Notice2023-01117
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
January 23, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 14 (Monday, January 23, 2023)</title>
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[Federal Register Volume 88, Number 14 (Monday, January 23, 2023)]
[Notices]
[Pages 4058-4061]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-01117]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-96677; File No. SR-CboeEDGX-2023-001]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule
January 17, 2023.
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 January 3, 2023, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule chanege 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 Options'')
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>), 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 the Fee Schedule, effective January
3, 2023. The Exchange proposes to modify its market data fees for EDGX
Options Top.\3\ Particularly, the Exchange proposes to modify the
Professional and Non-Professional User Fees and adopt a new Enterprise
Fee for EDGX Options Top.
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\3\ EDGX Options Top is an uncompressed data feed that offers
top of book quotations and execution information based on options
orders entered into the System.
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The Exchange first proposes to reduce the Professional and Non-
Professional User fees for EDGX Options Top. The Exchange currently
charges Internal Distributors and External Distributors that
redistribute any of the EDGX Options Data Feeds different fees for
their Professional Users \4\ and Non-Professional Users.\5\ The
Exchange currently assesses a monthly fee for Professional Users of
$10.00 per User and a monthly fee of $1.00 per Non-Professional
User.\6\ Further, the Fee Schedule provides that Users of any one of
EDGX Options market data products (i.e., EDGX Options Top, EDGX Options
Depth, EDGX Options Auction Feed, EDGX Options Complex Depth, EDGX
Options Complex Top, and EDGX Options Complex Auction Fees) may
receive, at no additional charge, access to any or all of the other
market data products listed. The Exchange proposes to reduce the User
fees for EDGX Options Top. Particularly, the Exchange proposes to
reduce the monthly (i) Professional User fee from $10 per user to $5
per user and (ii) Non-Professional User fee from $1.00 per user to
$0.10 per user. The Exchange also proposes to start charging separate
User fees for EDGX Options Top. User Fees for the Exchange's remaining
market data products will continue to receive, at no additional charge,
access to any or all of the other market data products lists (with the
exception of EDGX Options Top. The Exchange has reformatted the Market
Data Fees table to make this clear.\7\
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\4\ A Professional User of an Exchange Market Data product is
any User other than a Non-Professional User.
\5\ A ``Non-Professional User'' of an Exchange Market Data
product is a natural person or qualifying trust that uses Data only
for personal purposes and not for any commercial purpose and, for a
natural person who works in the United States, is not: (i)
registered or qualified in any capacity with the Securities and
Exchange Commission, the Commodities Futures Trading Commission, any
state securities agency, any securities exchange or association, or
any commodities or futures contract market or association; (ii)
engaged as an ``investment adviser'' as that term is defined in
Section 202(a)(11) of the Investment Advisors Act of 1940 (whether
or not registered or qualified under that Act); or (iii) employed by
a bank or other organization exempt from registration under federal
or state securities laws to perform functions that would require
registration or qualification if such functions were performed for
an organization not so exempt; or, for a natural person who works
outside of the United States, does not perform the same functions as
would disqualify such person as a Non-Professional User if he or she
worked in the United States.
\6\ Distributors that receive EDGX Options Data Feeds are
required to count every Professional User and Non-Professional User
to which they provide the market data product(s).
\7\ The Exchange is not proposing any changes to the current
User Fee rates for its other market data products at this time and
Users of any one of the remaining market data products may continue
to receive, at no additional charge, access to any or all of the
other market data products listed (i.e., except for EDGX Options
Top).
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The Exchange lastly proposes to establish a $20,000 per month
Enterprise Fee that will permit a recipient firm who receives EDGX
Options Top Data from a Distributor to receive the data for an
unlimited number of Professional and Non-Professional Users. The
Enterprise Fee is an alternative to User fees and will permit a
recipient firm who receives EDGX Options Top Data from a Distributor to
pay a flat fee to receive the data for an unlimited number of
Professional and Non-Professional Users, which the Exchange proposes to
make clear in the Fee Schedule. The Enterprise Fee may provide a
recipient an opportunity to reduce its fees. For example, if a
recipient firm has 15,000 Professional Users who each receive EDGX
Options Top at $5.00 per month (as proposed), then that recipient firm
will pay $75,000 per month in Professional Users fees. If the recipient
firm instead were to purchase the proposed Enterprise license, the
recipient firm would alternatively pay a flat fee of $20,000 for an
unlimited number of Professional and Non-Professional Users. A
recipient firm must pay a separate Enterprise Fee for each Distributor
that controls the display of EDGX Options Top if it wishes such User to
be covered by an Enterprise Fee rather than by per User fees. A
recipient firm that pays the Enterprise Fee will not have to report its
number of such Users on a monthly basis. Rather, every six months, the
recipient firm must provide the Exchange with a count of the total
number of authorized person users of each product, including both
Professional and Non-Professional Users. The Exchange notes that the
purchase of an Enterprise license is
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voluntary, and a firm may elect to instead use the per User structure
and benefit from the proposed per User Fees described above. For
example, a firm that does not have a sufficient number of subscribers
to benefit from purchase of the license need not do so.
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.\8\ Specifically, the
Exchange believes the proposed rule change is consistent with the
section 6(b)(5) \9\ 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
section 6(b)(4) of the Act,\10\ which requires that Exchange rules
provide for the equitable allocation of reasonable dues, fees, and
other charges among its Members and other persons using its facilities.
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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ 15 U.S.C. 78f(b)(4).
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The Exchange first notes that it operates in a highly competitive
environment. Indeed, there are currently 16 registered options
exchanges that trade options. Based on publicly available information,
no single options exchange has more than 18% of the market share.\11\
The Exchange believes top-of-book quotation and transaction data is
highly competitive as national securities exchanges compete vigorously
with each other to provide efficient, reliable, and low-cost data to a
wide range of investors and market participants. Indeed, there are
several competing products offered by other national securities
exchanges today, not counting products offered by the Exchange's
affiliates, and each of the Exchange's affiliated U.S. options
exchanges also offers similar top-of-book data.\12\ Each of those
exchanges offer top-of-book quotation and last sale information based
on their own quotation and trading activity that is substantially
similar to the information provided by the Exchange through the EDGX
Options Top Feed. Further, the quote and last sale data contained in
the EDGX Options Top Feed is identical to the data sent to OPRA for
redistribution to the public.\13\ Accordingly, market participants can
substitute EDGX Options Top with feeds from other exchanges and/or
through OPRA. Exchange top-of-book data is therefore widely available
today from a number of different sources.
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\11\ See Cboe Global Markets U.S. Options Market Month-to-Date
Volume Summary (December 27, 2022), available at <a href="https://markets.cboe.com/us/options/market_statistics/">https://markets.cboe.com/us/options/market_statistics/</a>.
\12\ See e.g.,, NYSE Arca Options Proprietary Market Data Fees
Schedule, MIAX Options Exchange, Fee Schedule, Section 6 (Market
Data Fees), Nasdaq PHLX Options 7 Pricing Schedule, Section 10
(Proprietary Data Feed Fees) and Cboe Data Services, LLC Fees
Schedule.
\13\ The Exchange notes that it makes available to ``Customers''
the BBO data and last sale data that is included in the EDGX Options
Top Data Feed no earlier than the time at which the Exchange sends
that data to OPRA.
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Moreover, the EDGX Options Top is distributed and purchased on a
voluntary basis, in that neither the Exchange nor market data
distributors are required by any rule or regulation to make this data
available. Accordingly, Distributors and Users can discontinue use at
any time and for any reason, including due to an assessment of the
reasonableness of fees charged. As described above, market participants
have a wide variety of alternative market data products from which to
choose, such as similar proprietary data products offered by other
exchanges and consolidated data. Further, the Exchange is not required
to make any proprietary data products available or to offer any
specific pricing alternatives to any customers. Moreover, all broker-
dealers involved in order routing must take consolidated data from
OPRA, and proprietary data feeds cannot be used to meet that particular
requirement. As such, all proprietary data feeds are optional.
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.'' \14\ 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 or less attractive than the
competition they can and do switch between similar products. The
proposed fees are a result of the competitive environment, as the
Exchange seeks to adopt fees to attract purchasers of EDGX Options Top
Data.
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\14\ 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 the proposed changes to reduce the current
Professional and Non-Professional User fees are reasonable as recipient
firms will be subject to lower User fees. Additionally, the User fees
continue to be lower than User fees assessed by other exchanges for
similar data.\15\ The Exchange believes that the proposed fees are
equitable and not unfairly discriminatory because they will be charged
uniformly to recipient firms and Users. The Exchange also believes
continuing to offer EDGX Options Top Data to Non-Professional Users at
a lower cost than Professional Users results in greater equity among
data recipients, as Professional Users are categorized as such based on
their employment and participation in financial markets, and thus, are
compensated to participate in the markets. Although Non-Professional
Users too can receive significant financial benefits through their
participation in the markets, the Exchange believes it is reasonable to
charge more to those Users who are more directly engaged in the
markets.
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\15\ See e.g., Nasdaq PHLX Options 7 Pricing Schedule, Section
10 (Proprietary Data Feed Fees), which provides for a fee of $40 per
month to professional users and $1.00 per month to non-professional
users of Top of PHLX Options (TOPO) Data. See also NYSE American
Options Proprietary Market Data Fees schedule, which provides for a
fee of $50 per month to professional users and $1.00 per month to
non-professional users of American Options Top Data.
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The Exchange believes the proposed change to start charging
separate User fees for EDGX Options Top is equitable and reasonable
because the Exchange has not charged for separate User Fees for both
feeds since EDGX Options Top was adopted in January 2018 and the
Exchange now wishes to have separate User fees for EDGX Options
Top.\16\ Moreover, the remaining EDGX Options data products are purely
optional. Only those Customers that deem the products
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to be of sufficient overall value and usefulness would purchase them.
Additionally, the Exchange is not required to provide any User fee
waiver to any Distributors of EDGX Options Top. The Exchange believes
the proposed change is equitable and not unfairly discriminatory as it
will apply uniformly to recipient firms.
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\16\ See Securities Exchange Act Release No. 82462 (January 12,
2018), 83 FR 1647 (January 8, 2018) (SR-CboeEDGX-2017-010).
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The proposed Enterprise Fee for EDGX Options Top Feed is equitable
and reasonable as the proposed fee could result in a fee reduction for
recipient firms with a large number of Professional and Non-
Professional Users. If a recipient firm has a smaller number of
Professional Users of EDGX Options Top Data, then it may continue using
the per User structure and benefit from the proposed per User Fee
reductions. By reducing prices for recipient firms with a large number
of Professional and Non-Professional Users, the Exchange believes that
more firms may choose to receive and to distribute EDGX Options Top
Data, thereby expanding the distribution of this market data for the
benefit of investors.
The Exchange further believes that the proposed Enterprise Fee is
reasonable because it will simplify reporting for certain recipients
that have large numbers of Professional and Non-Professional Users.
Firms that pay the proposed Enterprise Fee will not have to report the
number of Users on a monthly basis as they currently do, but rather
will only have to count authorized users every six months, which is a
significant reduction in administrative burden. Finally, as described
above the Enterprise Fee is entirely optional. A firm that does not
have a sufficient number of subscribers to benefit from purchase of the
license need not do so.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
operates in a highly competitive environment, and its ability to price
top-of-book data is constrained by competition among exchanges that
offer similar data products to their customers. Top-of-book data is
broadly disseminated by competing U.S. options exchanges and through
OPRA. There are therefore a number of alternative products available to
market participants and investors, including products offered by
certain competing exchanges. In this competitive environment potential
subscribers are free to choose which competing product to purchase to
satisfy their need for market information. Often, the choice comes down
to price, as market data customers look to purchase cheaper data
products, and quality, as market participants seek to purchase data
that represents significant market liquidity.
The Exchange believes that the proposed fees do not put any market
participants at a relative disadvantage compared to other market
participants. As discussed, the proposed fees would apply to all
similarly situated recipient firms of EDGX Options Top on an equal and
non-discriminatory basis. The Exchange believes the differentiated fees
for Professional and Non-Professional Users of EDGX Options Top is
appropriate given Professional Users are categorized as such based on
their employment and participation in financial markets, and thus, are
compensated to participate in the markets. Non-Professional Users too
can receive significant financial benefits through their participation
in the markets, however the Exchange believes it is reasonable to
charge more to those Users who are more directly engaged in the
markets. The Exchange therefore believes that the proposed fee neither
favors nor penalizes one or more categories of market participants in a
manner that would impose an undue burden on competition.
The Exchange believes that the proposed fees do not impose a burden
on competition or on other SROs that is not necessary or appropriate in
furtherance of the purposes of the Act. In particular, market
participants are not forced to subscribe to EDGX Options Top, or any of
the Exchange's data feeds, as described above. Also as described above,
there are numerous substitute products offered by other national
securities exchanges, as well as OPRA. Because market data customers
can find suitable substitute feeds, an exchange that overprices its
market data products stands a high risk that users may substitute
another product. These competitive pressures ensure that no one
exchange's market data fees can impose an undue burden on competition,
and the Exchange's proposed fees do not do so here.
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 \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#681a1d040d450b0705050d061c1b281b0d0b460f071e"><span class="__cf_email__" data-cfemail="2052554c450d434f4d4d454e5453605345430e474f56">[email protected]</span></a>. Please include
File Number SR-CboeEDGX-2023-001 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-2023-001. 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
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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-2023-001 and should
be submitted on or before February 13, 2023.
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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-01117 Filed 1-20-23; 8:45 am]
BILLING CODE 8011-01-P
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