Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Remove Volume Tier 2 of the Fee Schedule, 84657-84660 [2024-24471]
Download as PDF
<![CDATA[
Federal Register / Vol. 89, No. 205 / Wednesday, October 23, 2024 / Notices
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–SAPPHIRE–2024–31 and should be
submitted on or before November 13,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.55
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–24472 Filed 10–22–24; 8:45 am]
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101377; File No. SR–
CboeEDGX–2024–063]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend
Remove Volume Tier 2 of the Fee
Schedule
October 17, 2024.
khammond on DSKJM1Z7X2PROD with NOTICES
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on October
9, 2024, Cboe EDGX Exchange, Inc.
(‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (‘‘EDGX’’
or the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(‘‘Commission’’ or ‘‘SEC’’) a proposed
rule change 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.
55 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
18:48 Oct 22, 2024
Jkt 265001
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. Purpose
The Exchange proposes to amend its
Fee Schedule applicable to its equities
trading platform (‘‘EDGX Equities’’) by
changing the required criteria applicable
to Remove Volume Tier 2.3 The
Exchange proposes to implement these
changes effective October 1, 2024.
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
16 registered equities exchanges, as well
as a number of alternative trading
systems and other off-exchange venues
that do not have similar self-regulatory
responsibilities under the Act, to which
market participants may direct their
order flow. Based on publicly available
information,4 no single registered
equities exchange has more than 16% of
the market share. Thus, in such a lowconcentrated and highly competitive
market, no single equities exchange
possesses significant pricing power in
the execution of order flow. The
Exchange in particular operates a
‘‘Maker-Taker’’ model whereby it pays
rebates to members that add liquidity
and assesses fees to those that remove
liquidity. The Exchange’s Fee Schedule
sets forth the standard rebates and rates
applied per share for orders that provide
and remove liquidity, respectively.
Currently, for orders in securities priced
3 The Exchange initially filed the proposed fee
change on October 1, 2024 (SR–CboeEDGX–2024–
062). On October 9, 2024, the Exchange withdrew
that filing and submitted this filing.
4 See Cboe Global Markets, U.S. Equities Market
Volume Summary, Month-to-Date (September 23,
2024), available at https://www.cboe.com/us/
equities/market_statistics/.
PO 00000
Frm 00137
Fmt 4703
Sfmt 4703
84657
at or above $1.00, the Exchange
provides a standard rebate of $0.00160
per share for orders that add liquidity
and assesses a fee of $0.0030 per share
for orders that remove liquidity.5 For
orders in securities priced below $1.00,
the Exchange provides a standard rebate
of $0.00003 per share for orders that add
liquidity and assesses a fee of 0.30% of
the total dollar value for orders that
remove liquidity.6 Additionally, in
response to the competitive
environment, the Exchange also offers
tiered pricing which provides Members
opportunities to qualify for higher
rebates or reduced fees where certain
volume criteria and thresholds are met.
Tiered pricing provides an incremental
incentive for Members to strive for
higher tier levels, which provides
increasingly higher benefits or discounts
for satisfying increasingly more
stringent criteria.
Under footnote 1 of the Fee Schedule,
the Exchange currently offers various
Add/Remove Volume Tiers. In
particular, the Exchange offers two
Remove Volume Tiers that each assess
a reduced fee for Members’ qualifying
orders yielding fee codes BB,7 N,8 and
W 9 where a Member reaches certain
add volume-based criteria. The
Exchange now proposes to amend the
criteria of Remove Volume Tier 2.
Currently, the criteria for Remove
Volume Tier 2 is as follows:
• Remove Volume Tier 2 provides a
reduced fee of $0.00285 per share for
securities priced at or above $1.00 to
qualifying orders (i.e., orders yielding
fee codes BB, N, or W) and a reduced
fee of 0.28% of total dollar value for
securities priced below $1.00 where: (1)
Member has an ADAV 10 of greater than
or equal to 0.30% of the TCV; 11 (2)
Member has a total remove ADV 12
5 See EDGX Equities Fee Schedule, Standard
Rates.
6 Id.
7 Fee code BB is appended to orders that remove
liquidity from EDGX (Tape B).
8 Fee code N is appended to orders that remove
liquidity from EDGX (Tape C).
9 Fee code W is appended to orders that remove
liquidity from EDGX (Tape A).
10 ADAV means average daily added volume
calculated as the number of shares added per day.
ADAV is calculated on a monthly basis.
11 TCV means total consolidated volume
calculated as the volume reported by all exchanges
and trade reporting facilities to a consolidated
transaction reporting plan for the month for which
the fees apply. The Exchange excludes from its
calculation of TCV volume on any day that the
Exchange experiences an Exchange System
Disruption, on any day with a scheduled early
market close, and the Russell Reconstitution Day.
12 ADV means average daily volume calculated as
the number of shares added to, removed from, or
routed by, the Exchange, or any combination or
E:\FR\FM\23OCN1.SGM
Continued
23OCN1
84658
Federal Register / Vol. 89, No. 205 / Wednesday, October 23, 2024 / Notices
greater than or equal to 0.40% of the
TCV; and (3) Member adds a Retail Pre
Market Order ADV (i.e., yielding fee
code ZO) greater than or equal to 3
million shares.
Now, the Exchange proposes to
amend the second and third prongs of
the criteria in Remove Volume Tier 2 by
adding alternative criteria to prong 2
and reducing the Retail Pre Market
Order ADV requirement to prong 3. The
proposed criteria is as follows:
• Proposed Remove Volume Tier 2
provides a reduced fee of $0.00285 per
share for securities priced at or above
$1.00 to qualifying orders (i.e., orders
yielding fee codes BB, N, or W) and a
reduced fee of 0.28% of total dollar
value for securities priced below $1.00
where: (1) Member has an ADAV of
greater than or equal to 0.30% of the
TCV; (2) Member has a total remove
ADV greater than or equal to 0.40% of
the TCV or Member has a total remove
ADV greater than or equal to 40 million
shares; and (3) Member adds a Retail Pre
Market Order ADV (i.e., yielding fee
code ZO) greater than or equal to 1.5
million shares.
The proposed amendment to Remove
Volume Tier 2 is intended to slightly
decrease the difficulty of achieving an
existing opportunity to earn a reduced
fee by providing an alternative for
Members to increase their order flow to
the Exchange (as provided under
proposed prong 2) and reducing the
volume requirement provided under
proposed prong 3. Submitting increased
order flow to the Exchange will further
contribute to a deeper, more liquid
market and provide even more
execution opportunities for active
market participants. Incentivizing an
increase in liquidity removing volume,
through reduced fee opportunities,
encourages liquidity removing Members
on the Exchange to increase transactions
and take execution opportunities, and
liquidity adding Members to contribute
to a deeper, more liquid market, on the
Exchange, together providing for overall
enhanced price discovery and price
improvement opportunities on the
Exchange. As such, increased overall
order flow benefits all Members by
contributing towards a robust and wellbalanced market ecosystem.
khammond on DSKJM1Z7X2PROD with NOTICES
2. Statutory Basis
subset thereof, per day. ADV is calculated on a
monthly basis.
18:48 Oct 22, 2024
13 15
14 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
15 Id.
The Exchange believes the proposed
rule change is consistent with the Act
and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
VerDate Sep<11>2014
Section 6(b) of the Act.13 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 14 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) 15 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers as
well as Section 6(b)(4) 16 as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its Members and
other persons using its facilities.
As described above, the Exchange
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. The
Exchange believes that its proposal to
remove [sic] Retail [sic] Volume Tier 2
reflects a competitive pricing structure
designed to incentivize market
participants to direct their order flow to
the Exchange, which the Exchange
believes would enhance market quality
to the benefit of all Members.
Specifically, the Exchange’s proposed
criteria for Remove Volume Tier 2 is not
a significant departure from existing
criteria, continues to be reasonably
correlated to the reduced fee offered by
the Exchange and other competing
exchanges,17 and will continue to
incentivize Members to submit order
flow to the Exchange. Additionally, the
Exchange notes that relative volumebased incentives and discounts have
been widely adopted by exchanges,18
Jkt 265001
16 15
U.S.C. 78f(b)(4).
e.g., MIAX Pearl Equities Exchange Fee
Schedule, Remove Volume Tier, available at MIAX_
Pearl_Equities_Fee_Schedule_12012023.pdf
(miaxglobal.com); MEMX Equities Fee Schedule,
Liquidity Removal Tier, available at MEMX Equities
Fee Schedule—MEMX Exchanges
(memxtrading.com).
18 See e.g., BZX Equities Fee Schedule, Footnote
1, Add/Remove Volume Tiers.
17 See
PO 00000
Frm 00138
Fmt 4703
Sfmt 4703
including the Exchange,19 and are
reasonable, equitable and nondiscriminatory because they are open to
all Members on an equal basis and
provide additional benefits or discounts
that are reasonably related to (i) the
value to an exchange’s market quality,
and (ii) associated higher levels of
market activity, such as higher levels of
liquidity provision and/or growth
patterns. Competing equity exchanges
offer similar tiered pricing structures,
including schedules of rebates and fees
that apply based upon members
achieving certain volume and/or growth
thresholds, as well as assess similar fees
or rebates for similar types of orders, to
that of the Exchange.
The Exchange further believes the
proposed modifications to Remove
Volume Tier 2 will provide a reasonable
means to encourage liquidity removing
orders in Members’ order flow to the
Exchange and to incentivize Members to
continue to provide liquidity removing
volume to the Exchange by offering
them an opportunity to receive a
reduced fee on qualifying orders. Not
only is the proposed criteria in
proposed Remove Volume Tier 2
slightly less difficult than the current
criteria found in that tier, the proposed
criteria is not a significant departure
from existing criteria, is reasonably
correlated to the reduced fee offered by
the Exchange, and will continue to
incentivize Members to submit order
flow to the Exchange. An overall
increase in activity would deepen the
Exchange’s liquidity pool, offers
additional cost savings, support the
quality of price discovery, promote
market transparency and improve
market quality, for all investors.
The Exchange believes that the
proposal represents an equitable
allocation of fees and rebates and is not
unfairly discriminatory because all
Members will be eligible for the
proposed revised tier and have the
opportunity to meet the revised tier’s
criteria and receive the corresponding
reduced fee if such criteria is met.
Without having a view of activity on
other markets and off-exchange venues,
the Exchange has no way of knowing
whether this proposed rule change
would definitely result in any Members
qualifying the new proposed tiers.
While the Exchange has no way of
predicting with certainty how the
proposed changes will impact Member
activity, based on the prior months
volume, the Exchange anticipates that at
least one Member will be able to satisfy
proposed Remove Volume Tier 2. The
19 See e.g., EDGX Equities Fee Schedule, Footnote
1, Add/Remove Volume Tiers.
E:\FR\FM\23OCN1.SGM
23OCN1
Federal Register / Vol. 89, No. 205 / Wednesday, October 23, 2024 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
Exchange also notes that proposed
changes will not adversely impact any
Member’s ability to qualify for reduced
fees offered under other tiers. Should a
Member not meet the proposed new
criteria, the Member will merely not
receive that corresponding reduced fee.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Rather, as
discussed above, the Exchange believes
that the proposed changes would
encourage the submission of additional
order flow to a public exchange, thereby
promoting market depth, execution
incentives and enhanced execution
opportunities, as well as price discovery
and transparency for all Members. As a
result, the Exchange believes that the
proposed changes further the
Commission’s goal in adopting
Regulation NMS of fostering
competition among orders, which
promotes ‘‘more efficient pricing of
individual stocks for all types of orders,
large and small.’’
The Exchange believes the proposed
rule changes do not impose any burden
on intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Particularly,
the proposed changes to the Remove
Volume Tier 2 will apply to all
Members equally in that all Members
are eligible for the proposed revised tier,
have a reasonable opportunity to meet
the proposed tier’s criteria and will
receive the reduced fee on their
qualifying orders if such criteria is met.
The Exchange does not believe the
proposed changes burden competition,
but rather, enhances competition as they
are intended to increase the
competitiveness of EDGX by amending
an existing pricing incentive in order to
attract order flow and incentivize
participants to increase their
participation on the Exchange,
providing for additional execution
opportunities for market participants
and improved price transparency.
Greater overall order flow, trading
opportunities, and pricing transparency
benefits all market participants on the
Exchange by enhancing market quality
and continuing to encourage Members
to send orders, thereby contributing
towards a robust and well-balanced
market ecosystem.
Next, the Exchange believes the
proposed rule changes does not impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
VerDate Sep<11>2014
18:48 Oct 22, 2024
Jkt 265001
As previously discussed, the Exchange
operates in a highly competitive market.
Members have numerous alternative
venues that they may participate on and
direct their order flow, including other
equities exchanges, off-exchange
venues, and alternative trading systems.
Additionally, the Exchange represents a
small percentage of the overall market.
Based on publicly available information,
no single equities exchange has more
than 16% of the market share.20
Therefore, no exchange possesses
significant pricing power in the
execution of order flow. Indeed,
participants can readily choose to send
their orders to other exchange and offexchange venues if they deem fee levels
at those other venues to be more
favorable. Moreover, the Commission
has repeatedly expressed its preference
for competition over regulatory
intervention in determining prices,
products, and services in the securities
markets. Specifically, in Regulation
NMS, the Commission highlighted the
importance of market forces in
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.’’ 21 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’ . . .’’.22 Accordingly, the
Exchange does not believe its proposed
fee change imposes any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
20 Supra
note 3.
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
22 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) (SRNYSEArca–2006–21)).
21 See
PO 00000
Frm 00139
Fmt 4703
Sfmt 4703
84659
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 23 and paragraph (f) of Rule
19b–4 24 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–2024–063 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–2024–063. 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
23 15
24 17
E:\FR\FM\23OCN1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
23OCN1
84660
Federal Register / Vol. 89, No. 205 / Wednesday, October 23, 2024 / Notices
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–2024–063 and should be
submitted on or before November 13,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–24471 Filed 10–22–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–653, OMB Control No.
3235–0703]
khammond on DSKJM1Z7X2PROD with NOTICES
Proposed Collection; Comment
Request; Extension: Regulation SCI,
Form SCI
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 collection of information
provided for in Regulation Systems
Compliance and Integrity (‘‘Regulation
SCI’’) (17 CFR 242.1000–1007) and
Form SCI (17 CFR 249.1900) under the
Securities Exchange Act of 1934
(‘‘Exchange Act’’) (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.
25 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
18:48 Oct 22, 2024
Jkt 265001
Regulation SCI requires certain key
market participants to, among other
things: (1) have comprehensive policies
and procedures in place to help ensure
the robustness and resiliency of their
technological systems, and also that
their technological systems operate in
compliance with the federal securities
laws and with their own rules; and (2)
provide certain notices and reports to
the Commission to improve
Commission oversight of securities
market infrastructure.
Regulation SCI advances the goals of
the national market system by
enhancing the capacity, integrity,
resiliency, availability, and security of
the automated systems of entities
important to the functioning of the U.S.
securities markets, as well as reinforcing
the requirement that such systems
operate in compliance with the
Exchange Act and rules and regulations
thereunder, thus strengthening the
infrastructure of the U.S. securities
markets and improving its resilience
when technological issues arise. In this
respect, Regulation SCI establishes an
updated and formalized regulatory
framework, thereby helping to ensure
more effective Commission oversight of
such systems.
Respondents consist of national
securities exchanges and associations,
registered clearing agencies, exempt
clearing agencies, plan processors, and
alternative trading systems. There are
currently 48 respondents, and the
Commission staff estimates that, on
average, 2 new respondents may become
SCI entities each year, 1 of which would
be a self-regulatory organization
(‘‘SRO’’). Accordingly, Commission staff
estimates that over the next three years
there will be an average of 50
respondents per year.
In addition, in December 2020, the
Commission adopted amendments to
Regulation SCI in connection with
updates to the national market system
for the collection, consolidation, and
dissemination of information with
respect to quotations for and
transactions in national market system
(‘‘NMS’’) stocks (‘‘Infrastructure
Amendments’’). Specifically, the
Commission adopted a definition of
‘‘SCI competing consolidator’’ that will
subject competing consolidators to
Regulation SCI, after a transition period,
if they are above a specified
consolidated market data gross revenue
threshold.1 The Infrastructure
Amendments increased the number of
1 See
Securities Exchange Act Release No. 34–
90610 (December 9, 2020), 86 FR 18596 (April 9,
2021) (File No. S7–03–20) (‘‘Infrastructure Adopting
Release’’).
PO 00000
Frm 00140
Fmt 4703
Sfmt 4703
respondents to the collections of
information in Regulation SCI, and the
Commission estimates that seven
competing consolidators will meet this
definition and be subject to the
requirements of Regulation SCI.2
Rule 1001(a) requires each SCI entity
to establish, maintain, and enforce
written policies and procedures
reasonably designed to ensure that its
SCI systems and, for purposes of
security standards, indirect SCI systems,
have levels of capacity, integrity,
resiliency, availability, and security,
adequate to maintain the SCI entity’s
operational capability and promote the
maintenance of fair and orderly markets.
The Commission staff estimates that the
total annual initial recordkeeping
burden for 7 new respondents will be
4,511 hours, and the annual ongoing
recordkeeping burden for all 55
respondents will be, on average, 12,760
hours. The Commission staff estimates
that the 7 new respondents would incur,
on average, an annual initial internal
cost of compliance of $1,696,578, as
well as outside legal or consulting costs
of $305,500. In addition, all respondents
will incur, on average, an estimated
ongoing annual internal cost of
compliance of $4,801,060.
Rule 1001(b) requires each SCI entity
to establish, maintain, and enforce
written policies and procedures
reasonably designed to ensure that its
SCI systems operate in a manner that
complies with the Exchange Act and the
rules and regulations thereunder and
the entity’s rules and governing
documents, as applicable. The
Commission staff estimates that the total
annual initial recordkeeping burden for
7 new respondents will be 1,755 hours,
and the annual ongoing recordkeeping
burden for all respondents will be, on
average, 8,105 hours. The Commission
staff estimates that the 7 new
respondents would incur an initial
internal cost of compliance of $628,160,
as well as outside legal or consulting
costs of $175,500. In addition, all
respondents will incur, on average, an
estimated ongoing annual internal cost
of compliance of $2,881,660.
Rule 1001(c) requires each SCI entity
to establish, maintain, and enforce
reasonably designed written policies
and procedures that include the criteria
for identifying responsible SCI
personnel, the designation and
documentation of responsible SCI
personnel, and escalation procedures to
quickly inform responsible SCI
2 Some of these respondents were estimated to
incur no, or only part of, the estimated initial
burdens because they were already subject to
Regulation SCI (i.e., as plan processors, SROs or
affiliates of SROs).
E:\FR\FM\23OCN1.SGM
23OCN1
]]>Agencies
[Federal Register Volume 89, Number 205 (Wednesday, October 23, 2024)]
[Notices]
[Pages 84657-84660]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-24471]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101377; File No. SR-CboeEDGX-2024-063]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Remove Volume Tier 2 of the Fee Schedule
October 17, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on October 9, 2024, Cboe EDGX Exchange, Inc. (``Exchange'' or ``EDGX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
---------------------------------------------------------------------------
\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. (``EDGX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (``Commission'' or ``SEC'')
a proposed rule change to amend its Fee Schedule. The text of the
proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/options/regulation/rule_filings/edgx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fee Schedule applicable to its
equities trading platform (``EDGX Equities'') by changing the required
criteria applicable to Remove Volume Tier 2.\3\ The Exchange proposes
to implement these changes effective October 1, 2024.
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed fee change on
October 1, 2024 (SR-CboeEDGX-2024-062). On October 9, 2024, the
Exchange withdrew that filing and submitted this filing.
---------------------------------------------------------------------------
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 registered equities exchanges, as well as a
number of alternative trading systems and other off-exchange venues
that do not have similar self-regulatory responsibilities under the
Act, to which market participants may direct their order flow. Based on
publicly available information,\4\ no single registered equities
exchange has more than 16% of the market share. Thus, in such a low-
concentrated and highly competitive market, no single equities exchange
possesses significant pricing power in the execution of order flow. The
Exchange in particular operates a ``Maker-Taker'' model whereby it pays
rebates to members that add liquidity and assesses fees to those that
remove liquidity. The Exchange's Fee Schedule sets forth the standard
rebates and rates applied per share for orders that provide and remove
liquidity, respectively. Currently, for orders in securities priced at
or above $1.00, the Exchange provides a standard rebate of $0.00160 per
share for orders that add liquidity and assesses a fee of $0.0030 per
share for orders that remove liquidity.\5\ For orders in securities
priced below $1.00, the Exchange provides a standard rebate of $0.00003
per share for orders that add liquidity and assesses a fee of 0.30% of
the total dollar value for orders that remove liquidity.\6\
Additionally, in response to the competitive environment, the Exchange
also offers tiered pricing which provides Members opportunities to
qualify for higher rebates or reduced fees where certain volume
criteria and thresholds are met. Tiered pricing provides an incremental
incentive for Members to strive for higher tier levels, which provides
increasingly higher benefits or discounts for satisfying increasingly
more stringent criteria.
---------------------------------------------------------------------------
\4\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (September 23, 2024), available at https://www.cboe.com/us/equities/market_statistics/.
\5\ See EDGX Equities Fee Schedule, Standard Rates.
\6\ Id.
---------------------------------------------------------------------------
Under footnote 1 of the Fee Schedule, the Exchange currently offers
various Add/Remove Volume Tiers. In particular, the Exchange offers two
Remove Volume Tiers that each assess a reduced fee for Members'
qualifying orders yielding fee codes BB,\7\ N,\8\ and W \9\ where a
Member reaches certain add volume-based criteria. The Exchange now
proposes to amend the criteria of Remove Volume Tier 2. Currently, the
criteria for Remove Volume Tier 2 is as follows:
---------------------------------------------------------------------------
\7\ Fee code BB is appended to orders that remove liquidity from
EDGX (Tape B).
\8\ Fee code N is appended to orders that remove liquidity from
EDGX (Tape C).
\9\ Fee code W is appended to orders that remove liquidity from
EDGX (Tape A).
---------------------------------------------------------------------------
Remove Volume Tier 2 provides a reduced fee of $0.00285
per share for securities priced at or above $1.00 to qualifying orders
(i.e., orders yielding fee codes BB, N, or W) and a reduced fee of
0.28% of total dollar value for securities priced below $1.00 where:
(1) Member has an ADAV \10\ of greater than or equal to 0.30% of the
TCV; \11\ (2) Member has a total remove ADV \12\
[[Page 84658]]
greater than or equal to 0.40% of the TCV; and (3) Member adds a Retail
Pre Market Order ADV (i.e., yielding fee code ZO) greater than or equal
to 3 million shares.
---------------------------------------------------------------------------
\10\ ADAV means average daily added volume calculated as the
number of shares added per day. ADAV is calculated on a monthly
basis.
\11\ TCV means total consolidated volume calculated as the
volume reported by all exchanges and trade reporting facilities to a
consolidated transaction reporting plan for the month for which the
fees apply. The Exchange excludes from its calculation of TCV volume
on any day that the Exchange experiences an Exchange System
Disruption, on any day with a scheduled early market close, and the
Russell Reconstitution Day.
\12\ ADV means average daily volume calculated as the number of
shares added to, removed from, or routed by, the Exchange, or any
combination or subset thereof, per day. ADV is calculated on a
monthly basis.
---------------------------------------------------------------------------
Now, the Exchange proposes to amend the second and third prongs of
the criteria in Remove Volume Tier 2 by adding alternative criteria to
prong 2 and reducing the Retail Pre Market Order ADV requirement to
prong 3. The proposed criteria is as follows:
Proposed Remove Volume Tier 2 provides a reduced fee of
$0.00285 per share for securities priced at or above $1.00 to
qualifying orders (i.e., orders yielding fee codes BB, N, or W) and a
reduced fee of 0.28% of total dollar value for securities priced below
$1.00 where: (1) Member has an ADAV of greater than or equal to 0.30%
of the TCV; (2) Member has a total remove ADV greater than or equal to
0.40% of the TCV or Member has a total remove ADV greater than or equal
to 40 million shares; and (3) Member adds a Retail Pre Market Order ADV
(i.e., yielding fee code ZO) greater than or equal to 1.5 million
shares.
The proposed amendment to Remove Volume Tier 2 is intended to
slightly decrease the difficulty of achieving an existing opportunity
to earn a reduced fee by providing an alternative for Members to
increase their order flow to the Exchange (as provided under proposed
prong 2) and reducing the volume requirement provided under proposed
prong 3. Submitting increased order flow to the Exchange will further
contribute to a deeper, more liquid market and provide even more
execution opportunities for active market participants. Incentivizing
an increase in liquidity removing volume, through reduced fee
opportunities, encourages liquidity removing Members on the Exchange to
increase transactions and take execution opportunities, and liquidity
adding Members to contribute to a deeper, more liquid market, on the
Exchange, together providing for overall enhanced price discovery and
price improvement opportunities on the Exchange. As such, increased
overall order flow benefits all Members by contributing towards a
robust and well-balanced market ecosystem.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\13\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \14\ 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) \15\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \16\
as it is designed to provide for the equitable allocation of reasonable
dues, fees and other charges among its Members and other persons using
its facilities.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ Id.
\16\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
As described above, the Exchange operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. The Exchange believes that
its proposal to remove [sic] Retail [sic] Volume Tier 2 reflects a
competitive pricing structure designed to incentivize market
participants to direct their order flow to the Exchange, which the
Exchange believes would enhance market quality to the benefit of all
Members.
Specifically, the Exchange's proposed criteria for Remove Volume
Tier 2 is not a significant departure from existing criteria, continues
to be reasonably correlated to the reduced fee offered by the Exchange
and other competing exchanges,\17\ and will continue to incentivize
Members to submit order flow to the Exchange. Additionally, the
Exchange notes that relative volume-based incentives and discounts have
been widely adopted by exchanges,\18\ including the Exchange,\19\ and
are reasonable, equitable and non-discriminatory because they are open
to all Members on an equal basis and provide additional benefits or
discounts that are reasonably related to (i) the value to an exchange's
market quality, and (ii) associated higher levels of market activity,
such as higher levels of liquidity provision and/or growth patterns.
Competing equity exchanges offer similar tiered pricing structures,
including schedules of rebates and fees that apply based upon members
achieving certain volume and/or growth thresholds, as well as assess
similar fees or rebates for similar types of orders, to that of the
Exchange.
---------------------------------------------------------------------------
\17\ See e.g., MIAX Pearl Equities Exchange Fee Schedule, Remove
Volume Tier, available at
MIAX_Pearl_Equities_Fee_Schedule_12012023.pdf (miaxglobal.com); MEMX
Equities Fee Schedule, Liquidity Removal Tier, available at MEMX
Equities Fee Schedule--MEMX Exchanges (memxtrading.com).
\18\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove
Volume Tiers.
\19\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
---------------------------------------------------------------------------
The Exchange further believes the proposed modifications to Remove
Volume Tier 2 will provide a reasonable means to encourage liquidity
removing orders in Members' order flow to the Exchange and to
incentivize Members to continue to provide liquidity removing volume to
the Exchange by offering them an opportunity to receive a reduced fee
on qualifying orders. Not only is the proposed criteria in proposed
Remove Volume Tier 2 slightly less difficult than the current criteria
found in that tier, the proposed criteria is not a significant
departure from existing criteria, is reasonably correlated to the
reduced fee offered by the Exchange, and will continue to incentivize
Members to submit order flow to the Exchange. An overall increase in
activity would deepen the Exchange's liquidity pool, offers additional
cost savings, support the quality of price discovery, promote market
transparency and improve market quality, for all investors.
The Exchange believes that the proposal represents an equitable
allocation of fees and rebates and is not unfairly discriminatory
because all Members will be eligible for the proposed revised tier and
have the opportunity to meet the revised tier's criteria and receive
the corresponding reduced fee if such criteria is met. Without having a
view of activity on other markets and off-exchange venues, the Exchange
has no way of knowing whether this proposed rule change would
definitely result in any Members qualifying the new proposed tiers.
While the Exchange has no way of predicting with certainty how the
proposed changes will impact Member activity, based on the prior months
volume, the Exchange anticipates that at least one Member will be able
to satisfy proposed Remove Volume Tier 2. The
[[Page 84659]]
Exchange also notes that proposed changes will not adversely impact any
Member's ability to qualify for reduced fees offered under other tiers.
Should a Member not meet the proposed new criteria, the Member will
merely not receive that corresponding reduced fee.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Rather, as discussed above,
the Exchange believes that the proposed changes would encourage the
submission of additional order flow to a public exchange, thereby
promoting market depth, execution incentives and enhanced execution
opportunities, as well as price discovery and transparency for all
Members. As a result, the Exchange believes that the proposed changes
further the Commission's goal in adopting Regulation NMS of fostering
competition among orders, which promotes ``more efficient pricing of
individual stocks for all types of orders, large and small.''
The Exchange believes the proposed rule changes do not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the proposed
changes to the Remove Volume Tier 2 will apply to all Members equally
in that all Members are eligible for the proposed revised tier, have a
reasonable opportunity to meet the proposed tier's criteria and will
receive the reduced fee on their qualifying orders if such criteria is
met. The Exchange does not believe the proposed changes burden
competition, but rather, enhances competition as they are intended to
increase the competitiveness of EDGX by amending an existing pricing
incentive in order to attract order flow and incentivize participants
to increase their participation on the Exchange, providing for
additional execution opportunities for market participants and improved
price transparency. Greater overall order flow, trading opportunities,
and pricing transparency benefits all market participants on the
Exchange by enhancing market quality and continuing to encourage
Members to send orders, thereby contributing towards a robust and well-
balanced market ecosystem.
Next, the Exchange believes the proposed rule changes does not
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As previously
discussed, the Exchange operates in a highly competitive market.
Members have numerous alternative venues that they may participate on
and direct their order flow, including other equities exchanges, off-
exchange venues, and alternative trading systems. Additionally, the
Exchange represents a small percentage of the overall market. Based on
publicly available information, no single equities exchange has more
than 16% of the market share.\20\ Therefore, no exchange possesses
significant pricing power in the execution of order flow. Indeed,
participants can readily choose to send their orders to other exchange
and off-exchange venues if they deem fee levels at those other venues
to be more favorable. Moreover, the Commission has repeatedly expressed
its preference for competition over regulatory intervention in
determining prices, products, and services in the securities markets.
Specifically, in Regulation NMS, the Commission highlighted the
importance of market forces in determining prices and SRO revenues and,
also, recognized that current regulation of the market system ``has
been remarkably successful in promoting market competition in its
broader forms that are most important to investors and listed
companies.'' \21\ 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' . . .''.\22\ Accordingly, the Exchange does not believe its
proposed fee change imposes any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
---------------------------------------------------------------------------
\20\ Supra note 3.
\21\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\22\ 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) (SRNYSEArca-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 \23\ and paragraph (f) of Rule 19b-4 \24\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 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-2024-063 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-2024-063. 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
[[Page 84660]]
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-2024-063 and should be
submitted on or before November 13, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
---------------------------------------------------------------------------
\25\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-24471 Filed 10-22-24; 8:45 am]
BILLING CODE 8011-01-P
