Notice2021-21353
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Exchange's Fee Schedule
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Published
October 1, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 188 (Friday, October 1, 2021)</title>
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[Federal Register Volume 86, Number 188 (Friday, October 1, 2021)]
[Notices]
[Pages 54494-54497]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-21353]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93130; File No. SR-CboeEDGA-2021-020]
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Exchange's Fee Schedule
September 27, 2021.
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 September 13, 2021, Cboe EDGA Exchange, Inc. (``Exchange'' or
``EDGA'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the self-regulatory
organization. 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 EDGA Exchange, Inc. (the ``Exchange'' or ``EDGA'' or ``EDGA
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/equities/regulation/rule_filings/edga/">http://markets.cboe.com/us/equities/regulation/rule_filings/edga/</a>), 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.
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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 (``EDGA Equities'') to modify the fee or
rebate associated with certain routing fee codes and eliminate a
particular routing fee code.\3\
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\3\ The Exchange initially filed the proposed fee changes
September 1, 2021 (SR-CboeEDGA-2021-019). On September 13, 2021, the
Exchange withdrew that filing and submitted this proposal.
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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,\4\ no single registered
equities exchange has more than 14% 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 believes that the ever-shifting market share among
the exchanges from month to month demonstrates that market participants
can shift order flow, discontinue, or reduce use of certain categories
of products, in response to fee changes. Accordingly, competitive
forces constrain the Exchange's transaction fees, and market
participants can readily trade on competing venues if they deem pricing
levels at those other venues to be more favorable.
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\4\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (August 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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The Exchange assesses fees in connection with orders routed away to
various exchanges. Now, the Exchange proposes to modify certain routing
fee codes currently under the Fee Codes and Associated Fees section of
the Fee Schedule. First, the Exchange proposes to modify fee code C,
which is appended to orders routed to Nasdaq BX, Inc. (``Nasdaq BX''),
and currently provides a rebate of $0.00110 per share for securities
priced at or above $1.00 and 0.10% of the dollar value for securities
priced below $1.00. Specifically, the Exchange proposes to modify the
description of the fee code to identify Nasdaq BX and to reduce the
rebate for securities priced at or above $1.00 to $0.0005 per share.
Second, the Exchange proposes to modify fee code NX, which is
appended to orders routed to NYSE National, Inc. (``NYSE National'')
using the ROBB, ROCO or ROUC routing strategy, and currently provides a
rebate of $0.00200 per share for securities priced at or above $1.00
and is free for securities priced below $1.00. The Exchange proposes to
reduce the rebate for securities priced at or above $1.00 to $0.0005
per share.
Third, the Exchange proposes to modify fee code S, which is
appended to directed intermarket sweep orders (``ISOs''), and currently
assesses a fee of $0.00320 per share for securities priced at or above
$1.00 and 0.30% of the dollar value for securities priced below $1.00.
The Exchange proposes to increase the fee for securities priced at or
above $1.00 to $.00330.
Finally, as a result of minimal use in the last months, the
Exchange proposes to eliminate fee code IX in its entirety. Fee code IX
is appended to orders routed to the Investors Exchange LLC (``IEX'')
using the DIRC routing strategy, and currently assesses a fee of
$0.00300 per share for securities priced at or above $1.00 and 0.30% of
the dollar value for securities priced below $1.00. The Exchange
believes that because so few users elect to route their orders with
specifications to which fee code IX is applicable, the current demand
does not warrant the infrastructure and ongoing Systems maintenance
required to support the separate fee code. Therefore, the Exchange now
proposes to delete fee code IX in the Fee Schedule. The Exchange notes
that users will continue to be able to choose to route their orders
with the same specifications to which fee codes IX currently applies--
such orders will simply be assessed the fees currently in place for
routed orders generally.\5\ That is, if any of the routed orders to
which fee code IX currently apply fee code X will be appended to such
orders, which also assesses a fee of $0.00300 per share for securities
priced at or above $1.00 and 0.30% of the dollar value for securities
priced below $1.00.
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\5\ The Exchange notes that there are other fee codes that apply
to certain other routing specifications, however, those routed
orders not otherwise specified in such other routing fee code
descriptions yield the general routing fee code X.
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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,\6\ in general, and
furthers the objectives of Section 6(b)(4),\7\ 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) \8\
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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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(4).
\8\ 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 Exchange believes that
its proposal to reduce the rebates applicable to fee codes C and NX and
to increase the fee applicable to fee code S is fair, equitable, and
reasonable because the proposed fees and rebate remain consistent with
pricing offered by the Exchange's affiliates and competitors and does
not represent a significant departure from the Exchange's general
pricing structure. Specifically, the proposed fee applicable to fee
code S is equal to the fee currently charged for directed ISOs on the
Exchange's affiliate, Cboe BZX Exchange, Inc. (``BZX Equities'').\9\
Similarly, the proposed rebates applicable to fee codes C and NX are
more than that offered by the Nasdaq Stock Market LLC (``Nasdaq''),
which does not provide a standard rebate for similar orders.\10\
Therefore, the Exchange believes the proposed fees and rebates
associated with fee codes C, NX, and S remain consistent with pricing
previously
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offered by the Exchange's affiliates and other exchanges and does not
represent a significant departure from such pricing.
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\9\ See the standard rate associated with fee code S, appended
to Directed ISOs, on the BZX Equities fee schedule at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/bzx/">https://www.cboe.com/us/equities/membership/fee_schedule/bzx/</a>.
\10\ See ``Route Rates'' on the Nasdaq fee schedule at <a href="http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2">http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2</a>.
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The Exchange believes the proposed rule change to remove fee code
IX is reasonable as the Exchange has observed a minimal amount of
volume in orders yielding the fee code and, therefore, the continuation
of this fee code does not warrant the infrastructure and ongoing
Systems maintenance required to support separate fee codes for specific
routed orders. As such, the Exchange also believes that is reasonable
and equitable to assess routed orders which meet the specifications to
which fee code IX are currently applicable the standard routing fee
currently in place for all other routed orders--via fee code X, which
also assesses a fee of $0.00300 per share for securities priced at or
above $1.00 and 0.30% of the dollar value for securities priced below
$1.00. The Exchange believes that the proposed rule change is equitable
and not unfairly discriminatory because Members will continue to have
the option to elect to route their orders in the same manner (i.e.,
routed to IEX using the DIRC strategy) and will be automatically and
uniformly assessed the applicable standard rates in place for generally
all other routed orders. Further, if members do not favor the
Exchange's pricing for routed orders, they can send their routable
orders directly to away markets instead of using routing functionality
provided by the Exchange. Routing through the Exchange is optional, and
the Exchange operates in a competitive environment where market
participants can readily direct order flow to competing venues or
providers of routing services if they deem fee levels to be excessive.
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. The Exchange does not believe
that the proposed modifications represent a significant departure from
previous pricing offered by the Exchange or pricing offered by the
Exchange's competitors. Further, while the Exchange is proposing to
eliminate fee code IX, orders that meet specifications of fee code IX
going forward will be assessed the rate for orders routed generally.
Members may opt to disfavor the Exchange's pricing if they believe that
alternatives offer them better value. Accordingly, the Exchange does
not believe that the proposed change will impair the ability of Members
or competing venues to maintain their competitive standing in the
financial markets.
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 proposed
fee and rebate modifications will continue to apply to all Members
equally, and as noted above, orders currently meeting the
specifications of fee code IX will be assessed the rate for orders
routed generally under fee code X. 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 14% of the market share.\11\ Therefore,
no exchange possesses significant pricing power in the execution of
order flow. Indeed, participants can readily choose to send their
orders to other exchange and off-exchange venues if they deem fee
levels at those other venues to be more favorable. Moreover, the
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. Specifically, in Regulation NMS, the
Commission highlighted the importance of market forces in determining
prices and SRO revenues and, also, recognized that current regulation
of the market system ``has been remarkably successful in promoting
market competition in its broader forms that are most important to
investors and listed companies.'' \12\ 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' . . . .''.\13\ 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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\11\ Supra note 3.
\12\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\13\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective upon filing pursuant
to Section 19(b)(3)(A) \14\ of the Act and paragraph (f)(2) of Rule
19b-4 \15\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange. At any time within 60 days of the
filing of such proposed rule change, the Commission summarily may
temporarily suspend such rule change if it appears to the Commission
that such action is necessary or appropriate in the public interest,
for the protection of investors, or otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings under Section 19(b)(2)(B) \16\
of the Act to determine whether the proposed rule change should be
approved or disapproved.
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\14\ 15 U.S.C. 78s(b)(3)(A).
\15\ 17 CFR 240.19b-4(f)(2).
\16\ 15 U.S.C. 78s(b)(2)(B).
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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> Send an email to <a href="/cdn-cgi/l/email-protection#dcaea9b0b9f1bfb3b1b1b9b2a8af9cafb9bff2bbb3aa"><span class="__cf_email__" data-cfemail="80f2f5ece5ade3efedede5eef4f3c0f3e5e3aee7eff6">[email protected]</span></a>. Please include
File Number SR-
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CboeEDGA-2021-020 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-CboeEDGA-2021-020. 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 will also 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-CboeEDGA-2021-020 and should be
submitted on or before October 22, 2021.
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\17\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21353 Filed 9-30-21; 8:45 am]
BILLING CODE 8011-01-P
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