Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend its Fee Schedule, 43912-43915 [2024-10950]

Download as PDF 43912 Federal Register / Vol. 89, No. 98 / Monday, May 20, 2024 / Notices • Send an email to rule-comments@ sec.gov. Please include file number SR–NYSENAT–2024–15 on the subject line. SECURITIES AND EXCHANGE COMMISSION [Release No. 34–100134; File No. SR– CboeEDGX–2024–023] 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–NYSENAT–2024–15. 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–NYSENAT–2024–15 and should be submitted on or before June 10, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.28 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–10962 Filed 5–17–24; 8:45 am] lotter on DSK11XQN23PROD with NOTICES1 BILLING CODE 8011–01–P Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Amend its Fee Schedule May 14, 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 April 30, 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. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe EDGX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGX Options’’) proposes to amend its 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. 1 15 28 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 19:14 May 17, 2024 2 17 Jkt 262001 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00113 Fmt 4703 Sfmt 4703 A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its fee schedule for its equity options platform (‘‘EDGX Options’’) relating to logical connectivity fees.3 By way of background, the Exchange offers a variety of logical ports, which provide users with the ability within the Exchange’s System to accomplish a specific function through a connection, such as order entry, data receipt or access to information. The Exchange currently assesses, among other things, the following logical port connectivity fees on a monthly basis: $500 per port for Logical Ports; 4 $500 per port for Multicast PITCH Spin Server Ports (‘‘Spin Ports’’) and GRP Ports; 5 and $600 per port for Ports with Bulk Quoting Capabilities 6 (‘‘Bulk Ports’’). The Exchange proposes to increase the monthly fees for the forgoing ports to the following rates: $750 per port for Logical Ports, Spin Ports and GRP Ports and $1,000 per port for Bulk Ports. The Exchange notes the proposed fee change better enables it to continue to maintain and improve its market technology and services and also notes that the proposed fee amount, even as amended, continues to be in line with, or even lower than, amounts assessed by other exchanges for similar connections, including the Exchange’s affiliated options exchanges.7 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 3 The Exchange initially filed the proposed fee change on January 2, 2024 (SR–CboeEDGX–2024– 006). On March 1, 2024, the Exchange withdrew that filing and submitted SR–CboeEDGX–2024–017. On April 30, 2024, the Exchange withdrew that filing and submitted this filing. 4 Logical Ports include FIX and BOE ports (used for order entry), drop logical port (which grants users the ability to receive and/or send drop copies) and ports that are used for receipt of certain market data feeds. 5 Spin Ports and GRP Ports are used to request and receive a retransmission of data from the Exchange’s Multicast PITCH data feeds. 6 Bulk Quoting Capabilities Ports provide users with the ability to submit and update multiple bids and offers in one message through logical ports enabled for bulk-quoting. 7 See e.g., Cboe C2 Options Exchange Fee Schedule, Options Logical Port Fees, Cboe BZX Options Exchange Fee Schedule, Options Logical Port Fees and Cboe Exchange Fees Schedule, Logical Connectivity Fees; see also The Nasdaq Stock Market Options Pricing Schedule, Section 3 Nasdaq Options Market—Ports and Other Services. E:\FR\FM\20MYN1.SGM 20MYN1 Federal Register / Vol. 89, No. 98 / Monday, May 20, 2024 / Notices and, in particular, the requirements of Section 6(b) of the Act.8 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 9 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) 10 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) 11 of the Act, which requires that Exchange rules provide for the equitable allocation of reasonable dues, fees, and other charges among its Members and other persons using its facilities. The Exchange believes the proposed fee is reasonable as it is still in line with, or even lower than, amounts assessed by other exchanges for similar connections.12 Indeed, the Exchange believes assessing fees that are a lower rate than fees assessed by other exchanges for analogous connectivity (which were similarly adopted via the rule filing process and filed with the Commission) is reasonable. Additionally, the Exchange believes the proposed fee increase is reasonable in light of recent and anticipated connectivity-related upgrades and changes. The Exchange and its affiliated exchanges recently launched a multiyear initiative to improve Cboe Exchange Platform performance and capacity requirements, including for its U.S. options markets, to increase competitiveness, support growth and advance a consistent world class platform. The goal of the project, among other things, is to provide faster and more consistent order handling and 8 15 U.S.C. 78f(b). U.S.C. 78f(b)(5). 10 Id. 11 15 U.S.C. 78f(b)(4). 12 See, e.g., Cboe C2 Options Exchange Fee Schedule, Options Logical Port Fees, Cboe BZX Options Exchange Fee Schedule, Options Logical Port Fees and Cboe Exchange Fees Schedule, Logical Connectivity Fees see also The Nasdaq Stock Market Options Pricing Schedule, Section 3 Nasdaq Options Market—Ports and Other Services. lotter on DSK11XQN23PROD with NOTICES1 9 15 VerDate Sep<11>2014 19:14 May 17, 2024 Jkt 262001 matching performance for options, while ensuring quicker processing time and supporting increasing volumes. For example, the Exchange is currently performing order handler and matching engine hardware upgrades across its markets to advance this goal. The Exchange anticipates that upgrades to its matching engines may result in a latency reduction up to 40% to 50% on the Exchange and that upgrades to its order handlers may offer lower variability in the processing of message, which can reduce the time a message takes to get to the matching engine. The Exchange expended, and will continue to expend, resources to innovate and modernize technology so that it may benefit its Members and continue to compete among other options markets. The Exchange also notes that neither it—nor its options exchange affiliates— have passed through or offset current or projected costs associated with these upgrades. The ability to continue to innovate with technology and offer new products to market participants allows the Exchange to remain competitive in the options space which currently has 17 options markets and potential new entrants. The Exchange also notes market participants may continue to choose the method of connectivity based on their specific needs, and no broker-dealer is required to become a Member of, let alone connect directly to, the Exchange. There is also no regulatory requirement that any market participant connect to any one particular exchange. Market participants may voluntarily choose to become a member of one or more of a number of different exchanges, of which, the Exchange is but one choice. Additionally, any Exchange member that is dissatisfied with the proposal is free to choose not to be a member of the Exchange and send order flow to another exchange. Moreover, direct connectivity is not a requirement to participate on the Exchange. The Exchange also believes substitutable products and services are available to market participants, including, among other things, other options exchanges to which a market participant may connect in lieu of the Exchange and/or trading of any options product, such as within the Over-the-Counter (OTC) markets, which do not require connectivity to the Exchange. Indeed, there are currently 17 registered options exchanges that trade options (13 of which are not affiliated with Cboe), some of which have similar or lower connectivity fees.13 Based on publicly available information, no single options exchange has more than 13 Id. PO 00000 Frm 00114 Fmt 4703 Sfmt 4703 43913 approximately 17% of the market share.14 Further, low barriers to entry mean that new exchanges may rapidly enter the market and offer additional substitute platforms to further compete with the Exchange and the products it offers. For example, there are 4 exchanges that have been added in the U.S. options markets in the last 5 years (i.e., Nasdaq MRX, LLC, MIAX Pearl, LLC, MIAX Emerald LLC, and most recently MEMX LLC), with a fifth options exchange anticipated to added in 2024 (MIAX Sapphire, LLC). As for market participants that determine to continue to maintain membership or to join the Exchange for business purposes, those business reasons presumably result in revenue capable of covering the proposed fee. Further, for such market participants that choose to connect to the Exchange, the Exchange believes the proposed fees continue to provide flexibility with respect to how to connect to the Exchange based on each market participants’ respective business needs. For example, the amount and type of logical ports are determined by factors relevant and specific to each market participant, including its business model, costs of connectivity, how its business is segmented and allocated and volume of messages sent to the Exchange. Moreover, the Exchange notes that it does not have unlimited system capacity and the proposed fees are also designed to encourage market participants to be efficient with their respective logical port usage and discourage the purchasing of large amounts of superfluous ports. There is also no requirement that any market participant maintain a specific number of logical ports and a market participant may choose to maintain as many or as few of such ports as each deems appropriate. Further, market participants may reduce or discontinue use of these ports in response to the proposed fees. Indeed, when the Exchange last increased pricing for logical ports in 2018, the Exchange observed with the first two months that market participants did in fact reduce the number of logical ports they maintained. Particularly, Logical Port quantities were reduced by approximately 20%. This demonstrates that if an exchange sets a fee too high for connectivity, market participants can and do choose to disconnect, or reduce, their connectivity from the Exchange. The Exchange also does not assess any 14 See Cboe Global Markets U.S. Options Market Volume Summary (December 20, 2023), available at https://markets.cboe.com/us/options/market_ statistics/. E:\FR\FM\20MYN1.SGM 20MYN1 43914 Federal Register / Vol. 89, No. 98 / Monday, May 20, 2024 / Notices termination fee for a market participant to drop its connectivity or membership, nor is the Exchange aware of any other costs that would be incurred by a market participant to do so. As noted above, there is no regulatory requirement that any market participant connect to any one options exchange, nor that any market participant connect at a particular connection speed or act in a particular capacity on the Exchange, or trade any particular product offered on an exchange. Moreover, membership is not a requirement to participate on the Exchange. Indeed, the Exchange is unaware of any one options exchange whose membership includes every registered broker-dealer. By way of example, while the Exchange has 51 members that trade options, Cboe BZX has 61 members that trade options, and Cboe C2 has 52 Trading Permit Holders (‘‘TPHs’’) (i.e., members). There is also no firm that is a Member of EDGX Options only. Further, based on previously publicly available information regarding a sample of the Exchange’s competitors, NYSE American Options has 71 members,15 and NYSE Arca Options has 69 members,16 MIAX Options has 46 members 17 and MIAX Pearl Options has 40 members.18 Accordingly, excessive fees would simply serve to reduce demand for these products, which market participants are under no regulatory obligation to utilize. The Exchange also believes that the proposed fee change is not unfairly discriminatory because it would be assessed uniformly across all market participants that purchase the respective logical ports. All Members have the option to select any connectivity option, and there is no differentiation among Members with regard to the fees charged for the services offered by the Exchange. lotter on DSK11XQN23PROD with NOTICES1 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 believes the proposed fee change will not impact intramarket competition because it will apply to all 15 See https://www.nyse.com/markets/americanoptions/membership#directory. 16 See https://www.nyse.com/markets/arcaoptions/membership#directory. 17 See https://www.miaxglobal.com/sites/default/ files/page-files/MIAX_Options_Exchange_ Members_April_2023_04282023.pdf. 18 See https://www.miaxglobal.com/sites/default/ files/page-files/MIAX_Pearl_Exchange_Members_ 01172023_0.pdf. VerDate Sep<11>2014 19:14 May 17, 2024 Jkt 262001 similarly situated market participants equally (i.e., all market participants that choose to purchase the relevant logical ports). The Exchange believes the proposed fees will not impact intermarket competition because they are also in line with, or even lower than some fees for similar connectivity on other exchanges, and therefore may stimulate intermarket competition by attracting additional firms to connect to the Exchange or at least should not deter interested participants from connecting directly to the Exchange. Further, if the changes proposed herein are unattractive to market participants, the Exchange can, and likely will, see a decline in usage of these ports as a result. The Exchange operates in a highly competitive market in which market participants can determine whether or not to connect directly to the Exchange based on the value received compared to the cost of doing so. Indeed, market participants have numerous alternative venues that they may participate on and direct their order flow, including 13 (soon to be 14) non-Cboe affiliated options markets, as well as off-exchange venues, where competitive products are available for trading. 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.’’ 19 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 19 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). PO 00000 Frm 00115 Fmt 4703 Sfmt 4703 dealers’ . . . . ’’.20 Accordingly, the Exchange does not believe its proposed 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 21 and paragraph (f) of Rule 19b–4 22 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: 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–2024–023 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–2024–023. This file number should be included on the subject line if email is used. To help the 20 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)). 21 15 U.S.C. 78s(b)(3)(A). 22 17 CFR 240.19b–4(f). E:\FR\FM\20MYN1.SGM 20MYN1 Federal Register / Vol. 89, No. 98 / Monday, May 20, 2024 / Notices 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–2024–023 and should be submitted on or before June 10, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–10950 Filed 5–17–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–346, OMB Control No. 3235–0392] lotter on DSK11XQN23PROD with NOTICES1 Proposed Collection; Comment Request; Extension: Rule 15g–3 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 (‘‘PRA’’) (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) is soliciting comments on the existing collection of information provided for in Rule 15g–3—Broker or dealer disclosure of quotations and 23 17 other information relating to the penny stock market (17 CFR 240.15g–3) under the Securities Exchange Act of 1934 (15 U.S.C. 78a et seq.). The Commission plans to submit this existing collection of information to the Office of Management and Budget (‘‘OMB’’) for extension and approval. Rule 15g–3 requires that brokers and dealers disclose to customers current quotation prices or similar market information in connection with transactions in penny stocks. The purpose of the rule is to increase the level of disclosure to investors concerning penny stocks generally and specific penny stock transactions. The Commission estimates that approximately 170 broker-dealers will each spend an average of approximately 87.0833333 hours annually to comply with this rule. Thus, the total time burden is approximately 14,804 hours per year. 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 estimates of the burden of the proposed 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 July 19, 2024. 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, 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: May 15, 2024. Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–10976 Filed 5–17–24; 8:45 am] BILLING CODE 8011–01–P CFR 200.30–3(a)(12). VerDate Sep<11>2014 19:14 May 17, 2024 Jkt 262001 PO 00000 Frm 00116 Fmt 4703 Sfmt 4703 43915 SECURITIES AND EXCHANGE COMMISSION [Release No. 34–100141; File No. SR–FICC– 2024–003] Self-Regulatory Organizations; Fixed Income Clearing Corporation; Notice of Filing of Partial Amendment No. 1 and Order Instituting Proceedings To Determine Whether To Approve or Disapprove a Proposed Rule Change, as Modified by Partial Amendment No. 1, Concerning the Adoption of a Minimum Margin Amount at GSD May 14, 2024. I. Introduction On February 27, 2024, Fixed Income Clearing Corporation (‘‘FICC’’) filed with the Securities and Exchange Commission (‘‘Commission’’) proposed rule change SR–FICC–2024–003 pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder.2 The notice of filing of the proposed rule change was published for comment in the Federal Register on March 15, 2024.3 On March 25, 2024, the Commission extended the review period of the proposed rule change, pursuant to section 19(b)(2) of the Act,4 until June 13, 2024, as the date by which the Commission shall either approve, disapprove, or institute proceedings to determine whether to disapprove the proposed rule change.5 The Commission has received comments regarding the proposed rule change.6 On April 5, 2024, FICC filed Partial Amendment No. 1 to the proposed rule change to correct errors FICC discovered regarding the impact analysis filed as Exhibit 3 and discussed in the filing narrative, as well as correct a typo in the methodology formula in Exhibit 5b.7 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 Securities Exchange Act Release No. 99711 (March 11, 2024), 89 FR 18991 (March 15, 2024) (SR–FICC–2024–003). 4 15 U.S.C. 78s(b)(2)(ii). 5 Securities Exchange Act Release No. 99769 (March 19, 2024), 89 FR 20716 (March 25, 2024) (SR–FICC–2024–003). 6 Comments on the proposed rule change are available at https://www.sec.gov/comments/sr-ficc2024-003/srficc2024003.htm. 7 To promote the public availability and transparency of its post-notice partial amendment, FICC submitted a copy of Partial Amendment No. 1 through the Commission’s electronic public comment letter mechanism. Accordingly, Partial Amendment No. 1 has been posted to the Commission’s website at https://www.sec.gov/ comments/sr-ficc-2024-003/srficc2024003-4556111167714.pdf and thus been publicly available since April 5, 2024. FICC has requested confidential treatment pursuant to 17 CFR 240.24b-2 with respect to Exhibit 3 and Exhibit 5b. 2 17 E:\FR\FM\20MYN1.SGM 20MYN1

Agencies

[Federal Register Volume 89, Number 98 (Monday, May 20, 2024)]
[Notices]
[Pages 43912-43915]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10950]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100134; File No. SR-CboeEDGX-2024-023]


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

May 14, 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 April 30, 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.
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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 Options'') 
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 for its equity 
options platform (``EDGX Options'') relating to logical connectivity 
fees.\3\
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed fee change on 
January 2, 2024 (SR-CboeEDGX-2024-006). On March 1, 2024, the 
Exchange withdrew that filing and submitted SR-CboeEDGX-2024-017. On 
April 30, 2024, the Exchange withdrew that filing and submitted this 
filing.
---------------------------------------------------------------------------

    By way of background, the Exchange offers a variety of logical 
ports, which provide users with the ability within the Exchange's 
System to accomplish a specific function through a connection, such as 
order entry, data receipt or access to information. The Exchange 
currently assesses, among other things, the following logical port 
connectivity fees on a monthly basis: $500 per port for Logical Ports; 
\4\ $500 per port for Multicast PITCH Spin Server Ports (``Spin 
Ports'') and GRP Ports; \5\ and $600 per port for Ports with Bulk 
Quoting Capabilities \6\ (``Bulk Ports''). The Exchange proposes to 
increase the monthly fees for the forgoing ports to the following 
rates: $750 per port for Logical Ports, Spin Ports and GRP Ports and 
$1,000 per port for Bulk Ports. The Exchange notes the proposed fee 
change better enables it to continue to maintain and improve its market 
technology and services and also notes that the proposed fee amount, 
even as amended, continues to be in line with, or even lower than, 
amounts assessed by other exchanges for similar connections, including 
the Exchange's affiliated options exchanges.\7\
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    \4\ Logical Ports include FIX and BOE ports (used for order 
entry), drop logical port (which grants users the ability to receive 
and/or send drop copies) and ports that are used for receipt of 
certain market data feeds.
    \5\ Spin Ports and GRP Ports are used to request and receive a 
retransmission of data from the Exchange's Multicast PITCH data 
feeds.
    \6\ Bulk Quoting Capabilities Ports provide users with the 
ability to submit and update multiple bids and offers in one message 
through logical ports enabled for bulk-quoting.
    \7\ See e.g., Cboe C2 Options Exchange Fee Schedule, Options 
Logical Port Fees, Cboe BZX Options Exchange Fee Schedule, Options 
Logical Port Fees and Cboe Exchange Fees Schedule, Logical 
Connectivity Fees; see also The Nasdaq Stock Market Options Pricing 
Schedule, Section 3 Nasdaq Options Market--Ports and Other Services.
---------------------------------------------------------------------------

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

[[Page 43913]]

and, in particular, the requirements of Section 6(b) of the Act.\8\ 
Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \9\ 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) \10\ 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) \11\ of the 
Act, which requires that Exchange rules provide for the equitable 
allocation of reasonable dues, fees, and other charges among its 
Members and other persons using its facilities.
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    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(5).
    \10\ Id.
    \11\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed fee is reasonable as it is still 
in line with, or even lower than, amounts assessed by other exchanges 
for similar connections.\12\ Indeed, the Exchange believes assessing 
fees that are a lower rate than fees assessed by other exchanges for 
analogous connectivity (which were similarly adopted via the rule 
filing process and filed with the Commission) is reasonable. 
Additionally, the Exchange believes the proposed fee increase is 
reasonable in light of recent and anticipated connectivity-related 
upgrades and changes. The Exchange and its affiliated exchanges 
recently launched a multi-year initiative to improve Cboe Exchange 
Platform performance and capacity requirements, including for its U.S. 
options markets, to increase competitiveness, support growth and 
advance a consistent world class platform. The goal of the project, 
among other things, is to provide faster and more consistent order 
handling and matching performance for options, while ensuring quicker 
processing time and supporting increasing volumes. For example, the 
Exchange is currently performing order handler and matching engine 
hardware upgrades across its markets to advance this goal. The Exchange 
anticipates that upgrades to its matching engines may result in a 
latency reduction up to 40% to 50% on the Exchange and that upgrades to 
its order handlers may offer lower variability in the processing of 
message, which can reduce the time a message takes to get to the 
matching engine. The Exchange expended, and will continue to expend, 
resources to innovate and modernize technology so that it may benefit 
its Members and continue to compete among other options markets. The 
Exchange also notes that neither it--nor its options exchange 
affiliates--have passed through or offset current or projected costs 
associated with these upgrades. The ability to continue to innovate 
with technology and offer new products to market participants allows 
the Exchange to remain competitive in the options space which currently 
has 17 options markets and potential new entrants. The Exchange also 
notes market participants may continue to choose the method of 
connectivity based on their specific needs, and no broker-dealer is 
required to become a Member of, let alone connect directly to, the 
Exchange. There is also no regulatory requirement that any market 
participant connect to any one particular exchange. Market participants 
may voluntarily choose to become a member of one or more of a number of 
different exchanges, of which, the Exchange is but one choice. 
Additionally, any Exchange member that is dissatisfied with the 
proposal is free to choose not to be a member of the Exchange and send 
order flow to another exchange. Moreover, direct connectivity is not a 
requirement to participate on the Exchange. The Exchange also believes 
substitutable products and services are available to market 
participants, including, among other things, other options exchanges to 
which a market participant may connect in lieu of the Exchange and/or 
trading of any options product, such as within the Over-the-Counter 
(OTC) markets, which do not require connectivity to the Exchange. 
Indeed, there are currently 17 registered options exchanges that trade 
options (13 of which are not affiliated with Cboe), some of which have 
similar or lower connectivity fees.\13\ Based on publicly available 
information, no single options exchange has more than approximately 17% 
of the market share.\14\ Further, low barriers to entry mean that new 
exchanges may rapidly enter the market and offer additional substitute 
platforms to further compete with the Exchange and the products it 
offers. For example, there are 4 exchanges that have been added in the 
U.S. options markets in the last 5 years (i.e., Nasdaq MRX, LLC, MIAX 
Pearl, LLC, MIAX Emerald LLC, and most recently MEMX LLC), with a fifth 
options exchange anticipated to added in 2024 (MIAX Sapphire, LLC).
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    \12\ See, e.g., Cboe C2 Options Exchange Fee Schedule, Options 
Logical Port Fees, Cboe BZX Options Exchange Fee Schedule, Options 
Logical Port Fees and Cboe Exchange Fees Schedule, Logical 
Connectivity Fees see also The Nasdaq Stock Market Options Pricing 
Schedule, Section 3 Nasdaq Options Market--Ports and Other Services.
    \13\ Id.
    \14\ See Cboe Global Markets U.S. Options Market Volume Summary 
(December 20, 2023), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------

    As for market participants that determine to continue to maintain 
membership or to join the Exchange for business purposes, those 
business reasons presumably result in revenue capable of covering the 
proposed fee. Further, for such market participants that choose to 
connect to the Exchange, the Exchange believes the proposed fees 
continue to provide flexibility with respect to how to connect to the 
Exchange based on each market participants' respective business needs. 
For example, the amount and type of logical ports are determined by 
factors relevant and specific to each market participant, including its 
business model, costs of connectivity, how its business is segmented 
and allocated and volume of messages sent to the Exchange. Moreover, 
the Exchange notes that it does not have unlimited system capacity and 
the proposed fees are also designed to encourage market participants to 
be efficient with their respective logical port usage and discourage 
the purchasing of large amounts of superfluous ports. There is also no 
requirement that any market participant maintain a specific number of 
logical ports and a market participant may choose to maintain as many 
or as few of such ports as each deems appropriate. Further, market 
participants may reduce or discontinue use of these ports in response 
to the proposed fees. Indeed, when the Exchange last increased pricing 
for logical ports in 2018, the Exchange observed with the first two 
months that market participants did in fact reduce the number of 
logical ports they maintained. Particularly, Logical Port quantities 
were reduced by approximately 20%. This demonstrates that if an 
exchange sets a fee too high for connectivity, market participants can 
and do choose to disconnect, or reduce, their connectivity from the 
Exchange. The Exchange also does not assess any

[[Page 43914]]

termination fee for a market participant to drop its connectivity or 
membership, nor is the Exchange aware of any other costs that would be 
incurred by a market participant to do so.
    As noted above, there is no regulatory requirement that any market 
participant connect to any one options exchange, nor that any market 
participant connect at a particular connection speed or act in a 
particular capacity on the Exchange, or trade any particular product 
offered on an exchange. Moreover, membership is not a requirement to 
participate on the Exchange. Indeed, the Exchange is unaware of any one 
options exchange whose membership includes every registered broker-
dealer. By way of example, while the Exchange has 51 members that trade 
options, Cboe BZX has 61 members that trade options, and Cboe C2 has 52 
Trading Permit Holders (``TPHs'') (i.e., members). There is also no 
firm that is a Member of EDGX Options only. Further, based on 
previously publicly available information regarding a sample of the 
Exchange's competitors, NYSE American Options has 71 members,\15\ and 
NYSE Arca Options has 69 members,\16\ MIAX Options has 46 members \17\ 
and MIAX Pearl Options has 40 members.\18\ Accordingly, excessive fees 
would simply serve to reduce demand for these products, which market 
participants are under no regulatory obligation to utilize.
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    \15\ See https://www.nyse.com/markets/american-options/membership#directory.
    \16\ See https://www.nyse.com/markets/arca-options/membership#directory.
    \17\ See https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Options_Exchange_Members_April_2023_04282023.pdf.
    \18\ See https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Exchange_Members_01172023_0.pdf.
---------------------------------------------------------------------------

    The Exchange also believes that the proposed fee change is not 
unfairly discriminatory because it would be assessed uniformly across 
all market participants that purchase the respective logical ports. All 
Members have the option to select any connectivity option, and there is 
no differentiation among Members with regard to the fees charged for 
the services offered by the Exchange.

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 believes the 
proposed fee change will not impact intramarket competition because it 
will apply to all similarly situated market participants equally (i.e., 
all market participants that choose to purchase the relevant logical 
ports).
    The Exchange believes the proposed fees will not impact intermarket 
competition because they are also in line with, or even lower than some 
fees for similar connectivity on other exchanges, and therefore may 
stimulate intermarket competition by attracting additional firms to 
connect to the Exchange or at least should not deter interested 
participants from connecting directly to the Exchange. Further, if the 
changes proposed herein are unattractive to market participants, the 
Exchange can, and likely will, see a decline in usage of these ports as 
a result. The Exchange operates in a highly competitive market in which 
market participants can determine whether or not to connect directly to 
the Exchange based on the value received compared to the cost of doing 
so. Indeed, market participants have numerous alternative venues that 
they may participate on and direct their order flow, including 13 (soon 
to be 14) non-Cboe affiliated options markets, as well as off-exchange 
venues, where competitive products are available for trading. 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.'' \19\ 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' . . . . ''.\20\ Accordingly, the 
Exchange does not believe its proposed change imposes any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
---------------------------------------------------------------------------

    \19\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \20\ 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 \21\ and paragraph (f) of Rule 19b-4 \22\ 
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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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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-2024-023 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-2024-023. This 
file number should be included on the subject line if email is used. To 
help the

[[Page 43915]]

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-2024-023 and should be 
submitted on or before June 10, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
---------------------------------------------------------------------------

    \23\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-10950 Filed 5-17-24; 8:45 am]
BILLING CODE 8011-01-P
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