Notice2024-13707
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule
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Published
June 24, 2024
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 89 Issue 121 (Monday, June 24, 2024)</title>
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[Federal Register Volume 89, Number 121 (Monday, June 24, 2024)]
[Notices]
[Pages 52525-52528]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-13707]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100356; File No. SR-CboeEDGA-2024-023]
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule
June 17, 2024
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on June 10, 2024, Cboe EDGA Exchange, Inc. (``Exchange'' or ``EDGA'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe EDGA Exchange, Inc. (the ``Exchange'' or ``EDGA'') 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: (1) modifying the
description of fee code MT; and (2) modifying the criteria associated
with Add Volume Tier 3. The Exchange proposes to implement these
changes effective June 3, 2024.\3\
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\3\ The Exchange initially filed the proposed fee change on June
3, 2024 (SR-CboeEDGA-2024-019). On June 10, 2024, the Exchange
withdrew that filing and submitted this proposal.
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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,\4\ no single registered equities exchange has more than
15% 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 $0.0014 per
share for orders that remove liquidity and assesses a fee of $0.0030
per share for orders that add liquidity.\5\ 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.\6\ Additionally,
in response to the competitive environment, the Exchange also offers
tiered pricing which provides Members opportunities to qualify for
[[Page 52526]]
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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\4\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (May 22, 2024), available at <a href="https://www.cboe.com/us/equities/market_statistics/">https://www.cboe.com/us/equities/market_statistics/</a>.
\5\ See EDGA Equities Fee Schedule, Standard Rates.
\6\ Id.
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Fee Code MT
Fee code MT is appended to orders that remove Mid-Point Peg
liquidity from EDGA. A MidPoint Peg Order is a non-displayed Market
Order or Limit Order with an instruction to execute at the midpoint of
the NBBO, or, alternatively, pegged to the less aggressive of the
midpoint of the NBBO or one minimum price variation inside the same
side of the NBBO as the order.\7\ Based on customer feedback, the
Exchange proposes to amend the description of fee code MT in order to
clarify when the fee code is appended to orders. The Exchange believes
that amending the description of fee code MT to state that it will be
appended to orders that remove liquidity designated as Mid-Point Peg
orders more accurately captures the alternative scenario described in
Rule 11.8 where a MidPoint Peg Order is pegged to one minimum price
variation inside the same side of the NBBO as the order. This change
will not affect when fee code MT is appended to an order and only
serves to clarify to Members when an order may be designated with fee
code MT.
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\7\ See EDGA Rule 11.8(d).
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Add/Remove Volume Tiers
Under footnote 7 of the Fee Schedule, the Exchange currently offers
various Add/Remove Volume Tiers. In particular, the Exchange offers
four Add Volume Tiers that each provide a reduced fee for Members'
qualifying orders yielding fee codes 3,\8\ 4,\9\ B,\10\ V,\11\ and Y
\12\ where a Member reaches certain add volume-based criteria. The
Exchange now proposes to modify the criteria associated with Add Volume
Tier 3. The current criteria for Add Volume Tier 3 is as follows:
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\8\ Fee code 3 is appended to orders that add liquidity to EDGA
in the pre and post market in Tape A or Tape C securities.
\9\ Fee code 4 is appended to orders that add liquidity to EDGA
in the pre and post market in Tape B securities.
\10\ Fee code B is appended to orders that add liquidity to EDGA
in Tape B securities.
\11\ Fee code V is appended to orders that add liquidity to EDGA
in Tape A securities.
\12\ Fee code Y is appended to orders that add liquidity to EDGA
in Tape C securities.
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<bullet> Add Volume Tier 3 assesses a reduced fee of $0.0015 per
share for securities priced at or above $1.00 to qualifying orders
(i.e., orders yielding fee codes 3, 4, B, V, or Y) where a Member adds
or removes an ADV \13\ >=0.75% of the TCV.\14\
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\13\ ``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.
\14\ ``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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The proposed criteria for Add Volume Tier 3 is as follows:
<bullet> Add Volume Tier 3 provides a reduced fee of $0.0015 per
share for securities priced at or above $1.00 to qualifying orders
(i.e., orders yielding fee codes 3, 4, B, V, or Y) where a Member adds
or removes an ADV >= 0.75% of the TCV or Member adds or removes an ADV
>= 80,000,000.
The Exchange believes that the proposed modification to Add Volume
Tier 3 will incentivize Members to add volume to and remove volume from
the Exchange, thereby contributing to a deeper and more liquid market,
which benefits all market participants and provides greater execution
opportunities on the Exchange. While the proposed criteria is slightly
easier to achieve than the current criteria in that it provides an
alternative manner in which to receive the reduced fee provided by Add
Volume Tier 3, the Exchange believes that the criteria continues to be
commensurate with the reduced fees offered by the Exchange for Members
who satisfy the proposed criteria of other Add Volume Tiers offered by
the Exchange.
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.\15\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \16\ 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) \17\ 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) \18\
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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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(5).
\17\ Id.
\18\ 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 modify Add Volume Tier 3 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,\19\ including the Exchange,\20\ 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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\19\ See e.g., BYX Equities Fee Schedule, Footnote 1, Add/Remove
Volume Tiers.
\20\ See e.g., EDGA Equities Fee Schedule, Footnote 7, Add/
Remove Volume Tiers.
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In particular, the Exchange believes its proposal to modify Add
Volume Tier 3 is reasonable because the tier will be available to all
Members and provide all Members with an opportunity to receive a
reduced fee. The Exchange further believes that modified Add Volume
Tier 3 will provide a reasonable means to encourage adding liquidity to
and removing liquidity from the Exchange and to incentivize Members to
continue to provide volume to the Exchange by offering them an
additional opportunity to receive a reduced fee on qualifying orders.
An overall increase in activity
[[Page 52527]]
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.
In addition, the Exchange believes that its proposal to amend the
description associated with fee code MT is reasonable, equitable, and
consistent with the Act because such change is designed to provide
additional clarity to Members as to which orders may be appended with
fee code MT without changing how fee code MT is currently applied to
orders. The Exchange further believes that the proposed amendment to
the description associated with fee code MT is not unfairly
discriminatory because it applies to all Members equally, in that the
amended description will apply to all Members and fee code MT will be
applied to all orders matching the revised description.
The Exchange believes the proposed modified Add Volume Tier 3 is
reasonable as it does not represent a significant departure from the
criteria currently offered in the fee schedule. The Exchange also
believes that the proposal represents an equitable allocation of fees
and rebates and is not unfairly discriminatory because all Members will
be eligible for the revised tier and have the opportunity to meet the
tier's criteria and receive the corresponding reduced fee if such
criteria are met. Without having a view of activity on other markets
and off-exchange venues, the Exchange has no way of knowing whether
these proposed rule changes would definitely result in any Members
qualifying for the new proposed tiers. While the Exchange has no way of
predicting with certainty how the proposed changes will impact Member
activity, based on the prior months volume, the Exchange anticipates
that at least two Members will be able to satisfy proposed Add Volume
Tier 3. The Exchange also notes that the proposed changes will not
adversely impact any Member's ability to qualify for reduced fees or
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 Add Volume Tier 3 will apply to all Members equally in that
all Members are eligible for the tier, have a reasonable opportunity to
meet the tier's criteria and will receive the reduced fee on their
qualifying orders if such criteria are met. The Exchange does not
believe the proposed change burdens competition, but rather, enhances
competition as it is intended to increase the competitiveness of EDGA
by amending an existing pricing incentive 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.
Further, the Exchange believes the proposed revised description
associated with fee code MT does not impose any burden on intramarket
competition that is not necessary or appropriate in furtherance of the
purposes of the Act. The proposed description associated with fee code
MT would apply to all Members equally in that all Members would be
subject to the revised definition and fee code MT will be applied to
all orders matching the revised description.
Next, the Exchange believes the proposed rule changes do 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 15% of the market share.\21\ 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.'' \22\ 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'. . . .''.\23\ 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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\21\ Supra note 3.
\22\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\23\ 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.
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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 \24\ and paragraph (f) of Rule 19b-4 \25\
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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\24\ 15 U.S.C. 78s(b)(3)(A).
\25\ 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#3e4c4b525b135d5153535b504a4d7e4d5b5d10595148"><span class="__cf_email__" data-cfemail="e496918881c9878b8989818a9097a4978187ca838b92">[email protected]</span></a>. Please include
file number SR-CboeEDGA-2024-023 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-2024-023. 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-CboeEDGA-2024-023 and should
be submitted on or before July 15, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\26\
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\26\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-13707 Filed 6-21-24; 8:45 am]
BILLING CODE 8011-01-P
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