Notice2022-10144
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
May 12, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 92 (Thursday, May 12, 2022)</title>
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[Federal Register Volume 87, Number 92 (Thursday, May 12, 2022)]
[Notices]
[Pages 29205-29208]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-10144]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94864; File No. SR-CboeEDGX-2022-026]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule
May 6, 2022.
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 May 2, 2022, 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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[[Page 29206]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') 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'') by amending the fee
associated with fee code DQ. The Exchange proposes to implement these
changes effective May 2, 2022.
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 16% of the market share. Thus, in such
a low-concentrated and highly competitive market, no single equities
exchange possesses significant pricing power in the execution of order
flow. The Exchange in particular operates a ``Maker-Taker'' model
whereby it pays rebates to members that add liquidity and assesses fees
to those that remove liquidity.
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\3\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (April 22, 2022), 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's Fee Schedule sets forth the standard rebates and
rates applied per share for orders that provide and remove liquidity,
respectively. Currently, for orders in securities priced at or above
$1.00, the Exchange provides a standard rebate of $0.00160 per share
for orders that add liquidity and assesses a fee of $0.0030 per share
for orders that remove liquidity. 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.
Specifically, the proposed rule change amends the fee assessed to
orders that yield fee code DQ under the Fee Codes and Associated Fees
table of the Fee Schedule. Fee code DQ is appended to Midpoint
Discretionary Orders (``MDOs'') \4\ using the Quote Depletion
Protection (``QDP'') order instruction.\5\ QDP is designed to provide
enhanced protections to MDOs by tracking significant executions that
constitute the best bid or offer on the EDGX Book and enabling Users to
avoid potentially unfavorable executions by preventing MDOs entered
with the optional QDP instruction from exercising discretion to trade
at more aggressive prices when QDP has been triggered.\6\ Currently,
MDOs entered with the QDP instruction are appended the fee code DQ and
are assessed a fee of $0.00020 per share in securities at or above
$1.00 and 0.30% of dollar value for securities priced below $1.00. The
proposal would increase the fee assessed under fee code DQ to $0.00040
per share in securities at or above $1.00. The Exchange seeks to align
the fee assessed to orders appended with fee code DQ with the current
fee assessed by the Exchange's affiliate exchange, Cboe EDGA Exchange,
Inc. (``EDGA''), which currently assesses a fee of $0.00040 per share
in securities at or above $1.00 and 0.30% of dollar value for
securities priced below $1.00.\7\ The Exchange does not propose to
change the fee assessed for orders yielding fee code DQ priced below
$1.00.
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\4\ See Exchange Rule 11.8(g).
\5\ See Exchange Rule 11.8(g)(10).
\6\ See Securities Exchange Act Release No. 89007 (June 4,
2020), 85 FR 35454 (June 10, 2020) (SR-CboeEDGX-2020-010).
\7\ See Cboe EDGA Exchange Fee Schedule, Fee Code and Associated
Fees, Fee Code DQ.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the objectives of Section 6 of the Securities and Exchange Act of 1933
[sic] (the ``Act''),\8\ in general, and furthers the objectives of
Section 6(b)(4),\9\ 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) \10\ 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. 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 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.
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\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(4).
\10\ 15 U.S.C. 78f(b)(5).
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In particular, the Exchange believes that the proposed amendment to
increase the fee associated with fee code DQ is reasonable, equitable
and not unfairly discriminatory. The Exchange believes the proposed
increase is reasonable because the proposed change represents a modest
fee increase for an optional order instruction. Members may continue to
submit MDOs without the QDP order instruction if they do not wish to
incur the slightly increased fee. Users may also opt to disfavor the
Exchange's pricing if they believe that alternatives offer them better
value. The Exchange further believes that the proposed change is
reasonable because
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the proposed fee remains consistent with pricing offered by the other
exchanges and does not represent a significant departure from the
Exchange's general pricing structure. Specifically, the proposed fee
applicable to fee code DQ is equal to that of the Exchange's affiliate,
EDGA, which currently assesses a fee of $0.00040 for MDOs submitted to
EDGA with a QDP order instruction. In addition, the proposed fee is
equal to the fee currently offered by the Nasdaq Stock Market LLC
(``Nasdaq''), for its Midpoint Extended Life Order (``M-ELO'') \11\ in
securities priced at or above $1.00.\12\ The Exchange believes that the
proposed fee is reasonable as it is competitive with the fee assessed
by EDGA for its MDOs appended with the QDP order instruction and the
fee Nasdaq charges for M-ELO executions, which offer similar protective
features to MDOs entered with the QDP order instruction on the
Exchange. The Exchange believes the proposed rule change is equitable
and not unfairly discriminatory because both the MDO order type and the
associated QDP order instruction are available to all Users on an equal
and non-discriminatory basis, and any User that chooses to use the QDP
instruction would be uniformly subject to the same proposed fee. The
Exchange notes that the QDP instruction is optional and market
participants who do not wish to incur the increased flat fee can
continue to enter MDOs without the QDP instruction.
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\11\ Nasdaq's Midpoint Extended Life Orders are non-displayed
orders pegged to the midpoint of the NBBO that do not execute until
the passage of at least 10 milliseconds after the order has been
accepted by the System. See Nasdaq Rules, Equity 4, Section
4702(b)(14).
\12\ See Nasdaq Rules, Equity 7, Pricing Schedule, Section
118(a)(1), (2), (3). Nasdaq assesses a fee of $0.0004 per share when
executed at a price at or above $1.00. Nasdaq does not charge a fee
for M-ELO executions in securities priced below $1.00. See Nasdaq
Rules, Equity 7, Pricing Schedule, Section 118(b).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
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
change to the fee assessed on orders that yield fee code DQ will apply
to all such orders equally in that all MDO orders utilizing the QDP
order instruction will be assessed the proposed slightly higher fee.
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 the proposed change does
not represent a significant departure from pricing currently offered by
the Exchange or pricing offered by other equities exchanges. 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. As previously discussed, the Exchange operates in a
highly competitive market. Members have numerous alternative venues
that they may participate on and direct their order flow, including
other equities exchanges, off-exchange venues, and alternative trading
systems. Additionally, the Exchange represents a small percentage of
the overall market. Based on publicly available information, no single
equities exchange has more than 16% of the market share.\13\ 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.'' \14\ 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' . . .''.\15\
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\13\ Supra note 3.
\14\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\15\ 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 pursuant to Section
19(b)(3)(A) of the Act \16\ and paragraph (f) of Rule 19b-4 \17\
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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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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> Send an email to <a href="/cdn-cgi/l/email-protection#9ceee9f0f9b1fff3f1f1f9f2e8efdceff9ffb2fbf3ea"><span class="__cf_email__" data-cfemail="2a585f464f07494547474f445e596a594f49044d455c">[email protected]</span></a>. Please include
File Number SR-CboeEDGX-2022-026 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-2022-026. This
file number should be included on the subject line if email is used. To
help the
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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. 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-2022-026, and
should be submitted on or before June 2, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10144 Filed 5-11-22; 8:45 am]
BILLING CODE 8011-01-P
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