Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Remove Certain Routing Options and Amend Certain Order Types, 87907-87914 [2024-25633]

Download as PDF Federal Register / Vol. 89, No. 214 / Tuesday, November 5, 2024 / Notices listing venues. In such an environment, the Exchange must adjust its fees and discounts to remain competitive with other exchanges competing for the same listings. Because competitors are free to modify their own fees and discounts in response, and because issuers may readily adjust their listing decisions and practices, the Exchange does not believe its proposed fee change can impose any burden on intermarket competition. As such, the proposal is a competitive proposal designed to enhance pricing competition among listing venues and implement pricing for Fund Shares to reflect the revenue and expenses associated with listing on the Exchange. 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. ddrumheller on DSK120RN23PROD with NOTICES1 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: Commission, 100 F Street NE, Washington, DC 20549–1090. SECURITIES AND EXCHANGE COMMISSION All submissions should refer to file number SR–CboeBZX–2024–102. 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–CboeBZX–2024–102 and should be submitted on or before November 26, 2024. [Release No. 34–101476; File No. SR– CboeEDGA–2024–042] For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.25 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–25635 Filed 11–4–24; 8:45 am] Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Remove Certain Routing Options and Amend Certain Order Types October 30, 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 October 28, 2024, Cboe EDGA Exchange, Inc. (the ‘‘Exchange’’ or ‘‘EDGA’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II below, which Items have been prepared by the Exchange. The Exchange filed the proposal as a ‘‘noncontroversial’’ proposed rule change pursuant to Section 19(b)(3)(A)(iii) of the Act 3 and Rule 19b–4(f)(6) thereunder.4 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 The Exchange proposes to move EDGA from its current inverted fee model to a maker-taker fee model, by remove certain routing options from the EDGA rulebook, and amending certain order type rules to align their behavior with the EDGX rule text, and the makertaker functionality that currently exists on EDGX. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/edga/), 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 BILLING CODE 8011–01–P 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– CboeBZX–2024–102 on the subject line. 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 Paper Comments • Send paper comments in triplicate to Secretary, Securities and Exchange 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(iii). 4 17 CFR 240.19b–4(f)(6). 2 17 23 15 24 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). VerDate Sep<11>2014 18:07 Nov 04, 2024 25 17 Jkt 265001 87907 PO 00000 CFR 200.30–3(a)(12). Frm 00068 Fmt 4703 Sfmt 4703 E:\FR\FM\05NON1.SGM 05NON1 87908 Federal Register / Vol. 89, No. 214 / Tuesday, November 5, 2024 / Notices 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 ddrumheller on DSK120RN23PROD with NOTICES1 The Exchange proposes to move EDGA from its current inverted 5 fee model to a maker-taker fee model.6 The Exchange anticipates that this transition will take effect on November 1, 2024. In order to move EDGA to a maker-taker fee model, the Exchange seeks to amend Rule 11.11(g)(3)(D), Rule 11.11(g)(3)(E), 11.11(g)(12)(A), 11.11(g)(12)(B), to remove the routing options ROBB, ROCO, RMPT, and RMPL, respectively, from the EDGA rulebook, as well as amend Rule 11.11(g)(14) to remove references to ROBB and ROCO. The Exchange also seeks to align certain EDGA order type functionality with how such orders behave on EDGX (a maker-taker exchange). These functionality changes will require amendments to EDGA Rules 11.8(d)(5), 11.8(e)(5), and 11.6(d), to fully align them with EDGX Rules, 11.8(d)(5), 11.8(g)(5), and 11.6(d), respectively.7 The Exchange believes these changes are non-controversial because they are identical 8 to existing EDGX rules which were immediately effective upon filing 9 5 The inverted fee model is a pricing structure in which a market, such as an exchange, charges its participants a fee to provide liquidity in securities, and provides a rebate to participants that remove liquidity in securities. See SEC Market Structure Advisory Committee, Memorandum on ‘‘MakerTaker Fees on Equities Exchanges,’’ October 20, 2015, available at: https://www.sec.gov/spotlight/ emsac/memo-maker-taker-fees-on-equitiesexchanges.pdf. 6 The maker-taker fee model is a pricing structure in which a market, such as an exchange, generally pays its members a per share rebate to provide (i.e., ‘‘make’’) liquidity in securities and assesses on them a fee to remove (i.e., ‘‘take’’) liquidity. Id. 7 The Exchange notes that it has also made a related EDGA fee filing, effective November 1, 2024, to reflect EDGA’s new maker-taker fee model. See SR–CboeEDGA–2024–045. 8 These rules will be substantively identical, absent the EDGA Rules’ references to the ‘‘EDGA Book’’, and the EDGX Rules’ references to the ‘‘EDGX Book.’’ 9 See Securities Exchange Act Release No. 75479 (July 17, 2015), 80 FR 43810 (July 23, 2015) (SR– EDGX–2015–33) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to Rules 11.6, 11.8, 11.9, 11.10 and 11.11 to Align With Similar Rules of the BATS Exchange, Inc.) (i.e., Rule 11.6(D) and Rule 11.8(d)(5)); see also Securities Exchange Act Release No. 90713 (December 17, 2020), 85 FR 84065 (December 23, 2020) (SR– CboeEDGX–2020–063) (Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend EDGX Rule 11.8(g), Which Describes the VerDate Sep<11>2014 18:07 Nov 04, 2024 Jkt 265001 and are already codified in the EDGX rulebook. In this regard, the proposed rule changes present no new or novel issues for consideration. Moreover, because the proposed functionality will mirror exactly the order behavior as it exists on EDGX, today, Users 10 will already be familiar with the new EDGA functionality.11 In addition to the filing of this proposal, the Exchange has provided Users with advance notice of these proposed changes, via a Trade Desk Notice and client letter on October 1, 2024 (i.e., one full month prior to the proposed changes), thereby providing Users with as much advanced notice of the proposed changes as possible and giving Users additional time to make any technological and operational changes necessary, on their end. Importantly, various Users have verbally expressed their support for this proposal and have verbally indicated they will be ready to trade on EDGA under a makertaker fee model. Rule 11.11(g)—Routing Options The Exchange proposes to amend Rule 11.11(g)(3)(D), Rule 11.11(g)(3)(E), 11.11(g)(12)(A), 11.11(g)(12)(B), to remove the routing options ROBB, ROCO, RMPT, and RMPL, respectively, from the EDGA rulebook, as well as amend Rule 11.11(g)(14) to remove references to ROBB and ROCO. These routing options are strategies that specifically target certain equities exchanges that provide low-cost executions or rebates to liquidity removing orders, and route to those venues after trading with the EDGA Book—i.e., ROBB, ROCO, RMPT, and RMPL are routing options applicable only to an inverted market. More specifically, these routing options are targeting Users that want low-cost executions. In this regard, each of these routing options first seek liquidity from the Exchange, which is currently inverted. However, once the Exchange transitions to a maker-taker fee model, these strategies will no longer be useful for Users targeting a low-cost execution, since the first trading venue these routing options would check—EDGA— will now assess Users a full remove fee. Therefore, given the proposal to convert Handling of MidPoint Discretionary Orders Entered on the Exchange) (i.e., Rule 11.6(e)(5)). 10 The term ‘‘User’’ shall mean any Member or Sponsored Participant who is authorized to obtain access to the System pursuant to Rule 11.3. See Rule 1.5(ee). 11 The Exchange notes that many EDGA Users are also EDGX Users. In this regard, the Exchange’s transition to a maker-taker fee model and to EDGX functionality will not present any new or novel issues for such EDGA Users to consider, as they are already familiar with EDGX’s maker-taker fee model, and EDGX’s order behavior. PO 00000 Frm 00069 Fmt 4703 Sfmt 4703 EDGA to a maker-taker fee structure, these routing options are no longer necessary. EDGA Rule 11.6(d)—Order With a Discretionary Range Current Functionality Currently, EDGA Rule 11.6(d) provides that Discretionary Range 12 is an instruction that a User may attach to an order to buy (sell) a stated amount of a security at a specified, displayed or non-displayed ranked price with discretion to execute up (down) to another specified, non-displayed price. Moreover, resting orders with a Discretionary Range instruction will be executed at a price that uses the minimum amount of discretion necessary to execute the order against an incoming order. When an incoming order also contains a Discretionary Range instruction, an order with a Discretionary Range instruction resting on the EDGA Book will execute at its least aggressive price when it matches against such incoming order. Any contra-side order that executes against a resting order with a Discretionary Range instruction at its displayed or nondisplayed ranked price, or a price in the discretionary range, will remove liquidity against the order with a Discretionary Range instruction. Furthermore, where an incoming order with a Post Only 13 instruction does not remove liquidity on entry pursuant to Rule 11.6(n)(4) against a resting order with a Discretionary Range instruction, the discretionary range of the resting order with a Discretionary Range instruction will be shortened to equal the limit price of the incoming contraside order with a Post Only instruction. As such, resting orders with a Discretionary Range instruction do not perform a liquidity swap against 12 See Rule 11.6(d). Only is ‘‘[a]n instruction that may be attached to an order that is to be ranked and executed on the Exchange pursuant to Rule 11.9 and Rule 11.10(a)(4) or cancelled, as appropriate, without routing away to another trading center except that the order will not remove liquidity from the EDGA Book, except as described below. An order with a Post Only instruction will remove contra-side liquidity from the EDGA Book if the order is an order to buy or sell a security priced below $1.00 or if the value of such execution when removing liquidity equals or exceeds the value of such execution if the order instead posted to the EDGA Book and subsequently provided liquidity, including the applicable fees charged or rebates provided. To determine at the time of a potential execution whether the value of such execution when removing liquidity equals or exceeds the value of such execution if the order instead posted to the EDGA Book and subsequently provided liquidity, the Exchange will use the highest possible rebate paid and highest possible fee charged for such executions on the Exchange.’’ See EDGA Rule 11.6(n)(4). 13 Post E:\FR\FM\05NON1.SGM 05NON1 Federal Register / Vol. 89, No. 214 / Tuesday, November 5, 2024 / Notices incoming orders (including those with a Post Only instruction), such that incoming orders always act as takers of liquidity, and the resting order with a Discretionary Range instruction always acts as the maker of liquidity, thereby ensuring that the incoming order is the taker of liquidity and is paid the applicable rebate rather than charged an unexpected fee. Proposed Functionality The Exchange proposes to add rule text to EDGA Rule 11.6(d) to align it with the rule text of EDGX Rule 11.6(d). As proposed, the EDGA and EDGX rule text will be identical.14 Moreover, by aligning the EDGA rule text with EDGX rule text, the behavior of EDGA orders with a Discretionary Range will be identical to how such orders behave on the maker-taker exchange, EDGX. Specifically, the Exchange proposes that a resting order with a Discretionary Range instruction would remove liquidity against: (1) an incoming Post Only order at its displayed or nondisplayed ranked price that does not remove liquidity on entry pursuant to Rule 11.6(n)(4), and (2) an incoming order with a time-in-force (‘‘TIF’’) other than Immediate-or-Cancel (‘‘IOC’’) 15 or Fill-or-Kill (‘‘FOK’’) 16 that is priced within its Discretionary Range. All other orders follow normal handling for the execution of an incoming order and remove liquidity when trading with a resting order with a Discretionary Range instruction.17 Accordingly, the Exchange proposes to amend its current Rule by adding language to 11.6(d) discussing how an order with a Discretionary Range instruction would interact with an order with a Post Only instruction. Specifically, when an order with a Post Only instruction that is entered at the 14 Supra note 8. term ‘‘Immediate-or-Cancel (‘‘IOC’’) shall mean, ‘‘An instruction the User may attach to an order stating the order is to be executed in whole or in part as soon as such order is received. The portion not executed immediately on the Exchange or another trading center is treated as cancelled and is not posted to the EDGA Book. An order with an IOC instruction that does not include a Book Only instruction and that cannot be executed in accordance with Rule 11.10(a)(4) on the System when reaching the Exchange will be eligible for routing away pursuant to Rule 11.11.’’ See Rule 11.6(q)(1). 16 The term Fill-or-Kill (‘‘FOK’’) shall mean, ‘‘An instruction the User may attach to an order stating that the order is to be executed in its entirety as soon as it is received and, if not so executed, cancelled. An order with a FOK instruction is not eligible for routing away pursuant to Rule 11.11.’’ See Rule 11.6(q)(3). 17 For example, an incoming order that executes at the ranked price of the Discretionary Range order, or an IOC or FOK order that executes at a price within the Discretionary Range would execute as the liquidity remover. ddrumheller on DSK120RN23PROD with NOTICES1 15 The VerDate Sep<11>2014 18:07 Nov 04, 2024 Jkt 265001 displayed or non-displayed ranked price of an order with a Discretionary Range instruction that does not remove liquidity on entry pursuant to Rule 11.6(n)(4), the order with a Discretionary Range instruction would be converted to an executable order and will remove liquidity against such incoming order. Since an order with a Discretionary Range instruction contains a more aggressive price at which it is willing to execute, the Exchange proposes to treat orders with a Discretionary Range instruction as aggressive orders that would prefer to execute rather than forego an execution, due to applicable fees or rebates. In such instances, Users of orders with Discretionary Range instructions, willing to execute at more aggressive prices, would expect to pay a fee to remove liquidity. Similarly, for example, a User who has entered a PostOnly order onto a maker-taker exchange, would not expect to immediately remove liquidity against a resting order with a Discretionary Range, and would expect instead to be treated as an adder of liquidity and receive a rebate. Accordingly, the proposed amendments align EDGA rule text with Users’ expectations. Examples—Order With a Discretionary Range Instruction Executes Against an Order With a Post Only Instruction • Assume that the National Best Bid or Offer (‘‘NBBO’’) is $10.00 by $10.05, and the Exchange’s BBO is $9.99 by $10.06. • Assume that the Exchange receives a non-routable order to buy 100 shares at $10.00 per share designated with discretion to pay up to an additional $0.05 per share. Assume further that an order would not remove any liquidity upon entry pursuant to the Exchange’s economic best interest functionality.18 • Assume that the next order received by the Exchange is an order with a Post Only instruction to sell 100 shares of the security priced at $10.03 per share. The order with a Post Only instruction would not remove any liquidity upon 18 See EDGA Rule 11.6(n), which in relevant part, provides, ‘‘. . . An order with a Post Only instruction will remove contra-side liquidity from the EDGA Book if the order is an order to buy or sell a security priced below $1.00 or if the value of such execution when removing liquidity equals or exceeds the value of such execution if the order instead posted to the EDGA Book and subsequently provided liquidity, including the applicable fees charged or rebates provided. To determine at the time of a potential execution whether the value of such execution when removing liquidity equals or exceeds the value of such execution if the order instead posted to the EDGA Book and subsequently provided liquidity, the Exchange will use the highest possible rebate paid and highest possible fee charged for such executions on the Exchange.’’ PO 00000 Frm 00070 Fmt 4703 Sfmt 4703 87909 entry and would post to the EDGA Book at $10.03. This would, in turn, trigger the discretion of the resting buy order with a Discretionary Range instruction and an execution would occur at $10.03. The order with a Post Only instruction to sell would be treated as the adder of liquidity and the buy order with discretion would be treated as the remover of liquidity. • Assume the same facts as above, but that the incoming order with a Post Only instruction is priced at $10.00 instead of $10.03. As is true in the example above, the order with a Post Only instruction would not remove any liquidity upon entry. Rather than cancelling the incoming order, with a Post Only instruction to sell, back to the User, particularly when the resting order with a Discretionary Range instruction is willing to buy the security for up to $10.05 per share, the Exchange proposes to execute at $10.00 the order with a Post Only instruction against the resting buy order with a Discretionary Range instruction. As is also true in the example above, the order with a Post Only instruction to sell would be treated as the liquidity adder and the buy order with discretion would be treated as the liquidity remover. As set forth in more detail below, if the incoming order was not an order with a Post Only instruction to sell, the incoming order could be executed at the ranked price of the order with a Discretionary Range instruction without restriction and would therefore be treated as the liquidity remover. Furthermore, the Exchange proposes to modify the description of the process by which it handles incoming orders that interact with orders with a Discretionary Range instruction. The Exchange proposes to specify in Rule 11.6(d) its proposed handling of a contra-side order that executes against a resting order with a Discretionary Range instruction at its displayed or nondisplayed ranked price or that contains a time-in-force of IOC or FOK and a price in the discretionary range by stating that such an incoming order will remove liquidity against the order with a Discretionary Range instruction. The Exchange also proposes to specify in Rule 11.6(d) its handling of orders that are intended to post to the EDGA Book 19 at a price within the discretionary range of an order with a Discretionary Range instruction. This includes, but is not limited to, an order with a Post Only instruction. Specifically, the Exchange proposes to specify in Rule 11.6(d) that any contra19 The term ‘‘EDGA Book’’ shall mean the System’s electronic file of orders. See Rule 1.5(d). E:\FR\FM\05NON1.SGM 05NON1 87910 Federal Register / Vol. 89, No. 214 / Tuesday, November 5, 2024 / Notices side order with a time-in-force other than IOC or FOK and a price within the discretionary range but not at the displayed or non-displayed ranked price of an order with a Discretionary Range instruction will be posted to the EDGA Book and then the order with a Discretionary Range instruction would remove liquidity against such posted order. Examples—Order With a Discretionary Instruction Executes Against an Order Without a Post Only Instruction • Assume that the NBBO is $10.00 by $10.05, and the Exchange’s BBO is $9.99 by $10.06. Assume that the Exchange receives an order to buy 100 shares of a security at $10.00 per share designated with discretion to pay up to an additional $0.05 per share. • Assume that the next order received by the Exchange is an order with a Book Only 20 instruction to sell 100 shares of the security with a TIF other than IOC or FOK priced at $10.03 per share. The order with a Book Only instruction would not remove any liquidity upon entry and would post to the EDGA Book at $10.03. This would, in turn, trigger the discretion of the resting buy order and an execution would occur at $10.03. The order with a Book Only instruction to sell would be treated as the adder of liquidity and the buy order with discretion would be treated as the remover of liquidity. • Assume the same facts as above, but that the incoming order with a Book Only instruction is priced at $10.00 instead of $10.03. The order with a Book Only instruction would remove liquidity upon entry at $10.00 per share pursuant to the Exchange’s order execution rule. Contrary to the examples set forth above, the order with a Book Only instruction to sell would be treated as the liquidity remover and the resting buy order with discretion would be treated as the liquidity adder. The Exchange notes that this example operates the same whether an order contains a TIF of IOC, FOK or any other TIF. ddrumheller on DSK120RN23PROD with NOTICES1 EDGA Rule 11.8(d)(5)—MidPoint Peg Order, Routing and Posting Current Functionality Pursuant to EDGA Rule 11.8(d), a MidPoint Peg Order 21 may include a 20 The term Book Only shall mean ‘‘An order instruction stating that an order will be matched against an order on the EDGA Book or posted to the EDGA Book, but will not route to an away Trading Center.’’ See Rule 11.6(n)(3). 21 A MidPoint Peg Order is ‘‘[a] non-displayed Market Order or Limit Order with an instruction to execute at the midpoint of the NBBO, or, alternatively, pegged to the less aggressive of the VerDate Sep<11>2014 18:07 Nov 04, 2024 Jkt 265001 Book Only or Post Only instruction. MidPoint Peg Orders are not eligible for routing pursuant to Rule 11.11 unless routed utilizing the RMPT,22 RMPL,23 or Destination Specific 24 routing strategy as defined in Rule 11.11(g)(13). A MidPoint Peg Order may include a NonDisplayed Swap (‘‘NDS’’) 25 instruction, however, when such instruction is included, a MidPoint Peg Order is not eligible for routing pursuant to Rule 11.11. Currently, RMPL and RMPT are routing strategies under which a MidPoint Peg Order checks the System for available shares and any remaining shares are then sent to destinations on the System routing table that support midpoint eligible orders. If any shares remain unexecuted after routing, they are posted on the EDGA Book as a MidPoint Peg Order, unless otherwise instructed by the User. Proposed Functionality The Exchange proposes to amend EDGA Rule 11.8(d)(5)’s rule text to align with the rule text of EDGX Rule 11.8(d)(5).26 As proposed, the EDGA midpoint of the NBBO or one minimum price variation inside the same side of the NBBO as the order. A MidPoint Peg Order with a limit price that is more aggressive than the midpoint of the NBBO will execute at the midpoint of the NBBO or better subject to its limit price. A MidPoint Peg Order may execute at its limit price or better when its limit price is less aggressive than the midpoint of the NBBO. A MidPoint Peg Order will be ranked at the midpoint of the NBBO where its limit price is equal to or more aggressive than the midpoint of the NBBO. A MidPoint Peg Order will not be eligible for execution when an NBBO is not available. In such case, a MidPoint Peg Order would rest on the EDGA Book and would not be eligible for execution in the System until an NBBO is available. The MidPoint Peg Order will receive a new time stamp when an NBBO becomes available and a new midpoint of the NBBO is established. In such case, pursuant to Rule 11.9, all MidPoint Peg Orders that are ranked at the midpoint of the NBBO will retain their priority as compared to each other based upon the time such orders were initially received by the System. A MidPoint Peg Order will be ranked at its limit price where its limit price is less aggressive than the midpoint of the NBBO. Notwithstanding that a MidPoint Peg Order may be a Market Order or a Limit Order, its operation and available modifiers are limited to this Rule 11.8(d).’’ See Rule 11.8(d). 22 See Rule 11.11(g)(12)(A). 23 See Rule 11.11(g)(12)(B). 24 See Rule 11.11(g)(13). 25 A Non-Displayed Swap (‘‘NDS’’) NonDisplayed Swap (‘‘NDS’’) is ‘‘[a]n instruction that may be attached to an order with a Non-Displayed instruction that when such order is resting on the EDGA Book and is locked by an incoming order with a Post Only instruction that does not remove liquidity pursuant to paragraph (4) of this rule, the order with an NDS instruction is converted to an executable order and will remove liquidity against such incoming order. An order with an NDS instruction is not eligible for routing pursuant to Rule 11.11.’’ See Rule 11.6(n)(7). 26 Note the Exchange proposes to remove the RMPT and RMPL routing strategies from the EDGA rulebook. While the Exchange does not propose to PO 00000 Frm 00071 Fmt 4703 Sfmt 4703 and EDGX rule text will be identical,27 and the routing and posting behavior of MidPoint Peg Orders on EDGA will now be identical to how such orders behave on EDGX. Specifically, as is the case under both the current EDGA and EDGX rules, MidPoint Peg Orders may contain a Book Only, Post Only, or NDS instruction. However, pursuant to the proposed EDGA Rule 11.8(d)(5), MidPoint Peg Orders entered onto EDGA will no longer be routable, thereby aligning the rule text with EDGX’s rule text. By fully adopting the EDGX Rule 11.8(d)(5) language, the Routing and Posting behavior for MidPoint Peg Order’s will be identical to that of MidPoint Peg Order’s entered onto EDGX, thereby aligning functionality on affiliated exchanges, EDGA and EDGX. Typically, MidPoint Peg Orders are entered with a Post Only or Book Only instruction,28 which result in orders seeking to either execute on the Exchange or post to the EDGA Book, but not route to an away market. Users often prefer to use these types of instructions to help them manage trading fees they may incur when their orders are routed away from EDGA and access other markets. In this regard, the Exchange believes that the alignment of EDGA’s rule text with EDGX’s rule text— particularly removing the routing of EDGA MidPoint Peg Orders—will help to make MidPoint Peg Order behavior consistent with Users’ expectations, as well as increase liquidity at the midpoint on EDGA. EDGA Rule 11.8(e)(5)—MidPoint Discretionary Order (‘‘MDO’’) 29 Functionality Current Functionality Today, EDGA Rule 11.8(e)(5), Routing, provides only that MDOs are entirely remove the Destination Specific routing option from the rulebook, EDGA does propose to prohibit the routing of Midpoint Peg Orders utilizing the Destination Specific routing option, just as it does on EDGX, today. 27 Supra note 8. 28 See Rule 11.8(d)(5). 29 A MidPoint Discretionary Order (‘‘MDO’’) is ‘‘[a] limit order to buy that is pegged to the NBB, with or without an offset, with discretion to execute at prices up to and including the midpoint of the NBBO, or a limit order to sell that is pegged to the NBO, with or without an offset, with discretion to execute at prices down to and including the midpoint of the NBBO. An MDO’s pegged price and Discretionary Range are bound by its limit price. An MDO to buy or sell with a limit price that is less (higher) than its pegged price, including any offset, is posted to the EDGA Book at its limit price. The pegged prices of an MDO are derived from the NBB or NBO, and cannot independently establish or maintain the NBB or NBO. An MDO in a stock priced at $1.00 or more can only be executed in sub-penny increments when it executes at the midpoint of the NBBO or against a contra-side order E:\FR\FM\05NON1.SGM 05NON1 Federal Register / Vol. 89, No. 214 / Tuesday, November 5, 2024 / Notices not eligible for routing pursuant to Rule 11.11. As such, MDOs entered onto EDGA today will typically exercise discretion and remove liquidity against eligible contra-side orders upon arrival or execute against contra-side MDOs at the NBBO midpoint and will not act as providers of liquidity. MDOs may also be entered with a Quote Depletion Protection (‘‘QDP’’) 30 instruction that Users may include on their MDOs to limit their orders’ ability to exercise discretion in certain circumstances. QDP restricts the exercise of discretion on MDOs in circumstances where applicable market conditions indicate that it may be less desirable to execute within an order’s Discretionary Range.31 Proposed Functionality ddrumheller on DSK120RN23PROD with NOTICES1 While the non-routable restriction will remain in place, the Exchange now seeks to add additional rule text to EDGA 11.8(e)(5) to align it with EDGX Rule 11.8(g)(5). As proposed, the EDGA and EDGX rule text will be identical,32 and the posting behavior of MDOs on EDGA will now be identical to how such orders behave on EDGX. Specifically, the Exchange seeks to add rule text to provide that MDOs entered onto the Exchange will, by default, act as liquidity providers. However, by adding rule text that allows MDOs entered with a QDP instruction to remove liquidity, by default, unless a User chooses to require an MDO act only as a liquidity provider, MDOs with a QDP instruction will be able to act as a liquidity provider or remover. pursuant to Rule 11.10(a)(4)(D). Notwithstanding that an MDO Order may be a Limit Order, its operation and available modifiers are limited to this Rule 11.8(e). See EDGA Rule 11.8(e). 30 Quote Depletion Protection (‘‘QDP’’) is an optional instruction that a User may include on an MDO to limit the order’s ability to exercise discretion in certain circumstances. A ‘‘QDP Active Period’’ will be enabled or refreshed for buy (sell) MDOs if the best bid (offer) displayed on the EDGA Book is executed below one round lot. During the QDP Active Period, an MDO entered with a QDP instruction will not exercise discretion, and is executable only at its ranked price. When a QDP Active Period is initially enabled, or refreshed by a subsequent execution or cancellation of the best bid (offer) then displayed on the EDGA Book, it will remain enabled for two milliseconds. Unless the User chooses otherwise, an MDO to buy (sell) entered with a QDP instruction will default to a Non-Displayed instruction and will include an Offset Amount equal to one Minimum Price Variation below (above) the NBB (NBO). See Rule 11.8(e)(10). 31 For instance, a QDP instruction would provide Users with protective features that would limit the order’s ability to exercise discretion in certain circumstances that may be indicative of a quotation that is moving against the resting MDO—i.e., a buy quotation that is moving to a lower price for MDOs to buy, or a sell quotation that is moving to a higher price for MDOs to sell. 32 Supra note 8. VerDate Sep<11>2014 18:07 Nov 04, 2024 Jkt 265001 In addition, the Exchange seeks to add rule text to EDGA Rule 11.8(e)(5) that would provide that if the instructions included on an MDO do not permit the order to remove liquidity, the MDO will only execute on entry against resting orders that include a Super Aggressive 33 instruction priced at the MDO’s pegged price if the MDO also contains a Displayed 34 instruction, and against orders with an NDS instruction priced at the MDO’s pegged price or within its Discretionary Range. The Exchange also proposes to add language to EDGA Rule 11.8(e)(5) stating that if a resting contra-side order that does not include an NDS instruction is priced within the discretionary range of an incoming MDO that is not permitted to remove liquidity, then the incoming MDO will be placed on the EDGA Book and its discretionary range will be shortened to equal the limit price of the resting contra-side order. Finally, the Exchange seeks to add language to Rule 11.8(e)(5) which provides that where an incoming order with a Post Only instruction does not remove liquidity on entry pursuant to EDGA Rule 11.6(n)(4) against a resting MDO, the discretionary range of the resting MDO will be shortened to equal the limit price of the incoming contraside order with a Post Only instruction. 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.35 Specifically, 33 Super Aggressive is ‘‘[a]n order instruction that directs the System to route the order if an away Trading Center locks or crosses the limit price of the order resting on the EDGA Book. A User may instruct the Exchange to apply the Super Aggressive instruction solely to routable orders posted to the EDGA Book with remaining size of an Odd Lot. When any order with a Super Aggressive instruction is locked by an incoming order with a Post Only instruction that does not remove liquidity pursuant to Rule 11.6(n)(4) below, the order with a Super Aggressive instruction is converted to an executable order and will remove liquidity against such incoming order. Notwithstanding the foregoing, if an order that does not contain a Super Aggressive instruction maintains higher priority than one or more Super Aggressive eligible orders, the Super Aggressive eligible order(s) with lower priority will not be converted, as described above, and the incoming order with a Post Only instruction will be posted or cancelled in accordance with Rule 11.6(n)(4) below.’’ See Rule 11.6(n)(2). 34 Displayed is ‘‘[a]n instruction the User may attach to an order stating that the order is to be displayed by the System on the EDGA Book. Unless the User elects otherwise, all orders eligible to be displayed on the EDGA Book will be automatically defaulted by the System to Displayed. See Rule 11.6(e)(1). 35 15 U.S.C. 78f(b). PO 00000 Frm 00072 Fmt 4703 Sfmt 4703 87911 the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 36 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) 37 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. In particular, the proposed changes are designed to align the economics of executing under the pending EDGA maker-taker fee model, with that of the EDGX maker-taker fee model. In order to do so, though, certain amendments to EDGA order type behavior are necessary, such that EDGA adders of liquidity and removers of liquidity, receive rebates and pay fees, as expected, i.e., receive rebate to add liquidity, and pay a fee to remove liquidity. The proposed changes appropriately treat aggressive order types that would prefer to immediately execute, favoring immediate executions over rebates. The Exchange believes that such Users would naturally expect to pay a fee to immediately remove liquidity. In this regard, the proposed changes are designed to promote just and equitable principles of trade, and facilitate 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 proposed changes are necessary to align EDGA rules 11.6(d), 11.8(d)(5), and 11.8(e)(5), with EDGX rules 11.6(d), 11.8(d)(5), and 11.8(g)(5), respectively, thereby making the EDGA rule text 38 and order behavior identical to that of EDGX, a maker-taker exchange. Rule 11.11(g)—Routing Options The Exchange believes that the deletion of the routing options ROBB, ROCO, RMPT, and RMPL from the EDGA rulebook are consistent with the Act and these requirements because 36 15 U.S.C. 78f(b)(5). 37 Id. 38 Supra E:\FR\FM\05NON1.SGM note 8. 05NON1 87912 Federal Register / Vol. 89, No. 214 / Tuesday, November 5, 2024 / Notices ddrumheller on DSK120RN23PROD with NOTICES1 doing so will remove impediments to the mechanism of a free and open market, thereby protecting investors and the public interest. As stated, ROBB, ROCO, RMPT, and RMPL are routing options designed for an inverted fee schedule. Because EDGA is transitioning to a maker-taker fee model, these routing options are no longer necessary. Additionally, these routing options are targeting Users that want low-cost executions. In this regard, each of these routing options first seek liquidity from the Exchange, which is currently inverted. However, once the Exchange transitions to a maker-taker fee model, these strategies will no longer be useful for Users targeting a low-cost execution, since the first trading venue these routing options would check—EDGA—will now assess Users a full fee for removing liquidity. Therefore, the Exchange is discontinuing these routing options. The Exchange notes that routing through the Exchange is voluntary and alternative routing options offered by the Exchange as well as other methods remain available to Users that wish to route to other trading centers. By removing references to routing options that will no longer be offered by the Exchange, the Exchange believes the proposed rule change will remove impediments to the mechanism of a free and open market and protect investors by providing investors with rules that accurately reflect routing options currently available on the Exchange. The Exchange does not believe that this proposal will permit unfair discrimination among customers, brokers, or dealers because the ROBB, ROCO, RMPT, and RMPL routing options will no longer be available to any User. EDGA Rule 11.6(d)—Order With a Discretionary Range; EDGA Rule 11.8(d)(5)—MidPoint Peg Order, Routing and Posting; EDGA Rule 11.8(e)(5)—MidPoint Discretionary Order (‘‘MDO’’) Routing and Posting In general, these proposed amendments to EDGA Rule 11.6(d) are intended to better align certain Exchange rules and System 39 functionality with that currently offered by EDGX in order to provide a consistent functionality across the Exchange and EDGX and to align the economics of these order types and executions with that of a maker-taker model (i.e., receive a rebate to add 39 The term ‘‘System’’ shall mean the electronic communications and trading facility designated by the Board through which securities orders of Users are consolidated for ranking, execution and, when applicable, routing away. See Rule 1.5(cc). VerDate Sep<11>2014 18:07 Nov 04, 2024 Jkt 265001 liquidity, and pay a fee to remove liquidity). Consistent functionality between the EDGA and EDGX will reduce complexity and streamline duplicative functionality, thereby resulting in simpler technology implementation, and changes and maintenance by Users of the Exchange that are also participants on EDGX. The proposed rule changes also do not propose to implement new or unique functionality that has not been previously filed with the Commission or is not available on EDGX. The Exchange notes that the proposed rule text is based on applicable EDGX rule text, and that the proposed language of the Exchange’s Rules differs only to extent necessary to conform to existing Exchange rule text or to account for minor differences, such as references to EDGA and EDGX. Where possible, the Exchange has mirrored EDGX rules, because consistent rules will simplify the regulatory requirements and increase the understanding of the Exchange’s operations for Users of the Exchange that are also participants on EDGX. As such, the proposed rule change would foster cooperation and coordination with persons engaged in facilitating transactions in securities and would remove impediments to and perfect the mechanism of a free and open market and a national market system. Moreover, these changes are not designed to permit unfair discrimination because they apply equally to all Users, and Users are not required to utilize the described functionality. EDGA Rule 11.6(d)—Order With a Discretionary Range Executes Against an Order With a Post Only Instruction; EDGA Rule 11.6(d)—Order With a Discretionary Range Executes vs. an Order Without a Post Only Instruction The Exchange believes that aligning EDGA Rule 11.6(d) with EDGX Rule 11.6(d) will provide additional clarity and specificity regarding the functionality of the System and provide Users with consistent rules between EDGA and its affiliated exchange, EDGX. In this regard, the proposed amendments would promote just and equitable principles of trade and remove impediments to a free and open market. In particular, the Exchange believes it is consistent with the Act to execute orders with a Discretionary Range instruction against marketable liquidity (e.g., order with a Post Only instruction) when an execution would not otherwise occur is consistent with both: (i) the Act, by facilitating executions, removing impediments and perfecting the mechanism of a free and open market PO 00000 Frm 00073 Fmt 4703 Sfmt 4703 and national market system; and (ii) a User’s instructions, which have evidenced a willingness by the User to pay applicable execution fees and/or execute at more aggressive prices than they are currently ranked in favor of an execution. As noted above, because Users of orders with Discretionary Range instructions are willing to execute at more aggressive prices, they typically expect to pay a fee to remove liquidity. Similarly, a User who has entered a Post Only order onto a makertaker exchange, would not expect to immediately remove liquidity against a resting order with a Discretionary Range, and would expect instead to be treated as an adder of liquidity and receive a rebate. Accordingly, in order to facilitate transactions consistent with the instructions and expectations of its Users, the Exchange proposes to execute resting orders with a Discretionary Range instruction against incoming orders, when such incoming orders would otherwise forego an execution. Moreover, the proposed rule change to Rule 11.6(d) is not designed to permit unfair discrimination amongst Users because the proposed amendment is applicable to all Users, and the use of a Discretionary Range instruction is not required. EDGA Rule 11.8(d)(5)—MidPoint Peg Order, Routing and Posting The proposed amendments to Rule 11.8(d)(5) are consistent with the Act and its requirements because the MidPoint Peg Order would now operate in exactly the same fashion as the MidPoint Peg Order available on EDGX, thereby further aligning functionality across affiliated exchanges. In addition, the Exchange believes that by eliminating the routing of MidPoint Peg Orders entered on EDGA will help to increase liquidity at the midpoint of the National Best Bid or National Best Offer on EDGA, thereby improving both the potential for price improvement and execution on the Exchange. Accordingly, the Exchange believes that the proposed amendments to Rule 11.8(d)(5) would promote just and equitable principles of trade, remove impediments to, and perfect the mechanism of, a free and open market and a national market system. Finally, the Exchange also notes that there are minor differences between EDGA Rule 11.8(d), MidPoint Peg Order, and EDGX Rule 11.8(d), MidPoint Peg Order. Importantly, however, these differences are minor and do not change how Midpoint Peg Orders behave on EDGX and how MidPoint Peg Orders will behave on EDGA post implementation of the E:\FR\FM\05NON1.SGM 05NON1 Federal Register / Vol. 89, No. 214 / Tuesday, November 5, 2024 / Notices ddrumheller on DSK120RN23PROD with NOTICES1 proposed changes. As such, the Exchange believes the proposed conforming changes to be appropriate. EDGA Rule 11.8(e)(5)—MidPoint Discretionary Order (‘‘MDO’’) Functionality As noted above, the Exchange seeks to add rule text to provide that MDOs entered onto the Exchange will, by default, act as liquidity providers. However, by adding rule text that allows MDOs entered with a QDP instruction to remove liquidity, by default, unless a User chooses to require an MDO act only as a liquidity provider, MDOs with a QDP instruction will be able to act as a liquidity provider or remover. The addition of rule text providing that MDOs will act only as adders of liquidity makes sense under a makertaker fee model, as such amendment will now align the rule text with the expectations of such Users—i.e., Users of MDOs can use MDOs to post displayed or non-displayed liquidity at the NBB or NBO with or without an offset, with a Discretionary Range extending to and including the NBBO midpoint, and receive a rebate for providing liquidity. Additionally, the proposed operation of the EDGA MDO enables Users to act as liquidity providers while increasing its opportunities to rest on the EDGA Book and potentially execute at prices more favorable than the midpoint whenever contra-side orders are priced more aggressively than the NBBO midpoint. Therefore, the proposed operation of the EDGA MDO promotes just and equitable principles of trade and would facilitate transactions in securities and improve trading within the national market system by increasing the potential price improvement opportunities for incoming orders that may execute against a resting MDO within its discretionary range. Additionally, as noted above, by adding rule text that allows MDOs entered with a QDP instruction to remove liquidity, by default, unless a User chooses to require an MDO act only as a liquidity provider, MDOs with a QDP instruction will be able to act as a liquidity provider or remover. The Exchange believes adding this rule text makes sense under a maker-taker fee model because Users that enter MDOs with a QDP instruction would expect to potentially pay a remove fee if they permit their orders to remove liquidity, and to receive a rebate should they permit their orders only to add liquidity. A User that enters a MDO with a QDP instruction, and permits their order only to add liquidity, is prioritizing the provision of liquidity VerDate Sep<11>2014 18:07 Nov 04, 2024 Jkt 265001 and receipt of a rebate, rather than maximizing execution opportunities. Conversely, a User that enters a MDO with a QDP instruction, and permits their order to remove liquidity, would value the opportunity to improve their fill rates. Moreover, the addition of such rule text will help to increase price improvement opportunities to incoming orders, while at the same time limit the exercise of discretion in circumstances where an execution within the MDOs Discretionary Range may be undesirable. The Exchange therefore believes that the addition of the rule text regarding MDOs entered with a QDP instruction would remove impediments to and perfect the mechanism of a free and open market and a national market system. Furthermore, while the QDP instruction would be available to all Users, use of this instruction would be voluntary, meaning that Users could choose to use this instruction, or not, based on their specific needs. As a result of the proposed changes, MDOs entered on the Exchange without a QDP instruction will only execute on entry in limited circumstances where the resting order includes a Super Aggressive or NDS instruction that allows for a liquidity swap with the incoming MDO. The Exchange believes it is reasonable to execute resting orders with an NDS instruction within the incoming MDO’s discretionary range but not execute orders with a Super Aggressive instruction within the incoming MDO’s discretionary range due to the different purposes of each order instruction. Users of the Super Aggressive instruction tend to use it for best execution purposes because the order instruction enables the order to be routed away or executed locally when an order is displayed at a price equal to or better than the order’s limit price. Conversely, an order with an NDS instruction is not routable and only executes against an incoming order that would lock it. The User of the NDS instruction is generally agnostic to whether the order is displayed on an away market or priced at the NBBO. It simply seeks to execute against an order that is priced at its limit price and engages in a liquidity swap to do so, even if the contra-side interest contains a NDS instruction. Finally, the Exchange also notes that there are minor differences between EDGA Rule 11.8(e), MidPoint Discretionary Orders, and EDGX Rule 11.8(g), MidPoint Discretionary Orders. Importantly, however, these differences are minor and do not change how MDOs behave on EDGX and how MDOs will behave on EDGA post implementation PO 00000 Frm 00074 Fmt 4703 Sfmt 4703 87913 of the proposed changes. As such, the Exchange believes the proposed conforming changes to be appropriate. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule changes will impose any burden on intermarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. The elimination of the routing options ROBB, ROCO, RMPT, and RMPL is due to the fact that these routing options are not viable on a maker-taker exchange and are therefore obsolete. Additionally, the proposed changes to Discretionary Ranges, MidPoint Peg Orders, and MDOs, will provide consistent functionality between the Exchange and EDGX, thereby reducing complexity and streamlining duplicative functionality, resulting in simpler technology implementation, as well as changes and maintenance by Users of the Exchange that are also participants on EDGX. Thus, the Exchange believes this proposed rule change is necessary to permit fair competition among national securities exchanges. In addition, the Exchange believes the proposed rule change will benefit Exchange participants in that it is designed to achieve a consistent technology offering by affiliated exchanges. Furthermore, the Exchange does not believe that the proposed rule changes will impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the act, because the proposed changes to order type functionality, and the modification of the fee model from inverted to makertaker, will apply equally to all Users. Users are not required to continue to trade on the Exchange following the implementation of the proposed changes, and should they wish to continue to trade on an inverted exchange, Users may continue to access the Exchange’s affiliated inverted exchange, BYX, as well as other inverted exchanges offered by the Exchange’s competitors. 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 written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The Exchange has filed the proposed rule change pursuant to Section E:\FR\FM\05NON1.SGM 05NON1 87914 Federal Register / Vol. 89, No. 214 / Tuesday, November 5, 2024 / Notices 19(b)(3)(A) of the Act 40 and Rule 19b– 4(f)(6) 41 thereunder. 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 42 and Rule 19b– 4(f)(6) 43 thereunder. A proposed rule change filed under Rule 19b–4(f)(6) 44 normally does not become operative prior to 30 days after the date of the filing. However, pursuant to Rule 19b–4(f)(6)(iii),45 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 proposal may become operative immediately. According to the Exchange, waiver of the 30-day operative delay would assist the Exchange in transitioning from an inverted exchange to a maker-taker exchange, as well as harmonize its rules with its affiliate, EDGX. Further, the Exchange has alerted Users of these changes as well as its anticipated implementation date of November 1, 2024, so that Users had additional time to make the requisite changes.46 Based on the foregoing, the Commission believes that waiving the 30-day operative delay is consistent with the protection of investors and the public interest. Accordingly, the Commission designates the proposed rule change to be operative on November 1, 2024.47 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 40 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(6). 42 15 U.S.C. 78s(b)(3)(A). 43 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 4(f)(6)(iii) requires the Exchange to give the Commission written notice of the Exchange’s 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. 44 17 CFR 240.19b–4(f)(6). 45 17 CFR 240.19b–4(f)(6)(iii). 46 See supra notes 10–11 and accompanying text. 47 For purposes only of waiving the 30-day operative delay, the Commission also 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 41 17 VerDate Sep<11>2014 18:07 Nov 04, 2024 Jkt 265001 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– CboeEDGA–2024–042 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–CboeEDGA–2024–042. 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–CboeEDGA–2024–042 and should PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 be submitted on or before November 26, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.48 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–25633 Filed 11–4–24; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–101483; File No. SR– NASDAQ–2024–059] Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Notice of Filing of Proposed Rule Change To Modify the Package of Complimentary Services Provided to Certain Eligible Switches and To Modify the Definition of an Eligible Switch October 30, 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 17, 2024, The Nasdaq Stock Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I and II 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 The Exchange proposes to modify the package of complimentary services provided to certain Eligible Switches and to modify the definition of an Eligible Switch. The text of the proposed rule change is available on the Exchange’s website at https://listingcenter.nasdaq.com/ rulebook/nasdaq/rules, at the principal office of the Exchange, 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 48 17 CFR 200.30–3(a)(12), (59). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 E:\FR\FM\05NON1.SGM 05NON1

Agencies

[Federal Register Volume 89, Number 214 (Tuesday, November 5, 2024)]
[Notices]
[Pages 87907-87914]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-25633]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101476; File No. SR-CboeEDGA-2024-042]


Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Remove Certain Routing Options and Amend Certain Order Types

October 30, 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 October 28, 2024, Cboe EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
below, which Items have been prepared by the Exchange. The Exchange 
filed the proposal as a ``non-controversial'' proposed rule change 
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange proposes to move EDGA from its current inverted fee 
model to a maker-taker fee model, by remove certain routing options 
from the EDGA rulebook, and amending certain order type rules to align 
their behavior with the EDGX rule text, and the maker-taker 
functionality that currently exists on EDGX.
    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/edga/), 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

[[Page 87908]]

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 move EDGA from its current inverted \5\ 
fee model to a maker-taker fee model.\6\ The Exchange anticipates that 
this transition will take effect on November 1, 2024. In order to move 
EDGA to a maker-taker fee model, the Exchange seeks to amend Rule 
11.11(g)(3)(D), Rule 11.11(g)(3)(E), 11.11(g)(12)(A), 11.11(g)(12)(B), 
to remove the routing options ROBB, ROCO, RMPT, and RMPL, respectively, 
from the EDGA rulebook, as well as amend Rule 11.11(g)(14) to remove 
references to ROBB and ROCO. The Exchange also seeks to align certain 
EDGA order type functionality with how such orders behave on EDGX (a 
maker-taker exchange). These functionality changes will require 
amendments to EDGA Rules 11.8(d)(5), 11.8(e)(5), and 11.6(d), to fully 
align them with EDGX Rules, 11.8(d)(5), 11.8(g)(5), and 11.6(d), 
respectively.\7\ The Exchange believes these changes are non-
controversial because they are identical \8\ to existing EDGX rules 
which were immediately effective upon filing \9\ and are already 
codified in the EDGX rulebook. In this regard, the proposed rule 
changes present no new or novel issues for consideration. Moreover, 
because the proposed functionality will mirror exactly the order 
behavior as it exists on EDGX, today, Users \10\ will already be 
familiar with the new EDGA functionality.\11\ In addition to the filing 
of this proposal, the Exchange has provided Users with advance notice 
of these proposed changes, via a Trade Desk Notice and client letter on 
October 1, 2024 (i.e., one full month prior to the proposed changes), 
thereby providing Users with as much advanced notice of the proposed 
changes as possible and giving Users additional time to make any 
technological and operational changes necessary, on their end. 
Importantly, various Users have verbally expressed their support for 
this proposal and have verbally indicated they will be ready to trade 
on EDGA under a maker-taker fee model.
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    \5\ The inverted fee model is a pricing structure in which a 
market, such as an exchange, charges its participants a fee to 
provide liquidity in securities, and provides a rebate to 
participants that remove liquidity in securities. See SEC Market 
Structure Advisory Committee, Memorandum on ``Maker-Taker Fees on 
Equities Exchanges,'' October 20, 2015, available at: https://www.sec.gov/spotlight/emsac/memo-maker-taker-fees-on-equities-exchanges.pdf.
    \6\ The maker-taker fee model is a pricing structure in which a 
market, such as an exchange, generally pays its members a per share 
rebate to provide (i.e., ``make'') liquidity in securities and 
assesses on them a fee to remove (i.e., ``take'') liquidity. Id.
    \7\ The Exchange notes that it has also made a related EDGA fee 
filing, effective November 1, 2024, to reflect EDGA's new maker-
taker fee model. See SR-CboeEDGA-2024-045.
    \8\ These rules will be substantively identical, absent the EDGA 
Rules' references to the ``EDGA Book'', and the EDGX Rules' 
references to the ``EDGX Book.''
    \9\ See Securities Exchange Act Release No. 75479 (July 17, 
2015), 80 FR 43810 (July 23, 2015) (SR-EDGX-2015-33) (Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change to 
Rules 11.6, 11.8, 11.9, 11.10 and 11.11 to Align With Similar Rules 
of the BATS Exchange, Inc.) (i.e., Rule 11.6(D) and Rule 
11.8(d)(5)); see also Securities Exchange Act Release No. 90713 
(December 17, 2020), 85 FR 84065 (December 23, 2020) (SR-CboeEDGX-
2020-063) (Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change To Amend EDGX Rule 11.8(g), Which Describes the 
Handling of MidPoint Discretionary Orders Entered on the Exchange) 
(i.e., Rule 11.6(e)(5)).
    \10\ The term ``User'' shall mean any Member or Sponsored 
Participant who is authorized to obtain access to the System 
pursuant to Rule 11.3. See Rule 1.5(ee).
    \11\ The Exchange notes that many EDGA Users are also EDGX 
Users. In this regard, the Exchange's transition to a maker-taker 
fee model and to EDGX functionality will not present any new or 
novel issues for such EDGA Users to consider, as they are already 
familiar with EDGX's maker-taker fee model, and EDGX's order 
behavior.
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Rule 11.11(g)--Routing Options
    The Exchange proposes to amend Rule 11.11(g)(3)(D), Rule 
11.11(g)(3)(E), 11.11(g)(12)(A), 11.11(g)(12)(B), to remove the routing 
options ROBB, ROCO, RMPT, and RMPL, respectively, from the EDGA 
rulebook, as well as amend Rule 11.11(g)(14) to remove references to 
ROBB and ROCO. These routing options are strategies that specifically 
target certain equities exchanges that provide low-cost executions or 
rebates to liquidity removing orders, and route to those venues after 
trading with the EDGA Book--i.e., ROBB, ROCO, RMPT, and RMPL are 
routing options applicable only to an inverted market. More 
specifically, these routing options are targeting Users that want low-
cost executions. In this regard, each of these routing options first 
seek liquidity from the Exchange, which is currently inverted. However, 
once the Exchange transitions to a maker-taker fee model, these 
strategies will no longer be useful for Users targeting a low-cost 
execution, since the first trading venue these routing options would 
check--EDGA--will now assess Users a full remove fee. Therefore, given 
the proposal to convert EDGA to a maker-taker fee structure, these 
routing options are no longer necessary.
EDGA Rule 11.6(d)--Order With a Discretionary Range
Current Functionality
    Currently, EDGA Rule 11.6(d) provides that Discretionary Range \12\ 
is an instruction that a User may attach to an order to buy (sell) a 
stated amount of a security at a specified, displayed or non-displayed 
ranked price with discretion to execute up (down) to another specified, 
non-displayed price. Moreover, resting orders with a Discretionary 
Range instruction will be executed at a price that uses the minimum 
amount of discretion necessary to execute the order against an incoming 
order. When an incoming order also contains a Discretionary Range 
instruction, an order with a Discretionary Range instruction resting on 
the EDGA Book will execute at its least aggressive price when it 
matches against such incoming order. Any contra-side order that 
executes against a resting order with a Discretionary Range instruction 
at its displayed or non-displayed ranked price, or a price in the 
discretionary range, will remove liquidity against the order with a 
Discretionary Range instruction. Furthermore, where an incoming order 
with a Post Only \13\ instruction does not remove liquidity on entry 
pursuant to Rule 11.6(n)(4) against a resting order with a 
Discretionary Range instruction, the discretionary range of the resting 
order with a Discretionary Range instruction will be shortened to equal 
the limit price of the incoming contra-side order with a Post Only 
instruction. As such, resting orders with a Discretionary Range 
instruction do not perform a liquidity swap against

[[Page 87909]]

incoming orders (including those with a Post Only instruction), such 
that incoming orders always act as takers of liquidity, and the resting 
order with a Discretionary Range instruction always acts as the maker 
of liquidity, thereby ensuring that the incoming order is the taker of 
liquidity and is paid the applicable rebate rather than charged an 
unexpected fee.
---------------------------------------------------------------------------

    \12\ See Rule 11.6(d).
    \13\ Post Only is ``[a]n instruction that may be attached to an 
order that is to be ranked and executed on the Exchange pursuant to 
Rule 11.9 and Rule 11.10(a)(4) or cancelled, as appropriate, without 
routing away to another trading center except that the order will 
not remove liquidity from the EDGA Book, except as described below. 
An order with a Post Only instruction will remove contra-side 
liquidity from the EDGA Book if the order is an order to buy or sell 
a security priced below $1.00 or if the value of such execution when 
removing liquidity equals or exceeds the value of such execution if 
the order instead posted to the EDGA Book and subsequently provided 
liquidity, including the applicable fees charged or rebates 
provided. To determine at the time of a potential execution whether 
the value of such execution when removing liquidity equals or 
exceeds the value of such execution if the order instead posted to 
the EDGA Book and subsequently provided liquidity, the Exchange will 
use the highest possible rebate paid and highest possible fee 
charged for such executions on the Exchange.'' See EDGA Rule 
11.6(n)(4).
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Proposed Functionality
    The Exchange proposes to add rule text to EDGA Rule 11.6(d) to 
align it with the rule text of EDGX Rule 11.6(d). As proposed, the EDGA 
and EDGX rule text will be identical.\14\ Moreover, by aligning the 
EDGA rule text with EDGX rule text, the behavior of EDGA orders with a 
Discretionary Range will be identical to how such orders behave on the 
maker-taker exchange, EDGX. Specifically, the Exchange proposes that a 
resting order with a Discretionary Range instruction would remove 
liquidity against: (1) an incoming Post Only order at its displayed or 
non-displayed ranked price that does not remove liquidity on entry 
pursuant to Rule 11.6(n)(4), and (2) an incoming order with a time-in-
force (``TIF'') other than Immediate-or-Cancel (``IOC'') \15\ or Fill-
or-Kill (``FOK'') \16\ that is priced within its Discretionary Range. 
All other orders follow normal handling for the execution of an 
incoming order and remove liquidity when trading with a resting order 
with a Discretionary Range instruction.\17\
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    \14\ Supra note 8.
    \15\ The term ``Immediate-or-Cancel (``IOC'') shall mean, ``An 
instruction the User may attach to an order stating the order is to 
be executed in whole or in part as soon as such order is received. 
The portion not executed immediately on the Exchange or another 
trading center is treated as cancelled and is not posted to the EDGA 
Book. An order with an IOC instruction that does not include a Book 
Only instruction and that cannot be executed in accordance with Rule 
11.10(a)(4) on the System when reaching the Exchange will be 
eligible for routing away pursuant to Rule 11.11.'' See Rule 
11.6(q)(1).
    \16\ The term Fill-or-Kill (``FOK'') shall mean, ``An 
instruction the User may attach to an order stating that the order 
is to be executed in its entirety as soon as it is received and, if 
not so executed, cancelled. An order with a FOK instruction is not 
eligible for routing away pursuant to Rule 11.11.'' See Rule 
11.6(q)(3).
    \17\ For example, an incoming order that executes at the ranked 
price of the Discretionary Range order, or an IOC or FOK order that 
executes at a price within the Discretionary Range would execute as 
the liquidity remover.
---------------------------------------------------------------------------

    Accordingly, the Exchange proposes to amend its current Rule by 
adding language to 11.6(d) discussing how an order with a Discretionary 
Range instruction would interact with an order with a Post Only 
instruction. Specifically, when an order with a Post Only instruction 
that is entered at the displayed or non-displayed ranked price of an 
order with a Discretionary Range instruction that does not remove 
liquidity on entry pursuant to Rule 11.6(n)(4), the order with a 
Discretionary Range instruction would be converted to an executable 
order and will remove liquidity against such incoming order.
    Since an order with a Discretionary Range instruction contains a 
more aggressive price at which it is willing to execute, the Exchange 
proposes to treat orders with a Discretionary Range instruction as 
aggressive orders that would prefer to execute rather than forego an 
execution, due to applicable fees or rebates. In such instances, Users 
of orders with Discretionary Range instructions, willing to execute at 
more aggressive prices, would expect to pay a fee to remove liquidity. 
Similarly, for example, a User who has entered a Post-Only order onto a 
maker-taker exchange, would not expect to immediately remove liquidity 
against a resting order with a Discretionary Range, and would expect 
instead to be treated as an adder of liquidity and receive a rebate. 
Accordingly, the proposed amendments align EDGA rule text with Users' 
expectations.
Examples--Order With a Discretionary Range Instruction Executes Against 
an Order With a Post Only Instruction
     Assume that the National Best Bid or Offer (``NBBO'') is 
$10.00 by $10.05, and the Exchange's BBO is $9.99 by $10.06.
     Assume that the Exchange receives a non-routable order to 
buy 100 shares at $10.00 per share designated with discretion to pay up 
to an additional $0.05 per share. Assume further that an order would 
not remove any liquidity upon entry pursuant to the Exchange's economic 
best interest functionality.\18\
---------------------------------------------------------------------------

    \18\ See EDGA Rule 11.6(n), which in relevant part, provides, 
``. . . An order with a Post Only instruction will remove contra-
side liquidity from the EDGA Book if the order is an order to buy or 
sell a security priced below $1.00 or if the value of such execution 
when removing liquidity equals or exceeds the value of such 
execution if the order instead posted to the EDGA Book and 
subsequently provided liquidity, including the applicable fees 
charged or rebates provided. To determine at the time of a potential 
execution whether the value of such execution when removing 
liquidity equals or exceeds the value of such execution if the order 
instead posted to the EDGA Book and subsequently provided liquidity, 
the Exchange will use the highest possible rebate paid and highest 
possible fee charged for such executions on the Exchange.''
---------------------------------------------------------------------------

     Assume that the next order received by the Exchange is an 
order with a Post Only instruction to sell 100 shares of the security 
priced at $10.03 per share. The order with a Post Only instruction 
would not remove any liquidity upon entry and would post to the EDGA 
Book at $10.03. This would, in turn, trigger the discretion of the 
resting buy order with a Discretionary Range instruction and an 
execution would occur at $10.03. The order with a Post Only instruction 
to sell would be treated as the adder of liquidity and the buy order 
with discretion would be treated as the remover of liquidity.
     Assume the same facts as above, but that the incoming 
order with a Post Only instruction is priced at $10.00 instead of 
$10.03. As is true in the example above, the order with a Post Only 
instruction would not remove any liquidity upon entry. Rather than 
cancelling the incoming order, with a Post Only instruction to sell, 
back to the User, particularly when the resting order with a 
Discretionary Range instruction is willing to buy the security for up 
to $10.05 per share, the Exchange proposes to execute at $10.00 the 
order with a Post Only instruction against the resting buy order with a 
Discretionary Range instruction. As is also true in the example above, 
the order with a Post Only instruction to sell would be treated as the 
liquidity adder and the buy order with discretion would be treated as 
the liquidity remover. As set forth in more detail below, if the 
incoming order was not an order with a Post Only instruction to sell, 
the incoming order could be executed at the ranked price of the order 
with a Discretionary Range instruction without restriction and would 
therefore be treated as the liquidity remover.
    Furthermore, the Exchange proposes to modify the description of the 
process by which it handles incoming orders that interact with orders 
with a Discretionary Range instruction. The Exchange proposes to 
specify in Rule 11.6(d) its proposed handling of a contra-side order 
that executes against a resting order with a Discretionary Range 
instruction at its displayed or non-displayed ranked price or that 
contains a time-in-force of IOC or FOK and a price in the discretionary 
range by stating that such an incoming order will remove liquidity 
against the order with a Discretionary Range instruction. The Exchange 
also proposes to specify in Rule 11.6(d) its handling of orders that 
are intended to post to the EDGA Book \19\ at a price within the 
discretionary range of an order with a Discretionary Range instruction. 
This includes, but is not limited to, an order with a Post Only 
instruction. Specifically, the Exchange proposes to specify in Rule 
11.6(d) that any contra-

[[Page 87910]]

side order with a time-in-force other than IOC or FOK and a price 
within the discretionary range but not at the displayed or non-
displayed ranked price of an order with a Discretionary Range 
instruction will be posted to the EDGA Book and then the order with a 
Discretionary Range instruction would remove liquidity against such 
posted order.
---------------------------------------------------------------------------

    \19\ The term ``EDGA Book'' shall mean the System's electronic 
file of orders. See Rule 1.5(d).
---------------------------------------------------------------------------

Examples--Order With a Discretionary Instruction Executes Against an 
Order Without a Post Only Instruction
     Assume that the NBBO is $10.00 by $10.05, and the 
Exchange's BBO is $9.99 by $10.06. Assume that the Exchange receives an 
order to buy 100 shares of a security at $10.00 per share designated 
with discretion to pay up to an additional $0.05 per share.
     Assume that the next order received by the Exchange is an 
order with a Book Only \20\ instruction to sell 100 shares of the 
security with a TIF other than IOC or FOK priced at $10.03 per share. 
The order with a Book Only instruction would not remove any liquidity 
upon entry and would post to the EDGA Book at $10.03. This would, in 
turn, trigger the discretion of the resting buy order and an execution 
would occur at $10.03. The order with a Book Only instruction to sell 
would be treated as the adder of liquidity and the buy order with 
discretion would be treated as the remover of liquidity.
---------------------------------------------------------------------------

    \20\ The term Book Only shall mean ``An order instruction 
stating that an order will be matched against an order on the EDGA 
Book or posted to the EDGA Book, but will not route to an away 
Trading Center.'' See Rule 11.6(n)(3).
---------------------------------------------------------------------------

     Assume the same facts as above, but that the incoming 
order with a Book Only instruction is priced at $10.00 instead of 
$10.03. The order with a Book Only instruction would remove liquidity 
upon entry at $10.00 per share pursuant to the Exchange's order 
execution rule. Contrary to the examples set forth above, the order 
with a Book Only instruction to sell would be treated as the liquidity 
remover and the resting buy order with discretion would be treated as 
the liquidity adder. The Exchange notes that this example operates the 
same whether an order contains a TIF of IOC, FOK or any other TIF.
EDGA Rule 11.8(d)(5)--MidPoint Peg Order, Routing and Posting
Current Functionality
    Pursuant to EDGA Rule 11.8(d), a MidPoint Peg Order \21\ may 
include a Book Only or Post Only instruction. MidPoint Peg Orders are 
not eligible for routing pursuant to Rule 11.11 unless routed utilizing 
the RMPT,\22\ RMPL,\23\ or Destination Specific \24\ routing strategy 
as defined in Rule 11.11(g)(13). A MidPoint Peg Order may include a 
Non-Displayed Swap (``NDS'') \25\ instruction, however, when such 
instruction is included, a MidPoint Peg Order is not eligible for 
routing pursuant to Rule 11.11.
---------------------------------------------------------------------------

    \21\ A MidPoint Peg Order is ``[a] non-displayed Market Order or 
Limit Order with an instruction to execute at the midpoint of the 
NBBO, or, alternatively, pegged to the less aggressive of the 
midpoint of the NBBO or one minimum price variation inside the same 
side of the NBBO as the order. A MidPoint Peg Order with a limit 
price that is more aggressive than the midpoint of the NBBO will 
execute at the midpoint of the NBBO or better subject to its limit 
price. A MidPoint Peg Order may execute at its limit price or better 
when its limit price is less aggressive than the midpoint of the 
NBBO. A MidPoint Peg Order will be ranked at the midpoint of the 
NBBO where its limit price is equal to or more aggressive than the 
midpoint of the NBBO. A MidPoint Peg Order will not be eligible for 
execution when an NBBO is not available. In such case, a MidPoint 
Peg Order would rest on the EDGA Book and would not be eligible for 
execution in the System until an NBBO is available. The MidPoint Peg 
Order will receive a new time stamp when an NBBO becomes available 
and a new midpoint of the NBBO is established. In such case, 
pursuant to Rule 11.9, all MidPoint Peg Orders that are ranked at 
the midpoint of the NBBO will retain their priority as compared to 
each other based upon the time such orders were initially received 
by the System. A MidPoint Peg Order will be ranked at its limit 
price where its limit price is less aggressive than the midpoint of 
the NBBO. Notwithstanding that a MidPoint Peg Order may be a Market 
Order or a Limit Order, its operation and available modifiers are 
limited to this Rule 11.8(d).'' See Rule 11.8(d).
    \22\ See Rule 11.11(g)(12)(A).
    \23\ See Rule 11.11(g)(12)(B).
    \24\ See Rule 11.11(g)(13).
    \25\ A Non-Displayed Swap (``NDS'') Non-Displayed Swap (``NDS'') 
is ``[a]n instruction that may be attached to an order with a Non-
Displayed instruction that when such order is resting on the EDGA 
Book and is locked by an incoming order with a Post Only instruction 
that does not remove liquidity pursuant to paragraph (4) of this 
rule, the order with an NDS instruction is converted to an 
executable order and will remove liquidity against such incoming 
order. An order with an NDS instruction is not eligible for routing 
pursuant to Rule 11.11.'' See Rule 11.6(n)(7).
---------------------------------------------------------------------------

    Currently, RMPL and RMPT are routing strategies under which a 
MidPoint Peg Order checks the System for available shares and any 
remaining shares are then sent to destinations on the System routing 
table that support midpoint eligible orders. If any shares remain 
unexecuted after routing, they are posted on the EDGA Book as a 
MidPoint Peg Order, unless otherwise instructed by the User.
Proposed Functionality
    The Exchange proposes to amend EDGA Rule 11.8(d)(5)'s rule text to 
align with the rule text of EDGX Rule 11.8(d)(5).\26\ As proposed, the 
EDGA and EDGX rule text will be identical,\27\ and the routing and 
posting behavior of MidPoint Peg Orders on EDGA will now be identical 
to how such orders behave on EDGX. Specifically, as is the case under 
both the current EDGA and EDGX rules, MidPoint Peg Orders may contain a 
Book Only, Post Only, or NDS instruction. However, pursuant to the 
proposed EDGA Rule 11.8(d)(5), MidPoint Peg Orders entered onto EDGA 
will no longer be routable, thereby aligning the rule text with EDGX's 
rule text.
---------------------------------------------------------------------------

    \26\ Note the Exchange proposes to remove the RMPT and RMPL 
routing strategies from the EDGA rulebook. While the Exchange does 
not propose to entirely remove the Destination Specific routing 
option from the rulebook, EDGA does propose to prohibit the routing 
of Midpoint Peg Orders utilizing the Destination Specific routing 
option, just as it does on EDGX, today.
    \27\ Supra note 8.
---------------------------------------------------------------------------

    By fully adopting the EDGX Rule 11.8(d)(5) language, the Routing 
and Posting behavior for MidPoint Peg Order's will be identical to that 
of MidPoint Peg Order's entered onto EDGX, thereby aligning 
functionality on affiliated exchanges, EDGA and EDGX. Typically, 
MidPoint Peg Orders are entered with a Post Only or Book Only 
instruction,\28\ which result in orders seeking to either execute on 
the Exchange or post to the EDGA Book, but not route to an away market. 
Users often prefer to use these types of instructions to help them 
manage trading fees they may incur when their orders are routed away 
from EDGA and access other markets. In this regard, the Exchange 
believes that the alignment of EDGA's rule text with EDGX's rule text--
particularly removing the routing of EDGA MidPoint Peg Orders--will 
help to make MidPoint Peg Order behavior consistent with Users' 
expectations, as well as increase liquidity at the midpoint on EDGA.
---------------------------------------------------------------------------

    \28\ See Rule 11.8(d)(5).
---------------------------------------------------------------------------

EDGA Rule 11.8(e)(5)--MidPoint Discretionary Order (``MDO'') \29\ 
Functionality
---------------------------------------------------------------------------

    \29\ A MidPoint Discretionary Order (``MDO'') is ``[a] limit 
order to buy that is pegged to the NBB, with or without an offset, 
with discretion to execute at prices up to and including the 
midpoint of the NBBO, or a limit order to sell that is pegged to the 
NBO, with or without an offset, with discretion to execute at prices 
down to and including the midpoint of the NBBO. An MDO's pegged 
price and Discretionary Range are bound by its limit price. An MDO 
to buy or sell with a limit price that is less (higher) than its 
pegged price, including any offset, is posted to the EDGA Book at 
its limit price. The pegged prices of an MDO are derived from the 
NBB or NBO, and cannot independently establish or maintain the NBB 
or NBO. An MDO in a stock priced at $1.00 or more can only be 
executed in sub-penny increments when it executes at the midpoint of 
the NBBO or against a contra-side order pursuant to Rule 
11.10(a)(4)(D). Notwithstanding that an MDO Order may be a Limit 
Order, its operation and available modifiers are limited to this 
Rule 11.8(e). See EDGA Rule 11.8(e).
---------------------------------------------------------------------------

Current Functionality
    Today, EDGA Rule 11.8(e)(5), Routing, provides only that MDOs are

[[Page 87911]]

not eligible for routing pursuant to Rule 11.11. As such, MDOs entered 
onto EDGA today will typically exercise discretion and remove liquidity 
against eligible contra-side orders upon arrival or execute against 
contra-side MDOs at the NBBO midpoint and will not act as providers of 
liquidity. MDOs may also be entered with a Quote Depletion Protection 
(``QDP'') \30\ instruction that Users may include on their MDOs to 
limit their orders' ability to exercise discretion in certain 
circumstances. QDP restricts the exercise of discretion on MDOs in 
circumstances where applicable market conditions indicate that it may 
be less desirable to execute within an order's Discretionary Range.\31\
---------------------------------------------------------------------------

    \30\ Quote Depletion Protection (``QDP'') is an optional 
instruction that a User may include on an MDO to limit the order's 
ability to exercise discretion in certain circumstances. A ``QDP 
Active Period'' will be enabled or refreshed for buy (sell) MDOs if 
the best bid (offer) displayed on the EDGA Book is executed below 
one round lot. During the QDP Active Period, an MDO entered with a 
QDP instruction will not exercise discretion, and is executable only 
at its ranked price. When a QDP Active Period is initially enabled, 
or refreshed by a subsequent execution or cancellation of the best 
bid (offer) then displayed on the EDGA Book, it will remain enabled 
for two milliseconds. Unless the User chooses otherwise, an MDO to 
buy (sell) entered with a QDP instruction will default to a Non-
Displayed instruction and will include an Offset Amount equal to one 
Minimum Price Variation below (above) the NBB (NBO). See Rule 
11.8(e)(10).
    \31\ For instance, a QDP instruction would provide Users with 
protective features that would limit the order's ability to exercise 
discretion in certain circumstances that may be indicative of a 
quotation that is moving against the resting MDO--i.e., a buy 
quotation that is moving to a lower price for MDOs to buy, or a sell 
quotation that is moving to a higher price for MDOs to sell.
---------------------------------------------------------------------------

Proposed Functionality
    While the non-routable restriction will remain in place, the 
Exchange now seeks to add additional rule text to EDGA 11.8(e)(5) to 
align it with EDGX Rule 11.8(g)(5). As proposed, the EDGA and EDGX rule 
text will be identical,\32\ and the posting behavior of MDOs on EDGA 
will now be identical to how such orders behave on EDGX. Specifically, 
the Exchange seeks to add rule text to provide that MDOs entered onto 
the Exchange will, by default, act as liquidity providers. However, by 
adding rule text that allows MDOs entered with a QDP instruction to 
remove liquidity, by default, unless a User chooses to require an MDO 
act only as a liquidity provider, MDOs with a QDP instruction will be 
able to act as a liquidity provider or remover.
---------------------------------------------------------------------------

    \32\ Supra note 8.
---------------------------------------------------------------------------

    In addition, the Exchange seeks to add rule text to EDGA Rule 
11.8(e)(5) that would provide that if the instructions included on an 
MDO do not permit the order to remove liquidity, the MDO will only 
execute on entry against resting orders that include a Super Aggressive 
\33\ instruction priced at the MDO's pegged price if the MDO also 
contains a Displayed \34\ instruction, and against orders with an NDS 
instruction priced at the MDO's pegged price or within its 
Discretionary Range.
---------------------------------------------------------------------------

    \33\ Super Aggressive is ``[a]n order instruction that directs 
the System to route the order if an away Trading Center locks or 
crosses the limit price of the order resting on the EDGA Book. A 
User may instruct the Exchange to apply the Super Aggressive 
instruction solely to routable orders posted to the EDGA Book with 
remaining size of an Odd Lot. When any order with a Super Aggressive 
instruction is locked by an incoming order with a Post Only 
instruction that does not remove liquidity pursuant to Rule 
11.6(n)(4) below, the order with a Super Aggressive instruction is 
converted to an executable order and will remove liquidity against 
such incoming order. Notwithstanding the foregoing, if an order that 
does not contain a Super Aggressive instruction maintains higher 
priority than one or more Super Aggressive eligible orders, the 
Super Aggressive eligible order(s) with lower priority will not be 
converted, as described above, and the incoming order with a Post 
Only instruction will be posted or cancelled in accordance with Rule 
11.6(n)(4) below.'' See Rule 11.6(n)(2).
    \34\ Displayed is ``[a]n instruction the User may attach to an 
order stating that the order is to be displayed by the System on the 
EDGA Book. Unless the User elects otherwise, all orders eligible to 
be displayed on the EDGA Book will be automatically defaulted by the 
System to Displayed. See Rule 11.6(e)(1).
---------------------------------------------------------------------------

    The Exchange also proposes to add language to EDGA Rule 11.8(e)(5) 
stating that if a resting contra-side order that does not include an 
NDS instruction is priced within the discretionary range of an incoming 
MDO that is not permitted to remove liquidity, then the incoming MDO 
will be placed on the EDGA Book and its discretionary range will be 
shortened to equal the limit price of the resting contra-side order.
    Finally, the Exchange seeks to add language to Rule 11.8(e)(5) 
which provides that where an incoming order with a Post Only 
instruction does not remove liquidity on entry pursuant to EDGA Rule 
11.6(n)(4) against a resting MDO, the discretionary range of the 
resting MDO will be shortened to equal the limit price of the incoming 
contra-side order with a Post Only instruction.
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.\35\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \36\ 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) \37\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \35\ 15 U.S.C. 78f(b).
    \36\ 15 U.S.C. 78f(b)(5).
    \37\ Id.
---------------------------------------------------------------------------

    In particular, the proposed changes are designed to align the 
economics of executing under the pending EDGA maker-taker fee model, 
with that of the EDGX maker-taker fee model. In order to do so, though, 
certain amendments to EDGA order type behavior are necessary, such that 
EDGA adders of liquidity and removers of liquidity, receive rebates and 
pay fees, as expected, i.e., receive rebate to add liquidity, and pay a 
fee to remove liquidity. The proposed changes appropriately treat 
aggressive order types that would prefer to immediately execute, 
favoring immediate executions over rebates. The Exchange believes that 
such Users would naturally expect to pay a fee to immediately remove 
liquidity. In this regard, the proposed changes are designed to promote 
just and equitable principles of trade, and facilitate 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 proposed changes are necessary to align EDGA 
rules 11.6(d), 11.8(d)(5), and 11.8(e)(5), with EDGX rules 11.6(d), 
11.8(d)(5), and 11.8(g)(5), respectively, thereby making the EDGA rule 
text \38\ and order behavior identical to that of EDGX, a maker-taker 
exchange.
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    \38\ Supra note 8.
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Rule 11.11(g)--Routing Options
    The Exchange believes that the deletion of the routing options 
ROBB, ROCO, RMPT, and RMPL from the EDGA rulebook are consistent with 
the Act and these requirements because

[[Page 87912]]

doing so will remove impediments to the mechanism of a free and open 
market, thereby protecting investors and the public interest. As 
stated, ROBB, ROCO, RMPT, and RMPL are routing options designed for an 
inverted fee schedule. Because EDGA is transitioning to a maker-taker 
fee model, these routing options are no longer necessary. Additionally, 
these routing options are targeting Users that want low-cost 
executions. In this regard, each of these routing options first seek 
liquidity from the Exchange, which is currently inverted. However, once 
the Exchange transitions to a maker-taker fee model, these strategies 
will no longer be useful for Users targeting a low-cost execution, 
since the first trading venue these routing options would check--EDGA--
will now assess Users a full fee for removing liquidity. Therefore, the 
Exchange is discontinuing these routing options. The Exchange notes 
that routing through the Exchange is voluntary and alternative routing 
options offered by the Exchange as well as other methods remain 
available to Users that wish to route to other trading centers. By 
removing references to routing options that will no longer be offered 
by the Exchange, the Exchange believes the proposed rule change will 
remove impediments to the mechanism of a free and open market and 
protect investors by providing investors with rules that accurately 
reflect routing options currently available on the Exchange. The 
Exchange does not believe that this proposal will permit unfair 
discrimination among customers, brokers, or dealers because the ROBB, 
ROCO, RMPT, and RMPL routing options will no longer be available to any 
User.
EDGA Rule 11.6(d)--Order With a Discretionary Range; EDGA Rule 
11.8(d)(5)--MidPoint Peg Order, Routing and Posting; EDGA Rule 
11.8(e)(5)--MidPoint Discretionary Order (``MDO'') Routing and Posting
    In general, these proposed amendments to EDGA Rule 11.6(d) are 
intended to better align certain Exchange rules and System \39\ 
functionality with that currently offered by EDGX in order to provide a 
consistent functionality across the Exchange and EDGX and to align the 
economics of these order types and executions with that of a maker-
taker model (i.e., receive a rebate to add liquidity, and pay a fee to 
remove liquidity). Consistent functionality between the EDGA and EDGX 
will reduce complexity and streamline duplicative functionality, 
thereby resulting in simpler technology implementation, and changes and 
maintenance by Users of the Exchange that are also participants on 
EDGX.
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    \39\ The term ``System'' shall mean the electronic 
communications and trading facility designated by the Board through 
which securities orders of Users are consolidated for ranking, 
execution and, when applicable, routing away. See Rule 1.5(cc).
---------------------------------------------------------------------------

    The proposed rule changes also do not propose to implement new or 
unique functionality that has not been previously filed with the 
Commission or is not available on EDGX. The Exchange notes that the 
proposed rule text is based on applicable EDGX rule text, and that the 
proposed language of the Exchange's Rules differs only to extent 
necessary to conform to existing Exchange rule text or to account for 
minor differences, such as references to EDGA and EDGX. Where possible, 
the Exchange has mirrored EDGX rules, because consistent rules will 
simplify the regulatory requirements and increase the understanding of 
the Exchange's operations for Users of the Exchange that are also 
participants on EDGX. As such, the proposed rule change would foster 
cooperation and coordination with persons engaged in facilitating 
transactions in securities and would remove impediments to and perfect 
the mechanism of a free and open market and a national market system. 
Moreover, these changes are not designed to permit unfair 
discrimination because they apply equally to all Users, and Users are 
not required to utilize the described functionality.
EDGA Rule 11.6(d)--Order With a Discretionary Range Executes Against an 
Order With a Post Only Instruction; EDGA Rule 11.6(d)--Order With a 
Discretionary Range Executes vs. an Order Without a Post Only 
Instruction
    The Exchange believes that aligning EDGA Rule 11.6(d) with EDGX 
Rule 11.6(d) will provide additional clarity and specificity regarding 
the functionality of the System and provide Users with consistent rules 
between EDGA and its affiliated exchange, EDGX. In this regard, the 
proposed amendments would promote just and equitable principles of 
trade and remove impediments to a free and open market.
    In particular, the Exchange believes it is consistent with the Act 
to execute orders with a Discretionary Range instruction against 
marketable liquidity (e.g., order with a Post Only instruction) when an 
execution would not otherwise occur is consistent with both: (i) the 
Act, by facilitating executions, removing impediments and perfecting 
the mechanism of a free and open market and national market system; and 
(ii) a User's instructions, which have evidenced a willingness by the 
User to pay applicable execution fees and/or execute at more aggressive 
prices than they are currently ranked in favor of an execution. As 
noted above, because Users of orders with Discretionary Range 
instructions are willing to execute at more aggressive prices, they 
typically expect to pay a fee to remove liquidity. Similarly, a User 
who has entered a Post Only order onto a maker-taker exchange, would 
not expect to immediately remove liquidity against a resting order with 
a Discretionary Range, and would expect instead to be treated as an 
adder of liquidity and receive a rebate. Accordingly, in order to 
facilitate transactions consistent with the instructions and 
expectations of its Users, the Exchange proposes to execute resting 
orders with a Discretionary Range instruction against incoming orders, 
when such incoming orders would otherwise forego an execution.
    Moreover, the proposed rule change to Rule 11.6(d) is not designed 
to permit unfair discrimination amongst Users because the proposed 
amendment is applicable to all Users, and the use of a Discretionary 
Range instruction is not required.
EDGA Rule 11.8(d)(5)--MidPoint Peg Order, Routing and Posting
    The proposed amendments to Rule 11.8(d)(5) are consistent with the 
Act and its requirements because the MidPoint Peg Order would now 
operate in exactly the same fashion as the MidPoint Peg Order available 
on EDGX, thereby further aligning functionality across affiliated 
exchanges. In addition, the Exchange believes that by eliminating the 
routing of MidPoint Peg Orders entered on EDGA will help to increase 
liquidity at the midpoint of the National Best Bid or National Best 
Offer on EDGA, thereby improving both the potential for price 
improvement and execution on the Exchange. Accordingly, the Exchange 
believes that the proposed amendments to Rule 11.8(d)(5) would promote 
just and equitable principles of trade, remove impediments to, and 
perfect the mechanism of, a free and open market and a national market 
system.
    Finally, the Exchange also notes that there are minor differences 
between EDGA Rule 11.8(d), MidPoint Peg Order, and EDGX Rule 11.8(d), 
MidPoint Peg Order. Importantly, however, these differences are minor 
and do not change how Midpoint Peg Orders behave on EDGX and how 
MidPoint Peg Orders will behave on EDGA post implementation of the

[[Page 87913]]

proposed changes. As such, the Exchange believes the proposed 
conforming changes to be appropriate.
EDGA Rule 11.8(e)(5)--MidPoint Discretionary Order (``MDO'') 
Functionality
    As noted above, the Exchange seeks to add rule text to provide that 
MDOs entered onto the Exchange will, by default, act as liquidity 
providers. However, by adding rule text that allows MDOs entered with a 
QDP instruction to remove liquidity, by default, unless a User chooses 
to require an MDO act only as a liquidity provider, MDOs with a QDP 
instruction will be able to act as a liquidity provider or remover.
    The addition of rule text providing that MDOs will act only as 
adders of liquidity makes sense under a maker-taker fee model, as such 
amendment will now align the rule text with the expectations of such 
Users--i.e., Users of MDOs can use MDOs to post displayed or non-
displayed liquidity at the NBB or NBO with or without an offset, with a 
Discretionary Range extending to and including the NBBO midpoint, and 
receive a rebate for providing liquidity. Additionally, the proposed 
operation of the EDGA MDO enables Users to act as liquidity providers 
while increasing its opportunities to rest on the EDGA Book and 
potentially execute at prices more favorable than the midpoint whenever 
contra-side orders are priced more aggressively than the NBBO midpoint.
    Therefore, the proposed operation of the EDGA MDO promotes just and 
equitable principles of trade and would facilitate transactions in 
securities and improve trading within the national market system by 
increasing the potential price improvement opportunities for incoming 
orders that may execute against a resting MDO within its discretionary 
range.
    Additionally, as noted above, by adding rule text that allows MDOs 
entered with a QDP instruction to remove liquidity, by default, unless 
a User chooses to require an MDO act only as a liquidity provider, MDOs 
with a QDP instruction will be able to act as a liquidity provider or 
remover. The Exchange believes adding this rule text makes sense under 
a maker-taker fee model because Users that enter MDOs with a QDP 
instruction would expect to potentially pay a remove fee if they permit 
their orders to remove liquidity, and to receive a rebate should they 
permit their orders only to add liquidity. A User that enters a MDO 
with a QDP instruction, and permits their order only to add liquidity, 
is prioritizing the provision of liquidity and receipt of a rebate, 
rather than maximizing execution opportunities. Conversely, a User that 
enters a MDO with a QDP instruction, and permits their order to remove 
liquidity, would value the opportunity to improve their fill rates.
    Moreover, the addition of such rule text will help to increase 
price improvement opportunities to incoming orders, while at the same 
time limit the exercise of discretion in circumstances where an 
execution within the MDOs Discretionary Range may be undesirable. The 
Exchange therefore believes that the addition of the rule text 
regarding MDOs entered with a QDP instruction would remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system. Furthermore, while the QDP instruction would be 
available to all Users, use of this instruction would be voluntary, 
meaning that Users could choose to use this instruction, or not, based 
on their specific needs.
    As a result of the proposed changes, MDOs entered on the Exchange 
without a QDP instruction will only execute on entry in limited 
circumstances where the resting order includes a Super Aggressive or 
NDS instruction that allows for a liquidity swap with the incoming MDO. 
The Exchange believes it is reasonable to execute resting orders with 
an NDS instruction within the incoming MDO's discretionary range but 
not execute orders with a Super Aggressive instruction within the 
incoming MDO's discretionary range due to the different purposes of 
each order instruction. Users of the Super Aggressive instruction tend 
to use it for best execution purposes because the order instruction 
enables the order to be routed away or executed locally when an order 
is displayed at a price equal to or better than the order's limit 
price. Conversely, an order with an NDS instruction is not routable and 
only executes against an incoming order that would lock it. The User of 
the NDS instruction is generally agnostic to whether the order is 
displayed on an away market or priced at the NBBO. It simply seeks to 
execute against an order that is priced at its limit price and engages 
in a liquidity swap to do so, even if the contra-side interest contains 
a NDS instruction.
    Finally, the Exchange also notes that there are minor differences 
between EDGA Rule 11.8(e), MidPoint Discretionary Orders, and EDGX Rule 
11.8(g), MidPoint Discretionary Orders. Importantly, however, these 
differences are minor and do not change how MDOs behave on EDGX and how 
MDOs will behave on EDGA post implementation of the proposed changes. 
As such, the Exchange believes the proposed conforming changes to be 
appropriate.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The elimination 
of the routing options ROBB, ROCO, RMPT, and RMPL is due to the fact 
that these routing options are not viable on a maker-taker exchange and 
are therefore obsolete. Additionally, the proposed changes to 
Discretionary Ranges, MidPoint Peg Orders, and MDOs, will provide 
consistent functionality between the Exchange and EDGX, thereby 
reducing complexity and streamlining duplicative functionality, 
resulting in simpler technology implementation, as well as changes and 
maintenance by Users of the Exchange that are also participants on 
EDGX. Thus, the Exchange believes this proposed rule change is 
necessary to permit fair competition among national securities 
exchanges. In addition, the Exchange believes the proposed rule change 
will benefit Exchange participants in that it is designed to achieve a 
consistent technology offering by affiliated exchanges.
    Furthermore, the Exchange does not believe that the proposed rule 
changes will impose any burden on intramarket competition that is not 
necessary or appropriate in furtherance of the act, because the 
proposed changes to order type functionality, and the modification of 
the fee model from inverted to maker-taker, will apply equally to all 
Users. Users are not required to continue to trade on the Exchange 
following the implementation of the proposed changes, and should they 
wish to continue to trade on an inverted exchange, Users may continue 
to access the Exchange's affiliated inverted exchange, BYX, as well as 
other inverted exchanges offered by the Exchange's competitors.

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 written comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The Exchange has filed the proposed rule change pursuant to Section

[[Page 87914]]

19(b)(3)(A) of the Act \40\ and Rule 19b-4(f)(6) \41\ thereunder. 
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 \42\ and Rule 19b-4(f)(6) \43\ 
thereunder.
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    \40\ 15 U.S.C. 78s(b)(3)(A).
    \41\ 17 CFR 240.19b-4(f)(6).
    \42\ 15 U.S.C. 78s(b)(3)(A).
    \43\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)(iii) 
requires the Exchange to give the Commission written notice of the 
Exchange's 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.
---------------------------------------------------------------------------

    A proposed rule change filed under Rule 19b-4(f)(6) \44\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\45\ 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 proposal 
may become operative immediately. According to the Exchange, waiver of 
the 30-day operative delay would assist the Exchange in transitioning 
from an inverted exchange to a maker-taker exchange, as well as 
harmonize its rules with its affiliate, EDGX. Further, the Exchange has 
alerted Users of these changes as well as its anticipated 
implementation date of November 1, 2024, so that Users had additional 
time to make the requisite changes.\46\ Based on the foregoing, the 
Commission believes that waiving the 30-day operative delay is 
consistent with the protection of investors and the public interest. 
Accordingly, the Commission designates the proposed rule change to be 
operative on November 1, 2024.\47\
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    \44\ 17 CFR 240.19b-4(f)(6).
    \45\ 17 CFR 240.19b-4(f)(6)(iii).
    \46\ See supra notes 10-11 and accompanying text.
    \47\ For purposes only of waiving the 30-day operative delay, 
the Commission also has considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
---------------------------------------------------------------------------

    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 [email protected]. Please include 
file number SR-CboeEDGA-2024-042 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-CboeEDGA-2024-042. 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-CboeEDGA-2024-042 and should 
be submitted on or before November 26, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\48\
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    \48\ 17 CFR 200.30-3(a)(12), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-25633 Filed 11-4-24; 8:45 am]
BILLING CODE 8011-01-P
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