Notice2024-07223
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule To Adopt Fees for Dedicated Cores
Primary source
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Published
April 5, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 67 (Friday, April 5, 2024)</title>
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[Federal Register Volume 89, Number 67 (Friday, April 5, 2024)]
[Notices]
[Pages 24046-24049]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-07223]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99875; File No. SR-CboeEDGA-2024-009]
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fees Schedule To Adopt Fees for Dedicated Cores
April 1, 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 March 20, 2024, 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.
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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 Equities'')
proposes to amend its Fees 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 fees
relating to the use of Dedicated Cores.\3\
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\3\ On March 19, 2024, the Exchange filed a proposal to
introduce Dedicated Cores (SR-CboeEDGA-2024-008).
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The Exchange proposes to introduce a new connectivity offering
relating to the use of Dedicated Cores. By way of background, all
Central Processing Units (``CPU Cores'') have historically been shared
by logical order entry ports (i.e., multiple logical ports from
multiple firms may connect to a single CPU Core). Starting February 26,
2024, the Exchange began to allow Users \4\ to assign a single BOE
logical entry port to a single dedicated CPU Core (``Dedicated
Core'').\5\ Use of Dedicated Cores can provide reduced latency,
enhanced throughput, and improved performance since a firm using a
Dedicated Core is utilizing the full processing power of a CPU Core
instead of sharing that power with other firms. This offering is
completely voluntary
[[Page 24047]]
and is available to all Users that wish to purchase Dedicated Cores.
Users will also continue to have the option to utilize BOE logical
order entry ports on shared CPU Cores as they do today, either in lieu
of, or in addition to, their use of Dedicated Core(s). As such, Users
will be able to operate across a mix of shared and dedicated CPU Cores
which the Exchange believes provides additional risk and capacity
management. Further, Dedicated Cores are not required nor necessary to
participate on the Exchange and as such Users may opt not to use
Dedicated Cores at all.
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\4\ A User may be either a Member or Sponsored Participant. The
term ``Member'' shall mean any registered broker or dealer that has
been admitted to membership in the Exchange. limited liability
company or other organization which is a registered broker or dealer
pursuant to Section 15 of the Act, and which has been approved by
the Exchange. A Sponsored Participant may be a Member or non-Member
of the Exchange whose direct electronic access to the Exchange is
authorized by a Sponsoring Member subject to certain conditions. See
Exchange Rule 11.3.
\5\ The Exchange notes that firms will not have physical access
to their Dedicated Core and thus cannot make any modifications to
the Dedicated Core or server. All Dedicated Cores (including servers
used for this service) are owned and operated by the Exchange.
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The Exchange is proposing to assess the following monthly fees for
those Users that wish to use Dedicated Cores: $650 per Dedicated Core
for the first 3 Dedicated Cores; $1,050 per Dedicated Core for the 4th-
6th Dedicated Cores; and $1,450 per Dedicated Core for 7 or more
Dedicated Cores. The proposed fees are progressive, and the Exchange
proposes to include the following example in the Fees Schedule to
provide clarity as to how the fees will be applied. In particular, if a
firm chooses to purchase 5 Dedicated Cores, that firm will be assessed
a total monthly fee of $4,050 for use of those Dedicated Cores (i.e.,
$650 x 3 Dedicated Cores and $1,050 x 2 Dedicated Cores). The Exchange
also proposes to make clear in the Fees Schedule that the monthly fees
are assessed and applied in their entirety and are not prorated. The
monthly Dedicated Core fees are in addition to the standard per port
fee assessed to Users for the BOE Logical Port(s) ports assigned to the
Dedicated Core(s). The Exchange notes the current standard fees
assessed for BOE Logical Ports, whether used with Dedicated or shared
CPU cores, will remain applicable and unchanged.\6\
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\6\ See Cboe U.S. Equities Fees Schedules, EDGA Equities,
Logical Port Fees.
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Since the Exchange currently has finite amount of space in its data
centers in which its servers (and therefore corresponding CPU Cores)
are located, the Exchange also proposes to prescribe a maximum limit on
the number of Dedicated Cores that Users may purchase each month.
Particularly, the Exchange proposes to provide that Members will be
limited to a maximum number of 10 Dedicated Cores \7\ and Sponsoring
Members will be limited to a maximum number of 4 Dedicated Cores for
each of their Sponsored Access relationships.\8\ The purpose of
establishing these limits is to manage the allotment of Dedicated Cores
in a fair manner and to prevent the Exchange from being required to
expend large amounts of resources in order to provide an unlimited
number of Dedicated Cores.
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\7\ Members will be limited to 10 Dedicated Cores, regardless of
whether they purchase the Dedicated Cores directly and/or through a
Service Bureau. In a Service Bureau relationship, a customer allows
its MPID to be used on the ports of a technology provider, or
Service Bureau. One MPID may be allowed on several different Service
Bureaus.
\8\ The Exchange announced the initial limit via Exchange Notice
which was issued on January 29, 2024. <a href="https://cdn.cboe.com/resources/release_notes/2024/Cboe-Global-Markets-to-Introduce-Cboe-Dedicated-Cores-for-EDGA-Equities.pdf">https://cdn.cboe.com/resources/release_notes/2024/Cboe-Global-Markets-to-Introduce-Cboe-Dedicated-Cores-for-EDGA-Equities.pdf</a>.
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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.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \11\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. The Exchange also believes the proposed rule
change is consistent with Section 6(b)(4) \12\ of the Act, 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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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
\12\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the proposed fees are reasonable because
Dedicated Cores provide a valuable service in that it may provide
reduced latency, enhanced throughput, and improved performance compared
to use of a shared CPU Core since a firm using a Dedicated Core is
utilizing the full processing power of a CPU Core. The Exchange also
emphasizes however, that the use of Dedicated Cores is not necessary
for trading and as noted above, is entirely optional. Indeed, Users can
continue to access the Exchange through shared CPU Cores at no
additional cost. Depending on a firm's specific business needs, the
proposal enables Users to choose to use Dedicated Cores in lieu of, or
in addition to, shared CPU Cores (or as noted, not use Dedicated Cores
at all). The Exchange believes the proposal to operate across a mix of
shared and dedicated CPU Cores may further provide additional risk and
capacity management. If a User finds little benefit in having Dedicated
Cores, or determines Dedicated Cores are not cost-efficient for its
needs or does not provide sufficient value to the firm, such User may
continue its use of the shared CPU Cores, unchanged. Indeed, the
Exchange has no plans to eliminate shared CPU Cores nor to require
Users to purchase Dedicated Cores.
The Exchange also believes that the proposed Dedicated Core fees
are equitable and not unfairly discriminatory because they would be
assessed uniformly to similarly situated users in that all Users who
choose to purchase Dedicated Cores will be subject to the same proposed
tiered fee schedule. The Exchange believes the proposed ascending fee
structure is also reasonable, equitable and not unfairly discriminatory
as it is designed so that firms that use a higher allotment of the
Exchange's finite number of Dedicated Cores pay higher rates, rather
than placing that burden on market participants that have more modest
needs who will have the flexibility of obtaining Dedicated Cores at
lower price points in the lower tiers. As such, the proposed fees do
not favor certain categories of market participants in a manner that
would impose a burden on competition; rather, the ascending fee
structure reflects the resources consumed by the various needs of
market participants--that is, the lowest Dedicated Core consuming Users
pay the least, and highest Dedicated Core consuming Users pay the most.
Other exchanges similarly assess higher fees to those that consume more
Exchange resources.\13\ It's also designed to encourage firms to manage
their needs in a fair manner and to prevent the Exchange from being
required to expend large amounts of resources in order to provide an
additional number of Dedicated Cores.
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\13\ See e.g., MIAX Pearl Equities Exchange Fees Schedule,
Section 2(d) Port Fees. See also Cboe U.S. Options Fees Schedule,
BZX Options, Options Logical Port Fees, Ports with Bulk Quoting
Capabilities.
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[[Page 24048]]
The Exchange believes it is reasonable to limit the number of
Dedicated Cores Users can purchase because the Exchange has a finite
amount of space in its data centers and availability of cores. The
Exchange will continually monitor market participant demand and
resource availability and endeavor to adjust the limit if and when the
Exchange is able to accommodate additional CPU Cores (including
Dedicated Cores). The Exchange monitors its capacity and data center
space and thus is in the best place to determine these limits and
modify them as appropriate in response to changes to this capacity and
space. The proposed limits also apply uniformly to similarly situated
market participants (i.e. all Members are subject to the same limit and
all Sponsored Participants are subject to the same limit,
respectively). The Exchange believes it's not unfairly discriminatory
to provide for different limits for different types of users. For
example, the Exchange believe it's not unfairly discriminatory to
provide for an initial lower limit to be allocated for Sponsored
Participants because unlike Members, Sponsored Participants are able to
access the Exchange without paying a Membership Fee. Members also have
more regulatory obligations and risk that Sponsored Participants do
not. For example, while Sponsored Participants must agree to comply
with the Rules of the Exchange, it is the Sponsoring Member of that
Sponsored Participant that remains ultimately responsible for all
orders entered on or through the Exchange by that Sponsored
Participant. The industry also has a history of applying fees
differently to Members as compared to Sponsored Participants.\14\
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\14\ See e.g., Securities Exchange Act Release No. 68342
(December 3, 2012) 77 FR 73096 (December 7, 2012) (SR-CBOE-2012-114)
and Securities Exchange Act Release No. 66082 (January 3, 2012) 77
FR 1101 (January 9, 2012) (SR-C2-2011-041).
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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 intramarket competition that is not necessary in
furtherance of the purposes of the Act because the proposed tiered fee
structure will apply equally to all similarly situated Users that
choose to use Dedicated Cores. As discussed above, Dedicated Cores are
optional and Users may choose to utilize Dedicated Cores, or not, based
on their view of the additional benefits and added value provided by
utilizing a Dedicated Core. The Exchange believes the proposed fee will
be assessed proportionately to the potential value or benefit received
by Users with a greater number of Dedicated Cores and notes that Users
may determine at any time to cease using Dedicated Cores. As discussed,
Users can also continue to access the Exchange through shared CPU Cores
at no additional cost.
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, the Exchange operates in a highly competitive market,
including competition for exchange memberships. Market Participants
have numerous alternative venues that they may participate on,
including 15 other equities exchanges, as well as off-exchange venues,
where competitive products are available for trading. Indeed,
participants can readily choose to submit their order flow 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.'' \15\ 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'. . . .''.\16\ Accordingly, the Exchange does not believe its
proposed change imposes any burden on competition that is not necessary
or appropriate in furtherance of the purposes of the Act.
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\15\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\16\ 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 \17\ and paragraph (f) of Rule 19-b4 \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="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#8dfff8e1e8a0eee2e0e0e8e3f9fecdfee8eea3eae2fb"><span class="__cf_email__" data-cfemail="8ffdfae3eaa2ece0e2e2eae1fbfccffceaeca1e8e0f9">[email protected]</span></a>. Please include
file number SR-CboeEDGA-2024-009 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-2024-009. 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
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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-CboeEDGA-2024-009 and should be submitted on or before April 26,
2024.
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. 2024-07223 Filed 4-4-24; 8:45 am]
BILLING CODE 8011-01-P
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