Notice2021-17178
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule
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Published
August 12, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 153 (Thursday, August 12, 2021)</title>
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[Federal Register Volume 86, Number 153 (Thursday, August 12, 2021)]
[Notices]
[Pages 44421-44423]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-17178]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92593; File No. SR-CboeEDGX-2021-036]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule
August 6, 2021.
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 August 2, 2021, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'' or ``EDGX
Equities'') proposes to amend its Fee Schedule. The text of the
proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://markets.cboe.com/us/options/regulation/rule_filings/edgx/">http://markets.cboe.com/us/options/regulation/rule_filings/edgx/</a>) [sic], at the Exchange's Office of the Secretary,
and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fee Schedule applicable to its
equities trading platform (``EDGX Equities'') to modify the fee
associated with Remove Volume Tier 2.
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 registered equities exchanges, as well as a
number of alternative trading systems and other off-exchange venues
that do not have similar self-regulatory responsibilities under the
Exchange Act, to which market participants may direct their order flow.
Based on publicly available information,\3\ no single registered
equities exchange has more than 17% of the market share. Thus, in such
a low-concentrated and highly competitive market, no single equities
exchange possesses significant pricing power in the execution of order
flow. The Exchange in particular operates a ``Maker-Taker'' model
whereby it pays rebates to members that add liquidity and assesses fees
to those that remove liquidity. The Exchange's Fee Schedule sets forth
the standard rebates and rates applied per share for orders that
provide and remove liquidity, respectively. Currently, for orders in
securities priced at or above $1.00, the Exchange provides a standard
rebate of $0.00160 per share for orders that add liquidity and assesses
a fee of $0.00285 per share for orders that remove liquidity. For
orders in securities priced below $1.00, the Exchange provides a
standard rebate of $0.00009 per share for orders that add liquidity and
assesses a fee of 0.30% of total dollar value for orders that remove
liquidity. Additionally, in response to the competitive environment,
the Exchange also offers tiered pricing which provides Members
opportunities to qualify for higher rebates or reduced fees where
certain volume criteria and thresholds are met. Tiered pricing provides
an incremental incentive for Members to strive for higher tier levels,
which provides increasingly higher benefits or discounts for satisfying
increasingly more stringent criteria.
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\3\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (July 26, 2021), available at <a href="https://markets.cboe.com/us/equities/market_statistics/">https://markets.cboe.com/us/equities/market_statistics/</a>.
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Pursuant to footnote 1 of the Fee Schedule, the Exchange currently
offers Remove Volume Tiers that provide Members an opportunity to
receive a reduced fee from the standard fee assessed for liquidity
removing orders that yield fee codes BB,\4\ N,\5\ and W.\6\ The Remove
Volume Tiers offer two different tiers that vary in criteria difficulty
and incentive opportunities which Members may qualify for reduced fees
for such orders. For example, the Remove Volume Tier 2 currently
provides a reduced fee of $.00270 for Members who have either (1) an
ADAV \7\ greater than or equal to 0.25% of the TCV \8\ with displayed
orders that yield fee codes B,\9\ V \10\ or Y; \11\ or (2) Retail
[[Page 44422]]
Order ADV \12\ (i.e., yielding fee code ZA \13\) greater than or equal
to 0.45% of the TCV. The Exchange now proposes to increase the reduced
fee to $0.00275 provided under the Remove Volume Tier 2. The Exchange
notes that the Remove Volume Tier 2, as modified, continues to be
available to all Members and provides Members an opportunity to receive
a reduced fee, albeit less of a reduced fee than currently offered.
Further, the Remove Volume Tier 2 continues to be designed to encourage
Members to increase their order flow on the Exchange which further
contributes to a deeper, more liquid market and provides even more
execution opportunities for active market participants at improved
prices.
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\4\ Fee code `BB' is appended to orders that remove liquidity
from EDGX (Tape B) and is assessed a fee of $0.00285 per share.
\5\ Fee code `N' is appended to orders that remove liquidity
from EDGX (Tape C) and is assessed a fee of $0.00285 per share.
\6\ Fee code `W' is appended to orders that remove liquidity
from EDGX (Tape A) and is assessed a fee of $0.00285 per share.
\7\ ADAV means average daily added volume calculated as the
number of shares added per day. ADAV is calculated on a monthly
basis.
\8\ TCV means total consolidated volume calculated as the volume
reported by all exchanges and trade reporting facilities to a
consolidated transaction reporting plan for the month for which the
fees apply.
\9\ Fee code `B' is appended to orders that add liquidity to
EDGX (Tape B) and is provided a rebate of $0.0016 per share.
\10\ Fee code `V' is appended to orders that add liquidity to
EDGX (Tape A) and is provided a rebate of $0.0016 per share.
\11\ Fee code `Y' is appended to orders that add liquidity to
EDGX (Tape C) and is provided a rebate of $0.0016 per share.
\12\ ADV means average daily volume calculated as the number of
shares added to, removed from, or routed by, the Exchange, or any
combination or subset thereof, per day. ADV is calculated on a
monthly basis.
\13\ Fee code `ZA' is appended to Retail Orders that add
liquidity to EDGX and is provided a rebate of $0.0032 per share.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\14\ in general, and
furthers the objectives of Section 6(b)(4),\15\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its Members and issuers and other persons
using its facilities. The Exchange also believes that the proposed rule
change is consistent with the objectives of Section 6(b)(5) \16\
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, and, particularly, is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\14\ 15 U.S.C. 78f.
\15\ 15 U.S.C. 78f(b)(4).
\16\ 15 U.S.C. 78f(b)(5).
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As described above, the Exchange operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. The proposed rule change to
the Remove Volume Tier 2 reflects a competitive pricing structure
designed to incentivize market participants to direct their order flow
to the Exchange, which the Exchange believes would enhance market
quality to the benefit of all Members. In particular, the Exchange
believes the proposed fee change for Remove Volume Tier 2 is reasonable
because the tier will continue to be available to all Members and
provide all Members with an additional opportunity to receive a reduced
fee. The Exchange further believes Remove Volume Tier 2 is a reasonable
means to encourage growth in Members' overall order flow to the
Exchange and to incentivize Members to continue to provide liquidity
adding and liquidity removing on the Exchange by offering them an
opportunity to receive a reduced fee on qualifying orders. The Exchange
believes that the proposed tier will generally benefit all market
participants by incentivizing continuous liquidity and thus, deeper
more liquid markets as well as increased execution opportunities. This
overall increase in activity deepens the Exchange's liquidity pool,
offers additional cost savings, supports the quality of price
discovery, promotes market transparency and improves market quality,
for all investors.
Further, the Exchange believes that the amended Remove Volume Tier
2 is reasonable as it does not represent a significant departure from
the criteria or corresponding rates currently offered in the Fee
Schedule, and that the proposed reduced fee is commensurate with the
criteria. The Exchange also believes that the proposal represents an
equitable allocation of fees and rebates and is not unfairly
discriminatory because all Members are and will continue to be eligible
for Remove Volume Tiers and have the opportunity to meet the tiers'
criteria and receive the applicable reduced fee if such criteria is
met. The Exchange also notes that amended tier will not adversely
impact any Member's ability to qualify for reduced fees or enhanced
rebate offered under other tiers. Should a Member not meet the proposed
new criteria, the Member will merely not receive that corresponding
reduced fee.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. Rather, as discussed above, the
Exchange believes that the proposed amendment to the Remove Volume Tier
2 would encourage the submission of additional order flow to a public
exchange, thereby promoting market depth, execution incentives and
enhanced execution opportunities, as well as price discovery and
transparency for all Members. As a result, the Exchange believes that
the proposed change furthers the Commission's goal in adopting
Regulation NMS of fostering competition among orders, which promotes
``more efficient pricing of individual stocks for all types of orders,
large and small.''
The Exchange believes the proposed rule change does not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the Remove
Volume Tiers will continue to apply to all Members equally in that all
Members are eligible for these tiers, have a reasonable opportunity to
meet the tiers' criteria and will receive the reduced fee on their
qualifying orders if such criteria is met. Additionally, the Remove
Volume Tiers are designed to attract additional order flow to the
Exchange. Greater overall order flow, trading opportunities, and
pricing transparency benefits all market participants on the Exchange
by enhancing market quality and continuing to encourage Members to send
orders, thereby contributing towards a robust and well-balanced market
ecosystem.
Next, the Exchange believes the proposed rule change does not
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As previously
discussed, the Exchange operates in a highly competitive market.
Members have numerous alternative venues that they may participate on
and direct their order flow, including other equities exchanges, off-
exchange venues, and alternative trading systems. Additionally, the
Exchange represents a small percentage of the overall market. Based on
publicly available information, no single equities exchange has more
than 17% of the market share.\17\ Therefore, no exchange possesses
significant pricing power in the execution of order flow. Indeed,
participants can readily choose to send their orders to other exchange
and off-exchange venues if they deem fee levels at those other venues
to be more favorable. Moreover, the Commission has repeatedly expressed
its preference for competition over regulatory intervention in
determining prices, products, and services in the securities markets.
Specifically, in Regulation
[[Page 44423]]
NMS, the Commission highlighted the importance of market forces in
determining prices and SRO revenues and, also, recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \18\ The fact that this
market is competitive has also long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated as follows: ``[n]o one disputes that competition for order flow
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .''.\19\ Accordingly, the Exchange
does not believe its proposed fee change imposes any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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\17\ Supra note 4.
\18\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\19\ NetCoalition v. SEC, 615 F.3d 525, 539 (DC Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \20\ and paragraph (f) of Rule 19b-4 \21\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet<ls-thn-eq> Send an email to <a href="/cdn-cgi/l/email-protection#a9dbdcc5cc84cac6c4c4ccc7dddae9daccca87cec6df"><span class="__cf_email__" data-cfemail="8cfef9e0e9a1efe3e1e1e9e2f8ffccffe9efa2ebe3fa">[email protected]</span></a>. Please
include File Number SR-CboeEDGX-2021-036 on the subject line.
Paper Comments
<bullet> Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeEDGX-2021-036. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeEDGX-2021-036 and should be
submitted on or before September 2, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-17178 Filed 8-11-21; 8:45 am]
BILLING CODE 8011-01-P
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