Notice2023-09905
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
May 10, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 88 Issue 90 (Wednesday, May 10, 2023)</title>
</head>
<body><pre>
[Federal Register Volume 88, Number 90 (Wednesday, May 10, 2023)]
[Notices]
[Pages 30185-30187]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-09905]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97432; File No. SR-CboeEDGA-2023-007]
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule
May 4, 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 May 1, 2023, Cboe EDGA Exchange, Inc. (the ``Exchange'' or
``EDGA'') 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.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGA Exchange, Inc. (the ``Exchange'' or ``EDGA'') 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.
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'') by introducing new fee
code DX and modifying the description of existing fee code DQ. The
Exchange proposes to implement these changes effective May 1, 2023.
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
Securities Exchange Act of 1934 (the ``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 ``Taker-Maker'' model whereby it pays credits to
members that remove liquidity and assesses fees to those that add
liquidity. The Exchange's Fee Schedule sets forth the standard rebates
and rates applied per share for orders that remove and provide
liquidity, respectively. Currently, for orders in securities priced at
or above $1.00, the Exchange provides a standard rebate of $0.00180
[sic] per share for orders that remove liquidity and assesses a fee of
$0.0030 per share for orders that add liquidity.\4\ For orders in
securities priced below $1.00, the Exchange does not assess any fees or
provide any rebates for orders that add or remove liquidity.\5\
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.
---------------------------------------------------------------------------
\3\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (April 21, 2023), available at <a href="https://www.cboe.com/us/equities/market_statistics/">https://www.cboe.com/us/equities/market_statistics/</a>.
\4\ See EDGA Equities Fee Schedule, Standard Rates.
\5\ Id.
---------------------------------------------------------------------------
Fee Codes DQ and DX
The Exchange currently offers fee code DQ, which is appended to
Midpoint Discretionary Orders (``MDOs'') \6\ using the Quote Depletion
Protection (``QDP'') \7\ order instruction. QDP is designed to provide
enhanced protections to MDOs by tracking significant executions that
constitute the best bid or offer on the EDGA Book \8\ 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
[[Page 30186]]
QDP has been triggered.\9\ Currently, MDOs entered with the QDP
instruction are appended fee code DQ and assessed a flat 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. The Exchange now proposes to
amend fee code DQ to be appended to MDOs entered with a QDP instruction
that add liquidity to the Exchange. The Exchange also proposes to amend
the fee associated with fee code DQ from $0.00040 per share in
securities at or above to $1.00 to $0.0010 per share. The Exchange also
proposes to introduce fee code DX, which would be appended to MDOs with
a QDP instruction that remove liquidity from the Exchange. Orders
appended with fee code DX would be assessed 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.
---------------------------------------------------------------------------
\6\ See Exchange Rule 11.8(e).
\7\ See Exchange Rule 11.8(e)(10).
\8\ See Exchange Rule 1.5(d).
\9\ See Securities Exchange Act Release No. 89016 (June 4,
2020), 85 FR 35488 (June 10, 2020) (SR-CboeEDGA-2020-005) (``Notice
of Filing of Amendment No. 1 and Order Granting Accelerated Approval
of a Proposed Rule Change, as Modified by Amendment No. 1, to Amend
the Rule Relating to MidPoint Discretionary Orders to Allow Optional
Offset or Quote Depletion Protection Instructions'').
---------------------------------------------------------------------------
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.\10\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \11\ 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 the Section 6(b)(5) \12\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \13\
as it is designed to provide for the equitable allocation of reasonable
dues, fees and other charges among its Members and other persons using
its facilities.
---------------------------------------------------------------------------
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
\12\ Id.
\13\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
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 the
proposed addition of fee code DX and the revised applicability of fee
code DQ are reasonable as the Exchange offers many other fee codes that
are specifically designed for orders that add liquidity to the Exchange
or remove liquidity from the Exchange.\14\ In addition, the Exchange
notes that its affiliate exchanges have adopted a similar pricing
structure for MDOs containing a QDP instruction.\15\ While the fee
assessed for orders appended with fee code DQ will be slightly higher
than the fee assessed for orders appended with fee code DX, the
Exchange believes that promoting liquidity-removing MDOs containing a
QDP instruction represents an equitable allocation of fees and rebates
and is not unfairly discriminatory because the fees will apply to all
Members who add or remove liquidity utilizing an MDO with a QDP
instruction, equally. Furthermore, the Exchange believes that assessing
a lower fee under fee code DX will promote a reasonable means to
encourage liquidity removing volume to the Exchange for MDOs utilizing
a QDP instruction. While Members are assessed a small fee to utilize
MDOs with a QDP instruction, the Exchange believes that promoting
liquidity removing activity would help deepen the Exchange's liquidity
pool, support the quality of price discovery, and improve market
quality, for all investors.
---------------------------------------------------------------------------
\14\ See e.g., EDGA Equities Fee Schedule, Fee Codes 3 and 6.
\15\ See e.g., EDGX Equities Fee Schedule, Fee Codes DQ and DX.
---------------------------------------------------------------------------
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. Rather, as discussed above,
the Exchange believes that the proposed changes 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 changes
further 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 changes do not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed fees associated
with fee code DX would apply to all Members equally in that all Members
would be subject to the same flat fee for the execution of an MDO with
a QDP instruction that removes liquidity from the Exchange. Although
MDOs entered with the QDP instruction would be subject to the pricing
described in this proposed rule change, the Exchange does not believe
that pricing would impose any significant burden on intramarket
competition as this fee would be applied in the same manner to the
execution of any MDO entered with a QDP instruction that removes
liquidity from the Exchange. Both MDO and the associated QDP
instruction are available to all Members on an equal and non-
discriminatory basis. As a result, any Member can decide to use (or not
use) the QDP instruction based on the benefits provided by that
instruction in potentially avoiding unfavorable executions, and the
associated charge that the Exchange proposes to introduce. As
discussed, any firm that chooses to use the QDP instruction with an MDO
that removes liquidity would be charged the same flat fee for the
execution of orders that are entered with this instruction. The
proposal to modify fee code DQ to apply only to MDO orders using the
QDP instruction that add liquidity to the Exchange similarly does not
impose a burden on intramarket competition in that the applicability of
the fee code will apply equally to all Members in that all Members
would be subject to the same, revised flat fee for the execution of an
MDO with a QDP instruction that adds liquidity to the Exchange.
Next, the Exchange believes the proposed rule changes 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.
[[Page 30187]]
Based on publicly available information, no single equities exchange
has more than 16% of the market share.\16\ 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.'' \17\ 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'. . . .''.\18\ 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.
---------------------------------------------------------------------------
\16\ Supra note 3.
\17\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\18\ 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)).
---------------------------------------------------------------------------
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 \19\ and paragraph (f) of Rule 19b-4 \20\
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.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------
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#daa8afb6bff7b9b5b7b7bfb4aea99aa9bfb9f4bdb5ac"><span class="__cf_email__" data-cfemail="c1b3b4ada4eca2aeacaca4afb5b281b2a4a2efa6aeb7">[email protected]</span></a>. Please include
File Number SR-CboeEDGA-2023-007 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-2023-007. 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. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to File Number SR-CboeEDGA-2023-007, and should be
submitted on or before May 31, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
---------------------------------------------------------------------------
\21\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-09905 Filed 5-9-23; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on May 10, 2023.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.