Notice2024-03340
Self-Regulatory Organizations; Cboe EDGX 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
February 20, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 34 (Tuesday, February 20, 2024)</title>
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[Federal Register Volume 89, Number 34 (Tuesday, February 20, 2024)]
[Notices]
[Pages 12893-12898]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-03340]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99531; File No. SR-CboeEDGX-2024-011]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule
February 13, 2024.
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 February 1, 2024, Cboe EDGX Exchange, Inc. (``Exchange'' or
``EDGX'') 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 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>), 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
[[Page 12894]]
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'') as follows: (1) by
modifying the rate associated with fee code DX; (2) by introducing a
new Add Volume Tier and new Non-Displayed Add Volume Tier; (3) by
modifying certain Non-Displayed Add Volume Tiers; (4) by modifying the
Cross Asset Tier; and (5) by discontinuing Growth Tier 5, Non-Displayed
Step-Up Volume Tier 3, and Retail Growth Tier 3. The Exchange proposes
to implement these changes effective February 1, 2024.
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
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 in
particular operates a ``Maker-Taker'' model whereby it pays rebates to
members that add liquidity and assesses fees to those that remove
liquidity. 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.\4\ For orders in securities
priced below $1.00, the Exchange provides a standard rebate of $0.00003
per share for orders that add liquidity and assesses a fee of 0.30% of
the total dollar value for orders that 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.
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\3\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (January 24, 2024), available at <a href="https://www.cboe.com/us/equities/market_statistics/">https://www.cboe.com/us/equities/market_statistics/</a>.
\4\ See EDGX Equities Fee Schedule, Standard Rates.
\5\ Id.
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Fee Code DX
The Exchange currently offers fee code DX, which is appended to
Midpoint Discretionary Orders (``MDOs'') \6\ using the Quote Depletion
Protection (``QDP'') \7\ order instruction that remove liquidity from
the Exchange. QDP is designed to provide enhanced protections to MDOs
by tracking significant executions that constitute the best bid or
offer on the EDGX Book \8\ and enabling Users \9\ 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.\10\ Currently, orders appended with
fee code DX are assessed a fee of $0.00100 per share in securities at
or above $1.00 and 0.30% of dollar value for securities priced below
$1.00. The Exchange proposes to increase the fee to $0.00150 per share
in securities at or above $1.00. There is no proposed change in the fee
assessed to securities priced below $1.00. The purpose of increasing
the fee associated with fee code DX in securities priced at or above
$1.00 is for business and competitive reasons, as the Exchange believes
that increasing such fee as proposed would decrease the Exchange's
expenditures with respect to transaction pricing in a manner that is
still consistent with the Exchange's overall pricing philosophy of
encouraging added liquidity.
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\6\ See Exchange Rule 11.8(g).
\7\ See Exchange Rule 11.8(g)(10).
\8\ See Exchange Rule 1.5(d).
\9\ See Exchange Rule 1.5(ee).
\10\ See Securities Exchange Act Release No. 89007 (June 4,
2020), 85 FR 35454 (June 10, 2020) (SR-CboeEDGX-2020-010) (``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'').
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Add Volume Tiers
Under footnote 1 of the Fee Schedule, the Exchange currently offers
various Add/Remove Volume Tiers. In particular, the Exchange offers
seven Add Volume Tiers that each provide an enhanced rebate for
Members' qualifying orders yielding fee codes 3,\11\ 4,\12\ B,\13\
V,\14\ and Y \15\ where a Member reaches certain add volume-based
criteria. The Exchange now proposes to introduce a new Add Volume Tier
to provide Members an additional manner in which they could receive an
enhanced rebate if certain criteria is met. The criteria for proposed
Add Volume Tier 8 is as follows:
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\11\ Fee code 3 is appended to orders adding liquidity to EDGX
in the pre and post market in Tapes A or C securities.
\12\ Fee code 4 is appended to orders adding liquidity to EDGX
in the pre and post market in Tape B securities.
\13\ Fee code B is appended to orders adding liquidity to EDGX
in Tape B securities.
\14\ Fee code V is appended to orders adding liquidity to EDGX
in Tape A securities.
\15\ Fee code Y is appended to orders adding liquidity to EDGX
in Tape C securities.
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<bullet> Add Volume Tier 8 provides a rebate of $0.0034 per share
in securities priced at or above $1.00 to qualifying orders (i.e.,
orders yielding fee codes 3, 4, B, V, or Y) where (1) Member has a
total retail ADV \16\ (yielding fee codes ZA,\17\ ZO,\18\ ZM,\19\ and
ZR \20\) >=0.80% of the TCV \21\ or Member has a total retail ADV
(yielding fee codes ZA, ZO, ZM, and ZR) >=80,000,000; and (2) Member
has a total remove ADV >=0.80% of the TCV or Member has a total remove
ADV >=80,000,000.
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\16\ ``ADV'' means average daily volume calculated as the number
of shares added to, removed from, or routed by, the Exchange, or any
combination or subset thereof, per day. ADV is calculated on a
monthly basis.
\17\ Fee code ZA is appended to Retail Orders adding liquidity
to EDGX.
\18\ Fee code ZO is appended to Retail orders adding liquidity
to EDGX in the pre and post market.
\19\ Fee code ZM is appended to Retail orders marked as Day/RHO
or GTX that remove liquidity from EDGX upon arrival.
\20\ Fee code ZR is appended to Retail Orders that remove
liquidity from EDGX.
\21\ ``TCV'' means total consolidated volume calculated as the
volume reported by all exchanges and trade reporting facilities to a
consolidated transaction reporting plan for the month for which the
fees apply.
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In addition to the Add Volume Tiers offered under footnote 1, the
Exchange also offers a Cross Asset Tier, which is designed to
incentivize Members to achieve certain levels of participation on both
the Exchange's equities and options platform (``EDGX Options''). The
Exchange now proposes to amend
[[Page 12895]]
the criteria of the Cross Asset Tier as the tier has expired. The
proposed criteria for the Cross Asset Tier is as follows:
<bullet> The Cross Asset Tier provides a rebate of $0.0029 per
share for securities priced at or above $1.00 for qualifying orders
(i.e., orders yielding fee codes 3, 4, B, V, or Y) where (1) Member has
a Tape B & C ADAV >=6,000,000; and (2) Member has an Add ADV on EDGX
Options >=300,000 in SPY.
The proposed Cross Asset Tier will no longer have an expiration
date as it will no longer contain a component criteria requiring
Members to grow their volume over a certain baseline month. In
conjunction with the proposed modifications to the Cross Asset Tier,
the Exchange also proposes to remove the definition of Market Maker Add
\22\ from the fee schedule as this term is no longer being utilized.
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\22\ ``Market Maker Add'' means any order for the account of a
registered Market Maker on EDGX Options appended with fee code NM or
PM.
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Also under footnote 1, the Exchange offers four Non-Displayed Add
Volume Tiers that each provide an enhanced rebate for Members'
qualifying orders yielding fee codes DM,\23\ HA,\24\ MM,\25\ and
RP,\26\ where a Member reaches certain volume-based criteria offered in
each tier. The Exchange now proposes to introduce a new Non-Displayed
Add Volume Tier to provide Members an additional manner in which they
could receive an enhanced rebate if certain criteria is met. The
criteria for proposed Non-Displayed Add Volume Tier 5 is as follows:
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\23\ Fee code DM is appended to orders that add liquidity using
MidPoint Discretionary Order within discretionary range.
\24\ Fee code HA is appended to non-displayed orders that add
liquidity.
\25\ Fee code MM is appended to non-displayed orders that add
liquidity using Mid-Point Peg.
\26\ Fee code RP is appended to non-displayed orders that add
liquidity using Supplemental Peg.
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<bullet> Non-Displayed Add Volume Tier 5 provides a rebate of
$0.0026 per share for securities priced at or above $1.00 for
qualifying orders (i.e., orders yielding fee codes DM, HA, MM, or RP)
where (1) Member has a total retail ADV (yielding fee codes ZA, ZO, ZM,
and ZR) >=0.80% of the TCV or Member has a total retail ADV (yielding
fee codes ZA, ZO, ZM, and ZR) >=80,000,000; and (2) Member has a total
remove ADV >=0.80% of the TCV or Member has a total remove ADV
>=80,000,000.
In addition to introducing proposed Non-Displayed Add Volume Tier
5, the Exchange also proposes to amend Non-Displayed Add Volume Tiers
1-3 by removing the second prong of criteria from each of the three
tiers and modifying the TCV requirement for Non-Displayed Add Volume
Tiers 2 and 3. Currently, the criteria for Non-Displayed Add Volume
Tiers 1-3 is as follows:
<bullet> Non-Displayed Add Volume Tier 1 provides a rebate of
$0.0015 per share for securities priced at or above $1.00 for
qualifying orders (i.e., orders yielding fee codes DM, HA, MM, or RP)
where Member has an ADAV >=0.05% of TCV for Non-Displayed orders that
yield fee codes DM, HA, HI,\27\ MM or RP; or Member has an ADAV
>=5,000,000 for Non-Displayed orders that yield fee codes DM, HA, HI,
MM or RP.
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\27\ Fee code HI is appended to non-displayed orders that
receive price improvement and add liquidity to EDGX.
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<bullet> Non-Displayed Add Volume Tier 2 provides a rebate of
$0.0020 per share for securities priced at or above $1.00 for
qualifying orders (i.e., orders yielding fee codes DM, HA, MM, or RP)
where Member has an ADAV >=0.08% of TCV for Non-Displayed orders that
yield fee codes DM, HA, HI, MM or RP; or Member has an ADAV >=8,000,000
for Non-Displayed orders that yield fee codes DM, HA, HI, MM or RP.
<bullet> Non-Displayed Add Volume Tier 3 provides a rebate of
$0.0025 per share for securities priced at or above $1.00 for
qualifying orders (i.e., orders yielding fee codes DM, HA, MM, or RP)
where Member has an ADAV >=0.10% of TCV for Non-Displayed orders that
yield fee codes DM, HA, HI, MM or RP; or Member has an ADAV
>=10,000,000 for Non-Displayed orders that yield fee codes DM, HA, HI,
MM or RP.
The proposed criteria for Non-Displayed Add Volume Tiers 1-3 is as
follows:
<bullet> Non-Displayed Add Volume Tier 1 provides a rebate of
$0.0015 per share for securities priced at or above $1.00 for
qualifying orders (i.e., orders yielding fee codes DM, HA, MM, or RP)
where Member has an ADAV >=0.05% of TCV for Non-Displayed orders that
yield fee codes DM, HA, HI, MM or RP.
<bullet> Non-Displayed Add Volume Tier 2 provides a rebate of
$0.0020 per share for securities priced at or above $1.00 for
qualifying orders (i.e., orders yielding fee codes DM, HA, MM, or RP)
where Member has an ADAV >=0.10% of TCV for Non-Displayed orders that
yield fee codes DM, HA, HI, MM or RP.
<bullet> Non-Displayed Add Volume Tier 3 provides a rebate of
$0.0025 per share for securities priced at or above $1.00 for
qualifying orders (i.e., orders yielding fee codes DM, HA, MM, or RP)
where Member has an ADAV >=0.12% of TCV for Non-Displayed orders that
yield fee codes DM, HA, HI, MM or RP.
Together, the proposed addition of Add Volume Tier 8 and Non-
Displayed Add Volume Tier 5, proposed amendment to the Cross Asset
Tier, and proposed amendments to Non-Displayed Add Volume Tiers 1-3 are
each intended to provide Members an opportunity to earn an enhanced
rebate by increasing their order flow to the Exchange, which further
contributes to a deeper, more liquid market and provides even more
execution opportunities for active market participants. Incentivizing
an increase in liquidity adding volume through enhanced rebate
opportunities encourages liquidity adding Members on the Exchange to
contribute to a deeper, more liquid market, providing for overall
enhanced price discovery and price improvement opportunities on the
Exchange. As such, increased overall order flow benefits all Members by
contributing towards a robust and well-balanced market ecosystem.
In addition to the proposed additions and modifications to footnote
1 discussed above, the Exchange now proposes to discontinue Growth Tier
5 and Non-Displayed Step-Up Volume Tier 3 as the Exchange no longer
wishes to, nor is required to, maintain such tiers. More specifically,
the proposed change removes these tiers as the Exchange would rather
redirect future resources and funding into other programs and tiers
intended to incentivize increased order flow.
Retail Volume Tiers
Under footnote 2 of the Fee Schedule, the Exchange currently offers
various Retail Volume Tiers which provide an enhanced rebate for Retail
Member Organizations (``RMOs'') \28\ an opportunity to receive an
enhanced rebate from the standard rebate for Retail Orders \29\ that
add liquidity (i.e., yielding fee code ZA or ZO). Currently, the
Exchange offers one Retail Growth Tiers where an RMO is eligible for an
enhanced rebate for qualifying orders (i.e., yielding fee code ZA or
ZO) meeting certain add volume-based criteria, including ``growing''
its volume over a certain baseline month. The Exchange now proposes to
discontinue Retail Growth Tier 3 as the Exchange no longer wishes to,
nor is required to,
[[Page 12896]]
maintain such tier. More specifically, the proposed change removes this
tier as the Exchange would rather redirect future resources and funding
into other programs and tiers intended to incentivize increased order
flow.
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\28\ See EDGX Rule 11.21(a)(1). A ``Retail Member Organization''
or ``RMO'' is a Member (or a division thereof) that has been
approved by the Exchange under this Rule to submit Retail Orders.
\29\ See EDGX Rule 11.21(a)(2). A ``Retail Order'' is an agency
or riskless principal order that meets the criteria of FINRA Rule
5320.03 that originates from a natural person and is submitted to
the Exchange by a Retail Member Organization, provided that no
change is made to the terms of the order with respect to price or
side of the market and the order does not originate from a trading
algorithm or any other computerized methodology.
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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.\30\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \31\ 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) \32\ 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) \33\
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.
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\30\ 15 U.S.C. 78f(b).
\31\ 15 U.S.C. 78f(b)(5).
\32\ Id.
\33\ 15 U.S.C. 78f(b)(4).
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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: (1) introduce a new Add Volume Tier and new Non-
Displayed Add Volume Tier; (2) modify certain Non-Displayed Add Volume
Tiers; and (3) modify the Cross Asset Tier 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. Additionally, the
Exchange notes that relative volume-based incentives and discounts have
been widely adopted by exchanges,\34\ including the Exchange,\35\ and
are reasonable, equitable and non-discriminatory because they are open
to all Members on an equal basis and provide additional benefits or
discounts that are reasonably related to (i) the value to an exchange's
market quality and (ii) associated higher levels of market activity,
such as higher levels of liquidity provision and/or growth patterns.
Competing equity exchanges offer similar tiered pricing structures,
including schedules of rebates and fees that apply based upon members
achieving certain volume and/or growth thresholds, as well as assess
similar fees or rebates for similar types of orders, to that of the
Exchange.
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\34\ See, e.g., BZX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
\35\ See, e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
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In particular, the Exchange believes its proposal to: (1) introduce
a new Add Volume Tier and new Non-Displayed Add Volume Tier; (2) modify
certain Non-Displayed Add Volume Tiers; and (3) modify the Cross Asset
Tier is reasonable because the new and revised tiers will be available
to all Members and provide all Members with an opportunity to receive
an enhanced rebate, including additional opportunities to receive an
enhanced rebate with the addition of proposed Add Volume Tier 8 and
proposed Non-Displayed Add Volume Tier 5. The Exchange further believes
its proposal to: (1) introduce a new Add Volume Tier and new Non-
Displayed Add Volume Tier; (2) modify certain Non-Displayed Add Volume
Tiers; and (3) modify the Cross Asset Tier will provide a reasonable
means to encourage liquidity adding displayed orders in Members' order
flow to the Exchange and to incentivize Members to continue to provide
liquidity adding volume to the Exchange by offering them an opportunity
to receive an enhanced rebate on qualifying orders. While the modified
criteria in proposed Non-Displayed Add Volume Tiers 1-3 and the Cross
Asset Tier is slightly more difficult than the current criteria found
in those respective tiers, the proposed criteria is not a significant
departure from existing criteria, is reasonably correlated to the
enhanced rebate offered by the Exchange, and will continue to
incentivize Members to submit order flow to the Exchange. An overall
increase in activity would deepen the Exchange's liquidity pool, offers
additional cost savings, support the quality of price discovery,
promote market transparency and improve market quality, for all
investors.
The Exchange believes that its proposal to eliminate current Growth
Tier 5, Non-Displayed Step-Up Volume Tier 3, and Retail Growth Tier 3
is reasonable because the Exchange is not required to maintain these
tiers, nor is it required to provide Members an opportunity to receive
enhanced rebates. The Exchange believes its proposal to eliminate these
tiers is also equitable and not unfairly discriminatory because it
applies to all Members (i.e., the tiers will not be available for any
Member). The Exchange also notes that the proposed rule change to
remove these tiers merely results in Members not receiving an enhanced
rebate, which, as noted above, the Exchange is not required to offer or
maintain. Furthermore, the proposed rule change to eliminate current
Growth Tier 5, Non-Displayed Step-Up Volume Tier 3, and Retail Growth
Tier 3 enables the Exchange to redirect resources and funding into
other programs and tiers intended to incentivize increased order flow.
Further, the Exchange believes that its proposal to modify the fee
associated with fee code DX is reasonable, equitable, and consistent
with the Act because such change is designed to decrease the Exchange's
expenditures with respect to transaction pricing in order to offset
some of the costs associated with the Exchange's current pricing
structure, which provides various rebates for liquidity-adding orders,
and the Exchange's operations generally, in a manner that is consistent
with the Exchange's overall pricing philosophy of encouraging added
liquidity. The proposed increased fee of $0.0015 per share is
reasonable and appropriate because while it is slightly higher than the
existing fee, it remains lower than other fees assessed by the Exchange
in order to remove liquidity.\36\ The Exchange further believes that
the proposed increase to the fee associated with fee code DX is not
unfairly discriminatory because it applies to all Members equally, in
that all Members will be assessed the higher fee upon submitting orders
appended with fee codes DX.
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\36\ See e.g., EDGX Equity Fee Schedule, Fee Codes and
Associated Fees. For example, orders with a fee code of BB, N, or W
are assessed a fee of $0.00300.
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Without having a view of activity on other markets and off-exchange
venues, the Exchange has no way of knowing whether this proposed rule
change would definitely result in any Members qualifying the new
proposed tiers. While the Exchange has no way of
[[Page 12897]]
predicting with certainty how the proposed changes will impact Member
activity, based on the prior months volume, the Exchange anticipates
that at least one Member will be able to satisfy proposed Add Volume
Tier 8, at least one Member will be able to satisfy the proposed Cross
Asset Tier, at least one Member will be able to satisfy proposed Non-
Displayed Tier 1, at least two Members will be able to satisfy proposed
Non-Displayed Tier 2, at least one Member will be able to satisfy
proposed Non-Displayed Tier 3, and at least one Member will be able to
satisfy proposed Non-Displayed Add Volume Tier 5. The Exchange also
notes that proposed changes will not adversely impact any Member's
ability to qualify for enhanced rebates offered under other tiers.
Should a Member not meet the proposed new criteria, the Member will
merely not receive that corresponding enhanced rebate.
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. Particularly, the proposed
changes to: (1) introduce a new Add Volume Tier and new Non-Displayed
Add Volume Tier; (2) modify certain Non-Displayed Add Volume Tiers; and
(3) modify the Cross Asset Tier will apply to all Members equally in
that all Members are eligible for the proposed new and revised tiers,
have a reasonable opportunity to meet the proposed new and revised
tiers' criteria and will receive the enhanced rebate on their
qualifying orders if such criteria is met. Further, the proposed change
to the fee associated with fee code DX do not impose an unnecessary
burden as all Members will be subject to the higher fee assessed to
orders appended with fee code DX. The Exchange does not believe the
proposed changes burden competition, but rather, enhances competition
as it is intended to increase the competitiveness of EDGX by amending
existing pricing incentives and adopting new pricing incentives in
order to attract order flow and incentivize participants to increase
their participation on the Exchange, providing for additional execution
opportunities for market participants and improved price transparency.
Greater overall order flow, trading opportunities, and pricing
transparency benefits all market participants on the Exchange by
enhancing market quality and continuing to encourage Members to send
orders, thereby contributing towards a robust and well-balanced market
ecosystem.
The Exchange believes the proposed elimination of Growth Tier 5,
Non-Displayed Step-Up Volume Tier 3, and Retail Growth Tier 3 do not
impose any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Particularly,
the proposed changes to eliminate Growth Tier 5, Non-Displayed Step-Up
Volume Tier 3, and Retail Growth Tier 3 will not impose any burden on
intramarket competition because the changes apply to all Members
uniformly, as in, the tiers will no longer be available to any Member.
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. Based on
publicly available information, no single equities exchange has more
than 14% of the market share.\37\ 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.'' \38\ 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'. . . .''.\39\ 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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\37\ Supra note 3.
\38\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\39\ 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 \40\ and paragraph (f) of Rule 19b-4 \41\
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
[[Page 12898]]
change should be approved or disapproved.
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\40\ 15 U.S.C. 78s(b)(3)(A).
\41\ 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="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#fa888f969fd7999597979f948e89ba899f99d49d958c"><span class="__cf_email__" data-cfemail="681a1d040d450b0705050d061c1b281b0d0b460f071e">[email protected]</span></a>. Please include
file number SR-CboeEDGX-2024-011 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-2024-011. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 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-CboeEDGX-2024-011 and should
be submitted on or before March 12, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
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\42\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-03340 Filed 2-16-24; 8:45 am]
BILLING CODE 8011-01-P
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</html>Indexed from Federal Register on February 20, 2024.
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.