant pricing power in the
execution of option order flow. The
Exchange believes that the ever-shifting
market share among the exchanges from
month to month demonstrates that
market participants can shift order flow
or discontinue to reduce use of certain
categories of products, in response to fee
3 See Cboe Global Markets U.S. Options Market
Monthly Volume Summary (December 19, 2023),
available at https://markets.cboe.com/us/options/
market_statistics/.
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16JAN1
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Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Notices
ddrumheller on DSK120RN23PROD with NOTICES1
changes. Accordingly, competitive
forces constrain the Exchange’s
transaction fees, and market participants
can readily trade on competing venues
if they deem pricing levels at those
other venues to be more favorable.
The Exchange’s Fee Schedule sets
forth standard rebates and rates applied
per contract. For example, the Exchange
provides standard rebates ranging from
$0.01 up to $0.22 per contract for
Customer orders in both Penny and
Non-Penny Securities. The Fee Codes
and Associated Fees section of the Fees
Schedule also provides for certain fee
codes associated with certain order
types and market participants that
provide for various other fees or rebates.
For example, the Exchange assesses a
fee of $0.70 per contract for Market
Maker orders that remove liquidity in
Non-Penny Securities, yielding fee code
NT. The Exchange now proposes to
decrease the standard fee for Market
Maker orders that remove liquidity in
Non-Penny Securities (i.e., yield fee
code NT) from $0.70 per contract to
$0.30 per contract.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.4 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 5 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) 6 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange also believes the
proposed rule change is consistent with
Section 6(b)(4) of the Act,7 which
requires that Exchange rules provide for
the equitable allocation of reasonable
4 15
5 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
6 Id.
7 15
U.S.C. 78f(b)(4).
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dues, fees, and other charges among its
Trading Permit Holders 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
proposed rule change 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 market participants. The Exchange is
only one of several options venues to
which market participants may direct
their order flow, and it represents a
small percentage of the overall market.
The proposed fee changes reflect a
competitive pricing structure designed
to incentivize market participants to
direct their order flow, which the
Exchange believes would enhance
market quality to the benefit of all
Members.
The Exchange believes the proposed
change to decrease the standard fee for
Market Maker orders that remove
liquidity in Non-Penny Securities (i.e.,
yield fee code NT) from $0.70 to $0.30
is reasonable, equitable, and not
unfairly discriminatory. The Exchange
believes the proposed rate change is
reasonable because, as stated above, in
order to operate in the highly
competitive options markets, the
Exchange and its competing exchanges
seek to offer similar pricing structures,
including assessing comparable rates for
various types of orders. Thus, the
Exchange believes the proposed rate is
reasonable as it is lower than the
amounts assessed for similar Market
Maker orders on other options
exchanges.8 The Exchange also believes
that amending the standard fee amount
associated with fee code NT represents
an equitable allocation of fees and is not
unfairly discriminatory because the fee
will continue to automatically and
uniformly apply to all Members’
respective qualifying Market Maker
orders.
The Exchange believes that the
proposed change will incentivize
Market Maker order flow in Non-Penny
Securities, which may lead to an
increase in liquidity on the Exchange.
8 See, e.g., MEMX Options Exchange Fee
Schedule, Transactions Fees, which assesses a
charge of $1.10 for Market Maker orders that
remove liquidity in Non-Penny Securities; and
NYSE Arca Fee Schedule, Transaction Fee for
Electronic Executions—Per Contract, which
provides Market Makers that remove liquidity are
assessed $1.10 per contract in Non-Penny Issues.
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An overall increase in liquidity benefits
all market participants by providing
more trading opportunities, which
attracts Market Makers. An increase in
Market Maker activity in turn facilitates
tighter spreads, which may cause an
additional corresponding increase in
order flow from other market
participants.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange does not believe that the
proposed rule change will impose any
burden on intramarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act,
as the proposed fee code change applies
uniformly and automatically to all
Members’ respective qualifying orders.
Overall, the proposed change is
designed to attract additional Market
Maker order flow to the Exchange and
overall order flow directly to the
Exchange’s Book. The Exchange
believes that the fee change will attract
further Market Maker activity, further
incentivize the provision of liquidity
and continued order flow to the Book,
and improve price transparency on the
Exchange. Greater overall order flow
and pricing transparency benefits all
market participants on the Exchange by
generally providing a cycle of more
trading opportunities, enhancing market
quality, and continuing to encourage
Members to submit order flow and
continue to contribute towards a robust
and well-balanced market ecosystem to
the benefit of all market participants.
Next, the Exchange believes the
proposed rule change 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 16
other options exchanges and offexchange venues and alternative trading
systems. Additionally, the Exchange
represents a small percentage of the
overall market. Based on publicly
available information, no single options
exchange has more than 12% of the
market share.9 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 off9 See
E:\FR\FM\16JAN1.SGM
supra note 1.
16JAN1
Federal Register / Vol. 89, No. 10 / Tuesday, January 16, 2024 / Notices
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.’’ 10 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’ . . . .’’.11 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 12 and paragraph (f) of Rule
19b–4 13 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
10 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
11 See 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)).
12 15 U.S.C. 78s(b)(3)(A).
13 17 CFR 240.19b–4(f).
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18:57 Jan 12, 2024
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action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
2661
subject to copyright protection. All
submissions should refer to file number
SR–CboeEDGX–2024–001 and should be
submitted on or before February 6, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–00640 Filed 1–12–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–99298; File No. SR–
NYSEARCA–2021–90]
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–2024–001 on the subject
line.
Self-Regulatory Organizations; NYSE
Arca, Inc.; Notice of Filing of
Amendment No. 2 to a Proposed Rule
Change To List and Trade Shares of
Grayscale Bitcoin Trust Under NYSE
Arca Rule 8.201–E (Commodity-Based
Trust Shares)
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–2024–001. 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
On October 19, 2021, NYSE Arca, Inc.
(‘‘NYSE Arca’’ or ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’ or
‘‘Exchange Act’’) 1 and Rule 19b–4
thereunder,2 a proposed rule change to
list and trade shares (‘‘Shares’’) of
Grayscale Bitcoin Trust (‘‘Trust’’) under
NYSE Arca Rule 8.201–E (CommodityBased Trust Shares). The proposed rule
change was published for comment in
the Federal Register on November 8,
2021.3 On December 15, 2021, pursuant
to Section 19(b)(2) of the Exchange 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 February 4, 2022, the Commission
instituted proceedings under Section
19(b)(2)(B) of the Exchange Act 6 to
determine whether to disapprove the
proposed rule change.7 On April 21,
2022, the Exchange filed Amendment
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Frm 00080
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January 9, 2024.
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 93504
(Nov. 2, 2021), 86 FR 61804. Comments received on
the proposed rule change are available at: https://
www.sec.gov/comments/sr-nysearca-2021-90/
srnysearca202190.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 93788,
86 FR 72291 (Dec. 21, 2021).
6 15 U.S.C. 78s(b)(2)(B).
7 See Securities Exchange Act Release No. 94151,
87 FR 7889 (Feb. 10, 2022).
1 15
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]]>Agencies
[Federal Register Volume 89, Number 10 (Tuesday, January 16, 2024)]
[Notices]
[Pages 2659-2661]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00640]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99302; File No. SR-CboeEDGX-2024-001]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule
January 9, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 2, 2024, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to
amend its Fee Schedule. The text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/edgx/), 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, effective January
2, 2024. 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 17 options venues to which
market participants may direct their order flow. Based on publicly
available information, no single options exchange has more than 12% of
the market share.\3\ Thus, in such a low-concentrated and highly
competitive market, no single options exchange, including the Exchange,
possesses significant pricing power in the execution of option order
flow. The Exchange believes that the ever-shifting market share among
the exchanges from month to month demonstrates that market participants
can shift order flow or discontinue to reduce use of certain categories
of products, in response to fee
[[Page 2660]]
changes. Accordingly, competitive forces constrain the Exchange's
transaction fees, and market participants can readily trade on
competing venues if they deem pricing levels at those other venues to
be more favorable.
---------------------------------------------------------------------------
\3\ See Cboe Global Markets U.S. Options Market Monthly Volume
Summary (December 19, 2023), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------
The Exchange's Fee Schedule sets forth standard rebates and rates
applied per contract. For example, the Exchange provides standard
rebates ranging from $0.01 up to $0.22 per contract for Customer orders
in both Penny and Non-Penny Securities. The Fee Codes and Associated
Fees section of the Fees Schedule also provides for certain fee codes
associated with certain order types and market participants that
provide for various other fees or rebates. For example, the Exchange
assesses a fee of $0.70 per contract for Market Maker orders that
remove liquidity in Non-Penny Securities, yielding fee code NT. The
Exchange now proposes to decrease the standard fee for Market Maker
orders that remove liquidity in Non-Penny Securities (i.e., yield fee
code NT) from $0.70 per contract to $0.30 per contract.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\4\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \5\ 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) \6\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. The Exchange also believes the proposed rule
change is consistent with Section 6(b)(4) of the Act,\7\ which requires
that Exchange rules provide for the equitable allocation of reasonable
dues, fees, and other charges among its Trading Permit Holders and
other persons using its facilities.
---------------------------------------------------------------------------
\4\ 15 U.S.C. 78f(b).
\5\ 15 U.S.C. 78f(b)(5).
\6\ Id.
\7\ 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 proposed rule change
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
market participants. The Exchange is only one of several options venues
to which market participants may direct their order flow, and it
represents a small percentage of the overall market. The proposed fee
changes reflect a competitive pricing structure designed to incentivize
market participants to direct their order flow, which the Exchange
believes would enhance market quality to the benefit of all Members.
The Exchange believes the proposed change to decrease the standard
fee for Market Maker orders that remove liquidity in Non-Penny
Securities (i.e., yield fee code NT) from $0.70 to $0.30 is reasonable,
equitable, and not unfairly discriminatory. The Exchange believes the
proposed rate change is reasonable because, as stated above, in order
to operate in the highly competitive options markets, the Exchange and
its competing exchanges seek to offer similar pricing structures,
including assessing comparable rates for various types of orders. Thus,
the Exchange believes the proposed rate is reasonable as it is lower
than the amounts assessed for similar Market Maker orders on other
options exchanges.\8\ The Exchange also believes that amending the
standard fee amount associated with fee code NT represents an equitable
allocation of fees and is not unfairly discriminatory because the fee
will continue to automatically and uniformly apply to all Members'
respective qualifying Market Maker orders.
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\8\ See, e.g., MEMX Options Exchange Fee Schedule, Transactions
Fees, which assesses a charge of $1.10 for Market Maker orders that
remove liquidity in Non-Penny Securities; and NYSE Arca Fee
Schedule, Transaction Fee for Electronic Executions--Per Contract,
which provides Market Makers that remove liquidity are assessed
$1.10 per contract in Non-Penny Issues.
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The Exchange believes that the proposed change will incentivize
Market Maker order flow in Non-Penny Securities, which may lead to an
increase in liquidity on the Exchange. An overall increase in liquidity
benefits all market participants by providing more trading
opportunities, which attracts Market Makers. An increase in Market
Maker activity in turn facilitates tighter spreads, which may cause an
additional corresponding increase in order flow from other market
participants.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The Exchange does not
believe that the proposed rule change will impose any burden on
intramarket competition that is not necessary or appropriate in
furtherance of the purposes of the Act, as the proposed fee code change
applies uniformly and automatically to all Members' respective
qualifying orders. Overall, the proposed change is designed to attract
additional Market Maker order flow to the Exchange and overall order
flow directly to the Exchange's Book. The Exchange believes that the
fee change will attract further Market Maker activity, further
incentivize the provision of liquidity and continued order flow to the
Book, and improve price transparency on the Exchange. Greater overall
order flow and pricing transparency benefits all market participants on
the Exchange by generally providing a cycle of more trading
opportunities, enhancing market quality, and continuing to encourage
Members to submit order flow and continue to contribute towards a
robust and well-balanced market ecosystem to the benefit of all market
participants.
Next, the Exchange believes the proposed rule change 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 16 other options exchanges and
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 options exchange has more
than 12% of the market share.\9\ 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-
[[Page 2661]]
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.'' \10\ 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' . . . .''.\11\
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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\9\ See supra note 1.
\10\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\11\ See 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 \12\ and paragraph (f) of Rule 19b-4 \13\
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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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 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-2024-001 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-2024-001. 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-2024-001 and should
be submitted on or before February 6, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\14\
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\14\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-00640 Filed 1-12-24; 8:45 am]
BILLING CODE 8011-01-P
