Notice2024-18468
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Replace the Regulatory Transaction Fee With a Sales Value Fee
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
August 19, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 160 (Monday, August 19, 2024)</title>
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[Federal Register Volume 89, Number 160 (Monday, August 19, 2024)]
[Notices]
[Pages 67114-67116]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-18468]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100714; File No. SR-CboeEDGX-2024-048]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Replace the Regulatory Transaction Fee With a Sales Value Fee
August 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 July 30, 2024, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX'') 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 EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') 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/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 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 Fees Schedule to add language
concerning the application and collection of the Sales Value Fee, as
described below.
By way of background, Section 31 of the Securities Exchange Act of
1934 (the ``Act'') \3\ requires each self-regulatory organization
(``SRO'') to pay the Securities and Exchange Commission (``SEC'' or
``Commission'') twice annually a fee based on the aggregate dollar
amount of certain sales of securities (i.e., ``covered sales''). A
covered sale is a ``sale of a security, other than an exempt sale or a
sale of a security future, occurring on a national securities exchange
or by or through any member of a national securities association
otherwise than on a national securities exchange.'' \4\ Assessing a
sales fee to defray the cost of these fees is common practice among the
national securities exchanges and associations, including the
Exchange's affiliate options exchanges.\5\ In fact, the Exchange
currently assesses a fee on its Members \6\ for covered sales on the
Exchange to recoup these amounts, which is described in Exchange Rule
15.1(b) (Regulatory Transaction Fee) but
[[Page 67115]]
is not currently described on the Exchange's Fee Schedule. The Exchange
now proposes to amend its Fee Schedule to include information regarding
this fee, including an explanation and description of the fee and how
it is collected. In conjunction with the proposed addition to the Fee
Schedule, the exchange also proposes to delete the applicable rule text
found in Exchange Rule 15.1(b) and proposes to rename Rule 15.1(b) as
``Reserved.''
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\3\ 17 CFR 240.31.
\4\ 17 CFR 240.31(a)(6).
\5\ See, e.g. Cboe C2 Options Fee Schedule, Sales Value Fee;
NASDAQ Equities Price List, Sales Fees to Fund Section 31
Obligations; and NYSE Arca Rule 2.18 (Activity Assessment Fees).
\6\ See Rule 1.5(n). The term ``Member'' shall mean any
registered broker or dealer that has been admitted to membership in
the Exchange. A Member will have the status of a ``member'' of the
Exchange as that term is defined in Section 3(a)(3) of the Act.
Membership may be granted to a sole proprietor, partnership,
corporation, 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.
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Specifically, the Exchange proposes to add a section to the Fee
Schedule labeled ``Sales Value Fee''. The proposed new section defines
the Sales Value Fee (``Fee'') as the fee assessed by the Exchange to
each Member for sales in securities when a sale in an equity security
occurs with respect to which the Exchange is obligated to pay a fee to
the SEC under Section 31 of the Exchange Act or when a sell order in an
equity security is routed for execution at a market other than the
Exchange, resulting in a covered sale on that market and an obligation
of the routing broker providing routing services for the Exchange, as
described in Exchange Rules 2.11 and 2.12, to pay the related sales fee
of that market. The proposed section provides that to the extent the
Exchange may collect more from Members under the section than is due
from the Exchange to the Commission under Section 31 of the Act, for
example due to rounding differences, the excess monies collected may be
used by the Exchange to fund its general operating expenses. The
Exchange may reimburse its routing broker for all Section 31-related
fees incurred by the routing broker in connection with the routing
services it provides.
The proposed section explains that the transactions to which the
Fee applies are sales of equities. The Fee is collected indirectly from
Members through their clearing firms by the Depositary [sic] Trust &
Clearing Corporation (``DTCC'') on behalf of the Exchange with respect
to sales in equity securities.\7\ For Members who do not have a DTCC
account, the Exchange invoices these Members directly.
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\7\ See <a href="https://cdn.cboe.com/resources/membership/Direct_Debit_Opt-In_Form.pdf">https://cdn.cboe.com/resources/membership/Direct_Debit_Opt-In_Form.pdf</a>.
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The proposed section also sets forth the formula for calculating
the Fee. Specifically, the Fee with respect to sales in equity
securities is equal to (i) the Section 31 fee rate \8\ multiplied by
(ii) the Member's aggregate dollar amount of covered sales resulting
from equities transactions that have a charge date in that month.\9\
The Fee is calculated and invoiced by the Exchange on a monthly basis,
but is not paid to the Commission until the end of the applicable
billing period.\10\ The billing period for Section 31-related fees is
separated into two periods: (i) January 1 through August 31; and (ii)
September 1 through December 31.\11\ The Exchange notes that if the
SEC's Section 31 fee rate changes in the middle of a month, the
Exchange will perform a separate calculation with respect to covered
sales under the new fee rate for the remaining portion of the month.
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\8\ The Section 31 fee rate is the fee rate applicable to
covered sales under section 31(b) of the Act. See 15 U.S.C. 78ee(b).
The current rate applicable to equities securities transactions is
$27.80 per million dollars. See also <a href="https://cdn.cboe.com/resources/fee_schedule/2024/Regulatory-Transaction-Fee-Adjustment-per-SEC-Section-31-Rate-Change-Effective-May-22-2024.pdf">https://cdn.cboe.com/resources/fee_schedule/2024/Regulatory-Transaction-Fee-Adjustment-per-SEC-Section-31-Rate-Change-Effective-May-22-2024.pdf</a>.
\9\ 17 CFR 240.31(c).
\10\ 17 CFR 240.31(c)(1).
\11\ 17 CFR 240.31(a)(2).
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In addition to the Exchange's proposal to add the Fee to its Fee
Schedule, the Exchange simultaneously proposes to delete the rule text
found in Exchange Rule 15.1(b). Exchange Rule 15.1(b) currently
provides a description of the Fee within the Exchange rulebook, which
would be duplicative as the Fee will be set forth and more fully
described in the Fee Schedule. The Exchange notes that the Fee, as
described in Exchange Rule 15.1(b), is described only at a high-level
and does not contain specific details about how the Exchange currently
calculates and collects the Fee. Specifically, Exchange Rule 15.1(b)
merely states that the Exchange assesses a Regulatory Transaction Fee
to its Members in order to help fund the Exchange's obligations to the
Commission under Section 31. While Exchange Rule 15.1(b) does state how
the Fee is calculated (which is identical to the proposed calculation
described on the Fee Schedule), there is no description of the types of
transactions that trigger the Fee or how the fee is collected by the
Exchange. The Exchange proposes to more fully describe its current
practice of calculating and collecting the Fee by providing additional
details on the Fee Schedule. In conjunction with removing the rule text
in Exchange Rule 15.1(b), the Exchange proposes to rename Exchange Rule
15.1(b) as ``Reserved.''
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.\12\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \13\ 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) \14\ 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) of the Act,\15\ 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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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
\14\ Id.
\15\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that the proposed rule change is consistent
with these requirements because the proposed amended Fee Schedule text
provides Members with detail regarding the circumstances under which
the Exchange assesses a Sales Value Fee, and the current process by
which the Fee is collected. The Exchange's current codification of the
Fee in Exchange Rule 15.1(b) does not accurately depict the Exchange's
current practice of calculating and collecting the Fee. The Exchange
believes that amending the description of the Fee and placing this
description on its Fee Schedule rather than in the Exchange rulebook
will provide additional guidance to its Members about which
transactions are subject to the Fee, how the Fee is calculated, and how
the Fee is collected. As such, the proposed changes will increase
transparency, help avoid Member confusion and foster better
understanding of the application of the Fee, which the Exchange
believes promotes just and equitable principles of trade, removes
impediments to and perfects the mechanism of a free and open market and
a national market system, and protects investors and the public
interest. Further, the Exchange believes the proposed change is
reasonable, as the Exchange is proposing to assess the same Fee to its
[[Page 67116]]
Members that the Exchange must pay to the Commission twice annually.
The Exchange believes the proposed change represents an equitable
allocation of fees and is not unfairly discriminatory because it
applies uniformly to all Members in that all Members submitting covered
orders to the Exchange are assessed the Fee, which is equal to the fee
that the Exchange is required to pay to the Commission. Furthermore, by
moving the description of the Fee from Exchange Rule 15.1(b) to the Fee
Schedule, all Members will have additional information about the types
of orders subject to the Fee and how the Exchange collects the Fee from
its Members, which do not currently appear in Exchange Rule 15.1(b).
While Exchange Rule 15.1(b) describes at a high-level the Exchange's
ability to assess a fee in order to help fund the Exchange's
obligations under Section 31, it does not accurately depict the
Exchange's current practice in regard to calculating and collecting the
Fee from its Members. The proposed movement of the description of the
Fee from Exchange Rule 15.1(b) to the Fee Schedule will not change how
the Exchange calculates or collects the Fee from its Members, but
rather will provide a more complete and accurate description of the Fee
to all Members. All Members will be able to access a detailed
description of the Fee on the Fee Schedule and as such, the description
of the Fee found in Exchange Rule 15.1(b) that does not accurately
describe the Exchange's current practice in calculating or collecting
the Fee is no longer necessary.
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. The Exchange does not
believe the proposed changes will impose any burden on intramarket
competition. Particularly, the proposed change applies uniformly to all
Members, in that the Sales Value Fee is applied uniformly to all
Members' applicable covered orders. Similarly, the proposal to delete
Rule 15.1(b) from the Exchange rulebook will not impose any burden on
competition because the change applies to all Members uniformly, in
that all Members will instead be able to access the description of the
Sales Value Fee and how the Fee is calculated on the Fee Schedule.
The Exchange does not believe that the proposed rule changes will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As noted above,
assessing a sales fee to defray the cost of fees assessed under Section
31 of the Act is common practice among the national securities
exchanges and associations.\16\
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\16\ Supra note 5.
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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 19b-4 \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#0e7c7b626b236d6163636b607a7d4e7d6b6d20696178"><span class="__cf_email__" data-cfemail="cebcbba2abe3ada1a3a3aba0babd8ebdabade0a9a1b8">[email protected]</span></a>. Please include
file number SR-CboeEDGX-2024-048 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-2024-048. 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-2024-048 and should
be submitted on or before September 9, 2024.
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\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-18468 Filed 8-16-24; 8:45 am]
BILLING CODE 8011-01-P
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