Notice2024-16302
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule Related to Transaction Fee Tiers
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Published
July 25, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 143 (Thursday, July 25, 2024)</title>
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[Federal Register Volume 89, Number 143 (Thursday, July 25, 2024)]
[Notices]
[Pages 60476-60479]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-16302]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100566; File No. SR-CboeEDGA-2024-027]
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule Related to Transaction Fee Tiers
July 19, 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 July 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
[[Page 60477]]
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 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 modifying the criteria
associated with certain Add Volume Tiers. The Exchange proposes to
implement these changes effective July 1, 2024.\3\
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\3\ The Exchange initially filed the proposed fee change on July
1, 2024 (SR-CboeEDGA-2024-026). On July 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
17% 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
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 (June 24, 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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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/Remove Volume Tiers that each provide a reduced fee for
Members' qualifying orders yielding fee codes 3,\7\ 4,\8\ B,\9\ V,\10\
and Y \11\ where a Member reaches certain add or remove volume-based
criteria. The Exchange now proposes to modify the criteria associated
with Add/Remove Volume Tiers 2-4. The current criteria for Add/Remove
Volume Tiers 2-4 is as follows:
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\7\ 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.
\8\ Fee code 4 is appended to orders that add liquidity to EDGA
in the pre and post market in Tape B securities.
\9\ Fee code B is appended to orders that add liquidity to EDGA
in Tape B securities.
\10\ Fee code V is appended to orders that add liquidity to EDGA
in Tape A securities.
\11\ Fee code Y is appended to orders that add liquidity to EDGA
in Tape C securities.
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<bullet> Add Volume Tier 2 provides a reduced fee of $0.0016 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 \12\ >=0.60% of the TCV.\13\
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\12\ ADV means . . .
\13\ TCV means . . .
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<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.
<bullet> Add Volume Tier 4 provides a reduced fee of $0.0014 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 >=0.90% of the TCV or Member adds or removes an ADV
>=100,000,000.
The proposed criteria for Add/Remove Volume Tiers 2-4 is as
follows:
<bullet> Add Volume Tier 2 provides a reduced fee of $0.0016 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 >=0.50% of the TCV or Member adds or removes an ADV
>=52,000,000.
<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 >=0.65% of the TCV or Member adds or removes an ADV
>=67,000,000.
<bullet> Add Volume Tier 4 provides a reduced fee of $0.0014 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 >=0.80% of the TCV or Member adds or removes an ADV
>=82,000,000.
The Exchange believes that the proposed modification to Add/Remove
Volume Tiers 2-4 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, the
Exchange believes that the criteria continues to be commensurate with
the reduced fees offered by the Exchange, is a reflection
[[Page 60478]]
of current market trends, and will continue to encourage Members to
submit order flow to 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.\14\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \15\ 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) \16\ 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) \17\
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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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(5).
\16\ Id.
\17\ 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/Remove Volume Tiers 2-4 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. Specifically, the Exchange's proposal to modify Add/Remove
Volume Tiers 2-4 is not a significant departure from existing criteria,
is reasonably correlated to the reduced fees offered by the Exchange
and other competing exchanges,\18\ and will continue to incentivize
Members to submit order flow to the Exchange. The criteria proposed by
the Exchange is intended to reflect current market trends while
continuing to encourage Members to submit order flow to the Exchange.
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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\18\ See NYSE National, Inc., Schedule of Fees and Rebates,
Rates for Adding Liquidity (Per Share), available at <a href="https://www.nyse.com/publicdocs/nyse/regulation/nyse/_National_Schedule_of_Fees.pdf">https://www.nyse.com/publicdocs/nyse/regulation/nyse/_National_Schedule_of_Fees.pdf</a>.
\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/
Remove Volume Tiers 2-4 is reasonable because the tiers 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/
Remove Volume Tiers 2-4 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 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 the proposed modified Add/Remove Volume Tiers
2-4 are reasonable as they do 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 tiers and have the opportunity to meet
the tiers' 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 month's volume, the Exchange does not
anticipate that at any Member will be able to satisfy proposed Add/
Remove Volume Tier 2, at least two Members will be able to satisfy
proposed Add/Remove Volume Tier 3, and no Members will be able to
satisfy proposed Add/Remove Volume Tier 4. 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 reduced fee.
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/Remove Volume Tiers 2-4 will apply to all Members
equally in that all Members are eligible for the tiers, have a
reasonable opportunity to meet the tiers' criteria and will receive the
reduced fee on their qualifying orders if such criteria are met. The
Exchange does not believe the proposed changes burden competition, but
rather, enhances competition as they are intended to increase the
competitiveness of EDGA by amending existing pricing incentives in
order to attract order flow and incentivize participants to increase
their participation on the Exchange, providing for additional execution
[[Page 60479]]
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.
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 17% 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 2.
\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.
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#88fafde4eda5ebe7e5e5ede6fcfbc8fbedeba6efe7fe"><span class="__cf_email__" data-cfemail="0b797e676e26686466666e657f784b786e68256c647d">[email protected]</span></a>. Please include
file number SR-CboeEDGA-2024-027 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-2024-027. 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-2024-027 and should
be submitted on or before August 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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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-16302 Filed 7-24-24; 8:45 am]
BILLING CODE 8011-01-P
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