Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule To Adopt Fees for Dedicated Cores, 57454-57457 [2024-15402]

Download as PDF 57454 Federal Register / Vol. 89, No. 135 / Monday, July 15, 2024 / Notices III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action Because the foregoing proposed rule change does not: (i) significantly affect the protection of investors or the public interest; (ii) impose any significant burden on competition; and (iii) become operative for 30 days from the date on which it was filed, or such shorter time as the Commission may designate, it has become effective pursuant to Section 19(b)(3)(A) of the Act 17 and Rule 19b4(f)(6) thereunder.18 A proposed rule change filed under Rule 19b–4(f)(6) 19 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),20 the Commission may designate a shorter time if such action is consistent with the protection of investors and the public interest. The Exchange has asked the Commission to waive the 30-day operative delay so that the proposed rule change may become operative upon filing. The Exchange has stated that a waiver of the operative delay would allow the Exchange to implement the proposed changes to its CE rules without delay, thereby eliminating the possibility of a significant regulatory gap between the FINRA and the Exchange rules. The Exchange has also stated that a waiver would provide more uniform standards across the securities industry and help to avoid confusion for Exchange members that are also FINRA members. The Exchange believes a waiver would also provide immediately clarity to impacted individuals, thus minimizing the potential for confusion regarding the time frames for satisfying continuing education content in order to maintain eligibility to participate in the continuing education program. For these reasons, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Therefore, the Commission hereby waives the operative delay and designates the proposal operative upon filing.21 17 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6) requires a self-regulatory organization to give the Commission written notice of its intent to file the proposed rule change, along with a brief description and text of the proposed rule change, at least five business days prior to the date of filing of the proposed rule change, or such shorter time as designated by the Commission. The Exchange has satisfied this requirement. 19 17 CFR 240.19b–4(f)(6). 20 17 CFR 240.19b–4(f)(6)(iii). 21 For purposes only of waiving the 30-day operative delay, the Commission has considered the proposed rule’s impact on efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). ddrumheller on DSK120RN23PROD with NOTICES1 18 17 VerDate Sep<11>2014 18:25 Jul 12, 2024 Jkt 262001 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 shall institute proceedings under Section 19(b)(2)(B) 22 of the Act 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– MIAX–2024–27 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–MIAX–2024–27. 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 10:00 a.m. and 3:00 p.m. Copies of the filing also will be available for inspection and copying at the principal PO 00000 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–MIAX–2024–27 and should be submitted on or before August 5, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.23 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2024–15403 Filed 7–12–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–100471; File No. SR– CboeEDGX–2024–043] Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule To Adopt Fees for Dedicated Cores July 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 July 1, 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 Equities’’) proposes to amend its Fees Schedule. The text of the proposed rule change is provided in Exhibit 5. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ options/regulation/rule_filings/edgx/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. 23 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 22 15 U.S.C. 78s(b)(2)(B). Frm 00071 Fmt 4703 Sfmt 4703 E:\FR\FM\15JYN1.SGM 15JYN1 Federal Register / Vol. 89, No. 135 / Monday, July 15, 2024 / Notices 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 ddrumheller on DSK120RN23PROD with NOTICES1 1. Purpose The Exchange proposes to amend its fee schedule to adopt fees for Dedicated Cores, effective July 1, 2024. Effective July 1, 2024, the Exchange will begin allowing Users 3 to assign a Single Binary Order Entry (‘‘BOE’’) logical order entry port 4 to a single dedicated Central Processing Unit (CPU Core) (‘‘Dedicated Core’’). Historically, CPU Cores had been shared by logical order entry ports (i.e., multiple logical ports from multiple firms may connect to a single CPU Core). Use of Dedicated Cores however, can provide reduced latency, enhanced throughput, and improved performance since a firm using a Dedicated Core is utilizing the full processing power of a CPU Core instead of sharing that power with other firms. This offering is completely voluntary and is available to all Users that wish to purchase Dedicated Cores. Users may utilize BOE logical order entry ports on shared CPU Cores, either in lieu of, or in addition to, their use of Dedicated Core(s). As such, Users are able to operate across a mix of shared and dedicated CPU Cores which the Exchange believes provides additional risk and capacity management. Further, Dedicated Cores are not required nor 3 A User may be either a Member or Sponsored Participant. The term ‘‘Member’’ shall mean any registered broker or dealer that has been admitted to membership in the Exchange, limited liability company or other organization which is a registered broker or dealer pursuant to Section 15 of the Act, and which has been approved by the Exchange. A Sponsored Participant may be a Member or nonMember of the Exchange whose direct electronic access to the Exchange is authorized by a Sponsoring Member subject to certain conditions. See Exchange Rule 11.3. 4 Users may currently connect to the Exchange using a logical port available through an application programming interface (‘‘API’’), such as the Binary Order Entry (‘‘BOE’’) protocol. A BOE logical order entry port is used for order entry. VerDate Sep<11>2014 18:25 Jul 12, 2024 Jkt 262001 necessary to participate on the Exchange and as such Users may opt not to use Dedicated Cores at all. The Exchange proposes to assess the following monthly fees for Users that wish to use Dedicated Cores and adopt a maximum limit. First, the Exchange proposes to provide up to two Dedicated Cores to all Users who wish to use Dedicated Cores, at no additional cost. For the use of more than two Dedicated Cores, the Exchange proposes to assess the following fees: $650 per Dedicated Core for 3–15 Dedicated Cores; $850 per Dedicated Core for 16–30 Dedicated Cores; and $1,050 per Dedicated Core for 31 or more Dedicated Cores. The proposed fees are progressive and the Exchange proposes to include the following example in the Fees Schedule to provide clarity as to how the fees will be applied. Particularly, the Exchange will provide the following example: if a User were to purchase 16 Dedicated Cores, it will be charged a total of $9,300 per month ($0 * 2 + $650 * 13 + $850 * 1). The Exchange also proposes to make clear in the Fees Schedule that the monthly fees are assessed and applied in their entirety and are not prorated. The Exchange notes the current standard fees assessed for BOE Logical Ports, whether used with Dedicated or shared CPU cores, will remain applicable and unchanged.5 Since the Exchange currently has a finite amount of physical space in its data centers in which its servers (and therefore corresponding CPU Cores) are located, the Exchange also proposes to prescribe a maximum limit on the number of Dedicated Cores that Users may purchase each month. The purpose of establishing these limits is to manage the allotment of Dedicated Cores in a fair manner and to prevent the Exchange from being required to expend large amounts of resources in order to provide an unlimited number of Dedicated Cores. The Exchange proposes to provide that Members will be limited to a maximum number of 60 Dedicated Cores 6 and Sponsoring Members will be limited to a maximum number of 25 Dedicated Cores for each of their 5 The Exchange currently assesses $550 per port per month. Port fees will also continue to be assessed on the first two Dedicated Cores that Users receive at no additional cost. See Cboe EDGX Equities Fee Schedule. 6 The prescribed maximum quantity of Dedicated Cores for Members applies regardless of whether that Member purchases the Dedicated Cores directly from the Exchange and/or through a Service Bureau. In a Service Bureau relationship, a customer allows its MPID to be used on the ports of a technology provider, or Service Bureau. One MPID may be allowed on several different Service Bureaus. PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 57455 Sponsored Access relationships.7 The Exchange notes that it will continue monitoring Dedicated Core interest by all Users and allotment availability with the goal of increasing these limits to meet Users’ needs if and when the demand is there and the Exchange is able to accommodate additional Dedicated Cores. 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.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 7 The fee tier(s) applicable to Sponsoring Members are determined on a per Sponsored Access relationship basis and not on the combined total of Dedicated Cores across Sponsored Users. For example, under the proposed changes, a Sponsoring Member that has three Sponsored Access relationships is entitled to a total of 75 Dedicated Cores for those 3 Sponsored Access relationships but would be assessed fees separately based on the 25 Dedicated Cores for each Sponsored User (instead of combined total of 75 Dedicated Cores). For example, a Sponsoring Member with 3 Sponsored Access relationships would pay $16,950 per month if each Sponsored Access relationship purchased the maximum 25 Dedicated Cores. More specifically, the Sponsoring Member would be provided 2 Dedicated Cores at no additional cost for each Sponsored User under Tier 1 (total of 6 Dedicated Cores at no additional cost) and provided an additional 13 Dedicated Cores at $650 each for each Sponsored User, 10 Dedicated Cores at $850 each for each Sponsored User (combined total of 69 additional Dedicated Cores). 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). E:\FR\FM\15JYN1.SGM 15JYN1 ddrumheller on DSK120RN23PROD with NOTICES1 57456 Federal Register / Vol. 89, No. 135 / Monday, July 15, 2024 / Notices Members and other persons using its facilities. The Exchange believes the proposal is reasonable because the Exchange is offering any Users who wishes to utilize Dedicated Cores up to two Dedicated Cores at no additional cost. The Exchange believes the proposed fees are reasonable because Dedicated Cores provide a valuable service in that it may provide reduced latency, enhanced throughput, and improved performance compared to use of a shared CPU Core since a firm using a Dedicated Core is utilizing the full processing power of a CPU Core. The Exchange also emphasizes however, that the use of Dedicated Cores is not necessary for trading and as noted above, is entirely optional. Users can also continue to access the Exchange through shared CPU Cores at no additional cost. For example, less than half of the members of the Exchange’s affiliate Cboe EDGA Exchange, Inc., (‘‘Cboe EDGA’’) currently use Dedicated Cores on Cboe EDGA. Depending on a firm’s specific business needs, the proposal enables Users to choose to use Dedicated Cores in lieu of, or in addition to, shared CPU Cores (or as noted, not use Dedicated Cores at all). If a User finds little benefit in having Dedicated Cores, or determines Dedicated Cores are not cost-efficient for its needs or does not provide sufficient value to the firm, such User may continue its use of the shared CPU Cores, unchanged. The Exchange also has no plans to eliminate shared CPU Cores nor to require Users to purchase Dedicated Cores. The Exchange also notes that the proposed fees are the same as the fees recently adopted and assessed for Dedicated Cores on its affiliated exchange, Cboe BZX Exchange, Inc. (‘‘Cboe BZX’’).12 The Exchange also believes that the proposed Dedicated Core fees are equitable and not unfairly discriminatory because they continue to be assessed uniformly to similarly situated users in that all Users who choose to purchase Dedicated Cores will be subject to the same proposed tiered fee schedule. Further all Users are entitled to up to 2 Dedicated Cores at no additional cost. The Exchange believes the proposed ascending fee structure is also reasonable, equitable and not unfairly discriminatory as it is designed so that firms that use a higher allotment of the Exchange’s finite number of Dedicated Cores pay higher rates, rather than placing that burden on market 12 See Cboe U.S. Equities Fee Schedule, BZX Equities, Dedicated Cores. See Securities Exchange Act Release No. 100395 (June 21, 2024) 89 FR 53690 (June 27, 2024) (SR–CboeBZX–2024–054). VerDate Sep<11>2014 18:25 Jul 12, 2024 Jkt 262001 participants that have more modest needs who will have the flexibility of obtaining Dedicated Cores at lower price points in the lower tiers. As such, the proposed fees do not favor certain categories of market participants in a manner that would impose a burden on competition; rather, the ascending fee structure reflects the (finite) resources consumed by the various needs of market participants—that is, the lowest Dedicated Core consuming Users pay the least, and highest Dedicated Core consuming Users pay the most. Other exchanges similarly assess higher fees to those that consume more Exchange resources.13 It’s also designed to encourage firms to manage their needs in a fair manner and to prevent the Exchange from being required to expend large amounts of resources in order to provide an additional number of Dedicated Cores. Moreover, as discussed above and in more detail below, the Exchange cannot currently offer an unlimited number of Dedicated Cores due in part to physical space constraints. The Exchange believes the proposed ascending fee structure is another appropriate means, in conjunction with an established cap, to manage this finite resource and ensure the resource is apportioned more fairly. The Exchange believes it is reasonable to limit the number of Dedicated Cores Users can purchase because the Exchange has a finite amount of space in its third-party data centers to accommodate CPU cores, including Dedicated Cores. The Exchange must also take into account timing considerations in procuring additional Dedicated Cores and related hardware such as servers, switches, optics and cables, as well as the readiness of the Exchange’s data center to accommodate additional Dedicated Cores in the Exchange’s respective Order Handler Cabinets. The Exchange will monitor market participant demand and space availability and endeavor to adjust the limit if and when the Exchange is able to accommodate additional Dedicated Cores. The Exchange monitors its capacity and data center space and thus is in the best place to determine these limits and modify them as appropriate in response to changes to this capacity and space, as well as market demand. For example, Cboe EDGA has increased the prescribed maximum limit twice since the launch of Dedicated Cores on its exchange on February 26, 2024 as a result of evaluating the demand relative 13 See also Cboe U.S. Options Fee Schedule, BZX Options, Options Logical Port Fees, Ports with Bulk Quoting Capabilities. PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 to Dedicated Cores availability.14 The proposed limits also apply uniformly to similarly situated market participants (i.e., all Members are subject to the same limit and all Sponsored Participants are subject to the same limit, respectively). The Exchange believes it’s not unfairly discriminatory to provide for different limits for different types of Users. For example, the Exchange believe it’s not unfairly discriminatory to provide for an initial lower limit to be allocated for Sponsored Participants because unlike Members, Sponsored Participants are able to access the Exchange without paying a Membership Fee. Members also have more regulatory obligations and risk that Sponsored Participants do not. For example, while Sponsored Participants must agree to comply with the Rules of the Exchange, it is the Sponsoring Member of that Sponsored Participant that remains ultimately responsible for all orders entered on or through the Exchange by that Sponsored Participant. The industry also has a history of applying fees differently to Members as compared to Sponsored Participants.15 The Exchange believes its proposed maximum limits, and distinction between Members and Sponsored Users, is another appropriate means to help the Exchange manage its allotment of Dedicated Cores and better ensure this finite resource is apportioned fairly. 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 intramarket competition that is not necessary in furtherance of the purposes of the Act because the proposed tiered fee structure will apply equally to all similarly situated Users that choose to use Dedicated Cores. As discussed above, Dedicated Cores are optional and Users may choose to utilize Dedicated Cores, or not, based on their views of the additional benefits and added value provided by utilizing a Dedicated Core. The E9xchange believes the proposed fees will be assessed proportionately to the potential value or benefit received by Users with a greater number of Dedicated Cores and notes that Users may determine at any time to cease using Dedicated Cores. As 14 See Securities Exchange Act Release No. 99983 (April 17, 2024) 89 FR 30418 (April 23, 2024) (SR– CboeEDGA–2024–014) and Securities Exchange Act Release No. 100300 (June 10, 2024) 89 FR 50653 (June 14, 2024) SR–CboeEDGA–2024–020. 15 See e.g., Securities Exchange Act Release No. 68342 (December 3, 2012) 77 FR 73096 (December 7, 2012) (SR–CBOE–2012–114).and Securities Exchange Act Release No. 66082 (January 3, 2012) 77 FR 1101 (January 9, 2012) (SR–C2–2011–041). E:\FR\FM\15JYN1.SGM 15JYN1 ddrumheller on DSK120RN23PROD with NOTICES1 Federal Register / Vol. 89, No. 135 / Monday, July 15, 2024 / Notices discussed, Users can also continue to access the Exchange through shared CPU Cores at no additional cost. Finally, all Users will be entitled to two Dedicated Cores at no additional cost. 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, including competition for exchange memberships. Market Participants have numerous alternative venues that they may participate on, including 15 other equities exchanges, as well as offexchange venues, where competitive products are available for trading. Indeed, participants can readily choose to submit their order flow 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.’’ 16 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’. . . .’’.17 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. 16 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 17 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)). VerDate Sep<11>2014 18:25 Jul 12, 2024 Jkt 262001 C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 18 and paragraph (f) of Rule 19b–4 19 thereunder. At any time within 60 days of the filing of the proposed rule change, the Commission summarily may temporarily suspend such rule change if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or otherwise in furtherance of the purposes of the Act. If the Commission takes such action, the Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: 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–2024–043 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–2024–043. 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 PO 00000 18 15 19 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). Frm 00074 Fmt 4703 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–2024–043 and should be submitted on or before August 5, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2024–15402 Filed 7–12–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meetings 2:00 p.m. on Thursday, July 18, 2024. PLACE: The meeting will be held via remote means and/or at the Commission’s headquarters, 100 F Street NE, Washington, DC 20549. STATUS: This meeting will be closed to the public. MATTERS TO BE CONSIDERED: Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the closed meeting. Certain staff members who have an interest in the matters also may be present. In the event that the time, date, or location of this meeting changes, an announcement of the change, along with the new time, date, and/or place of the meeting will be posted on the Commission’s website at https:// www.sec.gov. The General Counsel of the Commission, or her designee, has certified that, in her opinion, one or more of the exemptions set forth in 5 TIME AND DATE: 20 17 Sfmt 4703 57457 E:\FR\FM\15JYN1.SGM CFR 200.30–3(a)(12). 15JYN1

Agencies

[Federal Register Volume 89, Number 135 (Monday, July 15, 2024)]
[Notices]
[Pages 57454-57457]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-15402]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100471; File No. SR-CboeEDGX-2024-043]


Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Its Fees Schedule To Adopt Fees for Dedicated Cores

July 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 July 1, 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 Equities'') 
proposes to amend its Fees Schedule. The text of the proposed rule 
change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

[[Page 57455]]

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 to adopt fees for 
Dedicated Cores, effective July 1, 2024. Effective July 1, 2024, the 
Exchange will begin allowing Users \3\ to assign a Single Binary Order 
Entry (``BOE'') logical order entry port \4\ to a single dedicated 
Central Processing Unit (CPU Core) (``Dedicated Core''). Historically, 
CPU Cores had been shared by logical order entry ports (i.e., multiple 
logical ports from multiple firms may connect to a single CPU Core). 
Use of Dedicated Cores however, can provide reduced latency, enhanced 
throughput, and improved performance since a firm using a Dedicated 
Core is utilizing the full processing power of a CPU Core instead of 
sharing that power with other firms. This offering is completely 
voluntary and is available to all Users that wish to purchase Dedicated 
Cores. Users may utilize BOE logical order entry ports on shared CPU 
Cores, either in lieu of, or in addition to, their use of Dedicated 
Core(s). As such, Users are able to operate across a mix of shared and 
dedicated CPU Cores which the Exchange believes provides additional 
risk and capacity management. Further, Dedicated Cores are not required 
nor necessary to participate on the Exchange and as such Users may opt 
not to use Dedicated Cores at all.
---------------------------------------------------------------------------

    \3\ A User may be either a Member or Sponsored Participant. The 
term ``Member'' shall mean any registered broker or dealer that has 
been admitted to membership in the Exchange, limited liability 
company or other organization which is a registered broker or dealer 
pursuant to Section 15 of the Act, and which has been approved by 
the Exchange. A Sponsored Participant may be a Member or non-Member 
of the Exchange whose direct electronic access to the Exchange is 
authorized by a Sponsoring Member subject to certain conditions. See 
Exchange Rule 11.3.
    \4\ Users may currently connect to the Exchange using a logical 
port available through an application programming interface 
(``API''), such as the Binary Order Entry (``BOE'') protocol. A BOE 
logical order entry port is used for order entry.
---------------------------------------------------------------------------

    The Exchange proposes to assess the following monthly fees for 
Users that wish to use Dedicated Cores and adopt a maximum limit. 
First, the Exchange proposes to provide up to two Dedicated Cores to 
all Users who wish to use Dedicated Cores, at no additional cost. For 
the use of more than two Dedicated Cores, the Exchange proposes to 
assess the following fees: $650 per Dedicated Core for 3-15 Dedicated 
Cores; $850 per Dedicated Core for 16-30 Dedicated Cores; and $1,050 
per Dedicated Core for 31 or more Dedicated Cores. The proposed fees 
are progressive and the Exchange proposes to include the following 
example in the Fees Schedule to provide clarity as to how the fees will 
be applied. Particularly, the Exchange will provide the following 
example: if a User were to purchase 16 Dedicated Cores, it will be 
charged a total of $9,300 per month ($0 * 2 + $650 * 13 + $850 * 1). 
The Exchange also proposes to make clear in the Fees Schedule that the 
monthly fees are assessed and applied in their entirety and are not 
prorated. The Exchange notes the current standard fees assessed for BOE 
Logical Ports, whether used with Dedicated or shared CPU cores, will 
remain applicable and unchanged.\5\
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    \5\ The Exchange currently assesses $550 per port per month. 
Port fees will also continue to be assessed on the first two 
Dedicated Cores that Users receive at no additional cost. See Cboe 
EDGX Equities Fee Schedule.
---------------------------------------------------------------------------

    Since the Exchange currently has a finite amount of physical space 
in its data centers in which its servers (and therefore corresponding 
CPU Cores) are located, the Exchange also proposes to prescribe a 
maximum limit on the number of Dedicated Cores that Users may purchase 
each month. The purpose of establishing these limits is to manage the 
allotment of Dedicated Cores in a fair manner and to prevent the 
Exchange from being required to expend large amounts of resources in 
order to provide an unlimited number of Dedicated Cores. The Exchange 
proposes to provide that Members will be limited to a maximum number of 
60 Dedicated Cores \6\ and Sponsoring Members will be limited to a 
maximum number of 25 Dedicated Cores for each of their Sponsored Access 
relationships.\7\ The Exchange notes that it will continue monitoring 
Dedicated Core interest by all Users and allotment availability with 
the goal of increasing these limits to meet Users' needs if and when 
the demand is there and the Exchange is able to accommodate additional 
Dedicated Cores.
---------------------------------------------------------------------------

    \6\ The prescribed maximum quantity of Dedicated Cores for 
Members applies regardless of whether that Member purchases the 
Dedicated Cores directly from the Exchange and/or through a Service 
Bureau. In a Service Bureau relationship, a customer allows its MPID 
to be used on the ports of a technology provider, or Service Bureau. 
One MPID may be allowed on several different Service Bureaus.
    \7\ The fee tier(s) applicable to Sponsoring Members are 
determined on a per Sponsored Access relationship basis and not on 
the combined total of Dedicated Cores across Sponsored Users. For 
example, under the proposed changes, a Sponsoring Member that has 
three Sponsored Access relationships is entitled to a total of 75 
Dedicated Cores for those 3 Sponsored Access relationships but would 
be assessed fees separately based on the 25 Dedicated Cores for each 
Sponsored User (instead of combined total of 75 Dedicated Cores). 
For example, a Sponsoring Member with 3 Sponsored Access 
relationships would pay $16,950 per month if each Sponsored Access 
relationship purchased the maximum 25 Dedicated Cores. More 
specifically, the Sponsoring Member would be provided 2 Dedicated 
Cores at no additional cost for each Sponsored User under Tier 1 
(total of 6 Dedicated Cores at no additional cost) and provided an 
additional 13 Dedicated Cores at $650 each for each Sponsored User, 
10 Dedicated Cores at $850 each for each Sponsored User (combined 
total of 69 additional Dedicated Cores).
---------------------------------------------------------------------------

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.\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

[[Page 57456]]

Members and other persons using its facilities.
---------------------------------------------------------------------------

    \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).
---------------------------------------------------------------------------

    The Exchange believes the proposal is reasonable because the 
Exchange is offering any Users who wishes to utilize Dedicated Cores up 
to two Dedicated Cores at no additional cost. The Exchange believes the 
proposed fees are reasonable because Dedicated Cores provide a valuable 
service in that it may provide reduced latency, enhanced throughput, 
and improved performance compared to use of a shared CPU Core since a 
firm using a Dedicated Core is utilizing the full processing power of a 
CPU Core. The Exchange also emphasizes however, that the use of 
Dedicated Cores is not necessary for trading and as noted above, is 
entirely optional. Users can also continue to access the Exchange 
through shared CPU Cores at no additional cost. For example, less than 
half of the members of the Exchange's affiliate Cboe EDGA Exchange, 
Inc., (``Cboe EDGA'') currently use Dedicated Cores on Cboe EDGA. 
Depending on a firm's specific business needs, the proposal enables 
Users to choose to use Dedicated Cores in lieu of, or in addition to, 
shared CPU Cores (or as noted, not use Dedicated Cores at all). If a 
User finds little benefit in having Dedicated Cores, or determines 
Dedicated Cores are not cost-efficient for its needs or does not 
provide sufficient value to the firm, such User may continue its use of 
the shared CPU Cores, unchanged. The Exchange also has no plans to 
eliminate shared CPU Cores nor to require Users to purchase Dedicated 
Cores. The Exchange also notes that the proposed fees are the same as 
the fees recently adopted and assessed for Dedicated Cores on its 
affiliated exchange, Cboe BZX Exchange, Inc. (``Cboe BZX'').\12\
---------------------------------------------------------------------------

    \12\ See Cboe U.S. Equities Fee Schedule, BZX Equities, 
Dedicated Cores. See Securities Exchange Act Release No. 100395 
(June 21, 2024) 89 FR 53690 (June 27, 2024) (SR-CboeBZX-2024-054).
---------------------------------------------------------------------------

    The Exchange also believes that the proposed Dedicated Core fees 
are equitable and not unfairly discriminatory because they continue to 
be assessed uniformly to similarly situated users in that all Users who 
choose to purchase Dedicated Cores will be subject to the same proposed 
tiered fee schedule. Further all Users are entitled to up to 2 
Dedicated Cores at no additional cost. The Exchange believes the 
proposed ascending fee structure is also reasonable, equitable and not 
unfairly discriminatory as it is designed so that firms that use a 
higher allotment of the Exchange's finite number of Dedicated Cores pay 
higher rates, rather than placing that burden on market participants 
that have more modest needs who will have the flexibility of obtaining 
Dedicated Cores at lower price points in the lower tiers. As such, the 
proposed fees do not favor certain categories of market participants in 
a manner that would impose a burden on competition; rather, the 
ascending fee structure reflects the (finite) resources consumed by the 
various needs of market participants--that is, the lowest Dedicated 
Core consuming Users pay the least, and highest Dedicated Core 
consuming Users pay the most. Other exchanges similarly assess higher 
fees to those that consume more Exchange resources.\13\ It's also 
designed to encourage firms to manage their needs in a fair manner and 
to prevent the Exchange from being required to expend large amounts of 
resources in order to provide an additional number of Dedicated Cores. 
Moreover, as discussed above and in more detail below, the Exchange 
cannot currently offer an unlimited number of Dedicated Cores due in 
part to physical space constraints. The Exchange believes the proposed 
ascending fee structure is another appropriate means, in conjunction 
with an established cap, to manage this finite resource and ensure the 
resource is apportioned more fairly.
---------------------------------------------------------------------------

    \13\ See also Cboe U.S. Options Fee Schedule, BZX Options, 
Options Logical Port Fees, Ports with Bulk Quoting Capabilities.
---------------------------------------------------------------------------

    The Exchange believes it is reasonable to limit the number of 
Dedicated Cores Users can purchase because the Exchange has a finite 
amount of space in its third-party data centers to accommodate CPU 
cores, including Dedicated Cores. The Exchange must also take into 
account timing considerations in procuring additional Dedicated Cores 
and related hardware such as servers, switches, optics and cables, as 
well as the readiness of the Exchange's data center to accommodate 
additional Dedicated Cores in the Exchange's respective Order Handler 
Cabinets. The Exchange will monitor market participant demand and space 
availability and endeavor to adjust the limit if and when the Exchange 
is able to accommodate additional Dedicated Cores. The Exchange 
monitors its capacity and data center space and thus is in the best 
place to determine these limits and modify them as appropriate in 
response to changes to this capacity and space, as well as market 
demand. For example, Cboe EDGA has increased the prescribed maximum 
limit twice since the launch of Dedicated Cores on its exchange on 
February 26, 2024 as a result of evaluating the demand relative to 
Dedicated Cores availability.\14\ The proposed limits also apply 
uniformly to similarly situated market participants (i.e., all Members 
are subject to the same limit and all Sponsored Participants are 
subject to the same limit, respectively). The Exchange believes it's 
not unfairly discriminatory to provide for different limits for 
different types of Users. For example, the Exchange believe it's not 
unfairly discriminatory to provide for an initial lower limit to be 
allocated for Sponsored Participants because unlike Members, Sponsored 
Participants are able to access the Exchange without paying a 
Membership Fee. Members also have more regulatory obligations and risk 
that Sponsored Participants do not. For example, while Sponsored 
Participants must agree to comply with the Rules of the Exchange, it is 
the Sponsoring Member of that Sponsored Participant that remains 
ultimately responsible for all orders entered on or through the 
Exchange by that Sponsored Participant. The industry also has a history 
of applying fees differently to Members as compared to Sponsored 
Participants.\15\ The Exchange believes its proposed maximum limits, 
and distinction between Members and Sponsored Users, is another 
appropriate means to help the Exchange manage its allotment of 
Dedicated Cores and better ensure this finite resource is apportioned 
fairly.
---------------------------------------------------------------------------

    \14\ See Securities Exchange Act Release No. 99983 (April 17, 
2024) 89 FR 30418 (April 23, 2024) (SR-CboeEDGA-2024-014) and 
Securities Exchange Act Release No. 100300 (June 10, 2024) 89 FR 
50653 (June 14, 2024) SR-CboeEDGA-2024-020.
    \15\ See e.g., Securities Exchange Act Release No. 68342 
(December 3, 2012) 77 FR 73096 (December 7, 2012) (SR-CBOE-2012-
114).and Securities Exchange Act Release No. 66082 (January 3, 2012) 
77 FR 1101 (January 9, 2012) (SR-C2-2011-041).
---------------------------------------------------------------------------

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 intramarket competition that is not necessary in 
furtherance of the purposes of the Act because the proposed tiered fee 
structure will apply equally to all similarly situated Users that 
choose to use Dedicated Cores. As discussed above, Dedicated Cores are 
optional and Users may choose to utilize Dedicated Cores, or not, based 
on their views of the additional benefits and added value provided by 
utilizing a Dedicated Core. The E9xchange believes the proposed fees 
will be assessed proportionately to the potential value or benefit 
received by Users with a greater number of Dedicated Cores and notes 
that Users may determine at any time to cease using Dedicated Cores. As

[[Page 57457]]

discussed, Users can also continue to access the Exchange through 
shared CPU Cores at no additional cost. Finally, all Users will be 
entitled to two Dedicated Cores at no additional cost.
    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, 
including competition for exchange memberships. Market Participants 
have numerous alternative venues that they may participate on, 
including 15 other equities exchanges, as well as off-exchange venues, 
where competitive products are available for trading. Indeed, 
participants can readily choose to submit their order flow 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.'' \16\ 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'. . . .''.\17\ 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.
---------------------------------------------------------------------------

    \16\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \17\ 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 \18\ and paragraph (f) of Rule 19b-4 \19\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
---------------------------------------------------------------------------

    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeEDGX-2024-043 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-2024-043. 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-2024-043 and should 
be submitted on or before August 5, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
---------------------------------------------------------------------------

    \20\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-15402 Filed 7-12-24; 8:45 am]
BILLING CODE 8011-01-P
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