Notice2022-20734
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule
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Published
September 26, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 185 (Monday, September 26, 2022)</title>
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[Federal Register Volume 87, Number 185 (Monday, September 26, 2022)]
[Notices]
[Pages 58393-58396]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-20734]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-95845; File No. SR-CboeEDGA-2022-013]
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule
September 20, 2022.
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 7, 2022, Cboe EDGA Exchange, Inc. (``Exchange'' or
``EDGA'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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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'') is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to amend its Fee Schedule. The
text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (<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.
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 to adopt monthly
fees assessed to Users \3\ that elect to
[[Page 58394]]
subscribe to the Short Volume Report, effective, August 24, 2022.\4\
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\3\ A ``User'' of an Exchange Market Data product is a natural
person, a proprietorship, corporation, partnership, or entity, or
device (computer or other automated service), that is entitled to
receive Exchange data. See the EDGA Equities Exchange Fee Schedule
at <a href="https://www.cboe.com/us/equities/membership/fee_schedule/EDGA/">https://www.cboe.com/us/equities/membership/fee_schedule/EDGA/</a>.
\4\ The Exchange initially filed the proposed fee changes on
August 24, 2022 (SR-CboeEDGA-2022-012). On September 7, 2022, the
Exchange withdrew that filing and submitted this filing.
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On August 9, 2022, the Exchange introduced a new data product known
as the Short Volume Report.\5\ The Short Volume Report, which will be
available on August 24, 2022, is an end-of-day report that provides
certain equity trading activity on the Exchange, and includes trade
date, total volume, sell short volume, and sell short exempt volume, by
symbol.\6\ In addition to the daily subscription, a Member \7\ or non-
Member may purchase the Short Volume Report on a historical monthly
basis, which provides the end-of-day report for each day during a given
calendar month.
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\5\ See Securities and Exchange Act No. 95552 (August 18, 2022)
87 FR 52089 (August 24, 2022) (SR-CboeEDGA-2022-011).
\6\ See Exchange Rule 13.8(h).
\7\ See Exchange Rule 1.5(n).
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The Exchange proposes to adopt fees applicable to Users that
subscribe to the Short Volume Report. As proposed, the Exchange would
assess a monthly \8\ fee of $50 per month to an Internal Distributor
\9\ and a fee of $75 per month to an External Distributor \10\ of the
Short Volume Report. External Distributors, unlike Internal
Distributors, are typically compensated for the distribution of short
sale data through subscription fees or other mechanisms. Some External
Distributors incorporate short sale data into their own proprietary
products, which they sell to downstream users. These distributors may
not charge separately for data included in the Short Volume Report, but
nevertheless gain value from the data by incorporating it into their
product. The higher price for External Distributors reflects the
additional value these distributors gain from the product.
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\8\ The monthly fees for the Short Volume Report end-of-day
reports are assessed based on a 30-day period. For example, if a
User subscribes to the Short Volume Report on September 15, 2022,
the monthly fee will cover the period of September 15, 2022 through
October 15, 2022. If the User cancels its subscription prior to
October 15, 2022, the User will not be charged for (or have access
to) Short Volume Reports for the remainder of October.
\9\ An ``Internal Distributor'' of an Exchange Market Data
product is a Distributor that receives the Exchange Market Data
product and then distributes that data to one or more Users within
the Distributor's own entity. Supra note 3.
\10\ An ``External Distributor'' of an Exchange Market Data
product is a Distributor that receives the Exchange Market Data
product and then distributes that data to a third party or one or
more Users outside the Distributor's own entity. Supra note 3.
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The Exchange also proposes to adopt fees for the Short Volume
Report provided on a historical basis. The Short Volume Report will be
available for each calendar month dating back to January 2015, and
Users of such data will be assessed a fee of $25 per month of data.
Data provided via the historical Short Volume Report is for only
display use redistribution (e.g., the data may be provided on the
User's platform). Therefore, Users of the historical data may not
charge separately for data included in the Short Volume Report or
incorporate such data into their product. Nonetheless, the Exchange
believes it is reasonable, equitable and not unfairly discriminatory to
charge a fee for display use redistribution that reflects the value
these distributors gain from the historical product.
The Exchange anticipates that a wide variety of market participants
will purchase the proposed Short Volume Report, including, but not
limited to, active equity trading firms and academic institutions. For
example, the Exchange notes that academic institutions may utilize the
Short Volume Report data and as a result promote research and studies
of the equities industry to the benefit of all market participants. The
Exchange further believes the proposed Short Volume Report may provide
helpful trading information regarding investor sentiment that may allow
market participants to make more informed trading decisions and may be
used to create and test trading models and analytical strategies and
provide comprehensive insight into trading on the Exchange.
The Exchange notes that the Short Volume Report is a completely
voluntary product, in that the Exchange is not required by any rule or
regulation to make the reports or services available and that potential
subscribers may purchase it only if they voluntarily choose to do so.
Further, the Exchange notes that other exchanges offer similar products
for a fee.\11\
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\11\ See the ``Nasdaq Short Sale Volume Reports'' portion of the
Nasdaq Fee Schedule at <a href="http://www.nasdaqtrader.com/TraderB.aspx?id=MDDPricingALLN">http://www.nasdaqtrader.com/TraderB.aspx?id=MDDPricingALLN</a>.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\12\ Specifically, the Exchange believes the proposed rule change
is consistent with Sections 6(b)(4) and 6(b)(5) of the Act,\13\ in
particular, in that it provides for the equitable allocation of
reasonable dues, fees and other charges among members and issuers and
other persons using any facility, and is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(4) and (5).
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In adopting Regulation NMS, the Commission granted self-regulatory
organizations (``SROs'') and broker-dealers increased authority and
flexibility to offer new and unique market data to the public. It was
believed that this authority would expand the amount of data available
to consumers, and also spur innovation and competition for the
provision of market data. The Exchange believes that the Short Volume
Report further broadens the availability of U.S. equity market data to
investors consistent with the principles of Regulation NMS. The Short
Volume Report also promotes increased transparency through the
dissemination of short volume data. The Short Volume Report benefits
investors by providing access to the Short Volume Report data, which
may promote better informed trading, as well as research and studies of
the equities industry.
The Exchange operates in a highly competitive environment. Indeed,
there are currently 16 registered equities exchanges that trade
equities. Based on publicly available information, no single equities
exchange has more than 16% of the equity market share.\14\ The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. Particularly, 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.'' \15\ Making similar data products
available to market participants fosters competition in the
marketplace, and constrains the ability of exchanges to charge
supracompetitive fees. In the event that a market participant views one
exchange's data product as more attractive than the competition, that
market participant can, and often does, switch between similar
products. The proposed fees are a result of the competitive environment
of the U.S. equities industry as the Exchange seeks
[[Page 58395]]
to adopt fees to attract purchasers of the recently introduced Short
Volume Report.
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\14\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (September 6, 2022), available at <a href="https://www.cboe.com/us/equities/market_statistics/">https://www.cboe.com/us/equities/market_statistics/</a>.
\15\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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The Exchange believes that the proposed fee for the Short Volume
Report is consistent with the Act in that it is reasonable, equitable,
and not unfairly discriminatory. In particular, the Exchange believes
that the proposed fee is reasonable because it is reasonably aligned
with the value and benefits provided to Users that choose to subscribe
to the Short Volume Report on the Exchange. As discussed above, the
Short Volume Report may be beneficial to Members and non-Members as it
may provide helpful trading information regarding investor sentiment
that may allow market participants to make more informed trading
decisions and may be used to create and test trading models and
analytical strategies and provide comprehensive insight into trading on
the Exchange. Therefore, the Exchange believes that it is reasonable to
assess a modest fee to Users that subscribe to the Short Volume Report.
The Exchange further believes the proposed fee is reasonable
because the amount assessed is less than the analogous fees charged by
competitor exchanges. For example, the Nasdaq Stock Market LLC
(``Nasdaq'') charges $750 to Internal Distributors and $1,250 to
External Distributors of the Nasdaq Short Sale Volume Reports provided
on both a daily and historical monthly basis. Additionally, the New
York Stock Exchange LLC (``NYSE'') and its affiliated equity markets
(the ``NYSE Group'') also charge for the TAQ NYSE Group Short Sales
(Monthly File) and TAQ NYSE Group Short Volume (Daily File).
Specifically, NYSE Group charges an access fee of $1,000 per month for
an ongoing subscription that includes 12 months of back history, then
additional back history charged at $500 per data content month. NYSE
Group also charges a back history fee, of $1,000 per data content month
for the first 12 months of history, then additional back history
charged at $500 per data content month. The Exchange therefore believes
that the proposed fees are reasonable and set at a level to compete
with other equity exchanges that offer similar reports. Indeed,
proposing fees that are excessively higher than established fees for
similar data products would simply serve to reduce demand for the
Exchange's data product, which as noted, is entirely optional. Although
each of these similar data products provide only proprietary trade data
and not trade data from other exchanges, it's possible investors are
still able to gauge overall investor sentiment across different
equities based on the included data points on any one exchange. As
such, if a market participant views another exchange's potential report
as more attractive, then such market participant can merely choose not
to purchase the Exchange's Short Volume Report and instead purchase
another exchange's similar data product, which offers similar data
points, albeit based on that other market's trading activity.
In addition, the Exchange believes that the proposed fees are
equitable and not unfairly discriminatory because they will apply to
all Members and non-Members that choose to subscribe to the Short
Volume Report equally. As stated, the Short Volume Report is completely
optional and not necessary for trading. Rather, the Exchange
voluntarily makes the Short Volume Report available, and Users may
choose to subscribe (and pay for) the report based on their own
individual business needs. Potential subscribers may subscribe to the
Short Volume Report at any time if they believe it to be valuable or
may decline to purchase it.
The Exchange also believes it is reasonable, equitable and not
unfairly discriminatory to charge an External Distributor of the Short
Volume Report a higher fee than an Internal Distributor as an External
Distributor will ordinarily charge a fee to its downstream customers
for this service, and, even if the vendor is not charging a specific
fee for this particular service, the Exchange expects products from the
Short Volume Report to be part of a suite of offerings from
distributors that generally promote sales. External distribution is
also fundamentally different than internal use, in that the former
generates revenue from external sales while the latter does not.
Therefore, the Exchange believes it is reasonable, equitable and not
unfairly discriminatory to charge a higher fee for a product that
generates downstream revenue. Further, the proposed fee will apply
equally to Internal and External Distributors, respectively, that
choose to distribute data from the Short Volume Report. Moreover, as
described above, another Exchange similarly charges External
Distributors higher fees as compared to Internal Distributors for a
similar data product.\16\
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\16\ See Nasdaq Rule 7 Section 152.
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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 because the Short Volume
Report will be available equally to all Members and non-Members that
choose to subscribe to the report. As stated, the Short Volume Report
is optional and Members and non-Members may choose to subscribe to such
report, or not, based on their view of the additional benefits and
added value provided by utilizing the Short Volume Report. As such, the
Exchange believes the proposed rule change imposes no burden on
intramarket competition. 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, similar products offered by Nasdaq and the
NYSE Group are priced higher than the Short Volume Report. 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.'' 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'. . . .''. Accordingly, the Exchange
does not believe its proposal imposes any burden on competition that is
not necessary or appropriate in furtherance of the purposes of the Act.
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.
[[Page 58396]]
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 \17\ and paragraph (f) of Rule 19b-4 \18\
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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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 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#d9abacb5bcf4bab6b4b4bcb7adaa99aabcbaf7beb6af"><span class="__cf_email__" data-cfemail="b8cacdd4dd95dbd7d5d5ddd6cccbf8cbdddb96dfd7ce">[email protected]</span></a>. Please include
File Number SR-CboeEDGA-2022-013 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-2022-013. 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-CboeEDGA-2022-013, and should be
submitted on or before October 17, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-20734 Filed 9-23-22; 8:45 am]
BILLING CODE 8011-01-P
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