Notice2024-27616
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule Relating to Routing Codes
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
November 26, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 228 (Tuesday, November 26, 2024)</title>
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[Federal Register Volume 89, Number 228 (Tuesday, November 26, 2024)]
[Notices]
[Pages 93374-93376]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-27616]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101669; File No. SR-CboeEDGX-2024-076]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule Relating to Routing Codes
November 20, 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 November 12, 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 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
Effective November 1, 2024, the Exchange proposes to amend its EDGX
Fee Schedule applicable to its equities trading platform. By
implementing a remove fee (as opposed to a rebate) for fee code, AA,
and removing fee codes, I and RR.\3\
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\3\ The Exchange initially filed the proposed fee change on
November 1, 2024 (SR-CboeEDGX-2024-073). On November 12, 2024, the
Exchange withdrew that filing and submitted this filing.
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Fee Codes
The Exchange proposes to implement a remove fee for fee code, AA.
The proposed changes are as follows:
<bullet> For securities priced above $1.00,\4\ fee code AA is
appended to orders that are routed to EDGA using the ALLB \5\ routing
strategy. Currently, orders appended with fee code AA receive a rebate
of $0.0016.
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\4\ The Exchange notes for securities priced below $1.00, there
is no fee or rebate for removing liquidity from EDGA using the ALLB
routing strategy.
\5\ ALLB is a routing option under which an order checks the
System for available shares and is then sent to Cboe BZX Exchange,
Inc., Cboe BYX Exchange, Inc., and/or Cboe EDGA Exchange, Inc., in
accordance with the System routing table. If shares remain
unexecuted after routing, they are posted on the EDGX Book, unless
otherwise instructed by the User. See Rule 11.11(g)(7).
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The Exchange now proposes to amend fee code, AA, as follows:
<bullet> For securities priced above $1.00, fee code AA will
continue to be appended to orders that are routed to EDGA using the
ALLB routing strategy. However, orders appended with fee code AA will
now pay a fee of $0.0030. The Exchange does not propose to add a fee or
rebate for removing liquidity for securities priced below $1.00.
The Exchange also proposes to remove fee codes, I and RR. For
orders in securities priced at $1.00 or above,
[[Page 93375]]
orders routed to EDGA using the routing option, ROUC, and appended with
fee code I, received a rebate \6\ of $0.00160 for removing liquidity
from the EDGA Book.\7\ However, effective November 1, 2024,\8\ EDGA
will be transitioning from an inverted fee model \9\ to a maker taker
fee model.\10\ As such, orders routed to EDGA that remove liquidity
will now be charged a remove fee for removing liquidity from the EDGA
Book. Therefore, the Exchange has elected to discontinue this fee code
as Members that utilize the ROUC \11\ strategy, and append their orders
with fee code, I, will no longer receive a rebate for removing
liquidity on EDGA, and EDGX does not desire to assess such orders a
fee.
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\6\ The Exchange notes that there is no fee or rebate for
removing liquidity for securities priced below $1.00.
\7\ The term ``EDGA Book'' shall mean the Systems' electronic
file of order. See Rule 1.5(d).
\8\ See SR-CboeEDGA-2024-042; see also, SR-CboeEDGA-2024-045.
\9\ The inverted fee model is a pricing structure in which a
market, such as an exchange, charges its participants a fee to
provide liquidity in securities, and provides a rebate to
participants that remove liquidity in securities. See SEC Market
Structure Advisory Committee, Memorandum on ``Maker-Taker Fees on
Equities Exchanges,'' October 20, 2015, available at: <a href="https://www.sec.gov/spotlight/emsac/memo-maker-taker-fees-on-equities-exchanges.pdf">https://www.sec.gov/spotlight/emsac/memo-maker-taker-fees-on-equities-exchanges.pdf</a>.
\10\ The maker-taker fee model is a pricing structure in which a
market, such as an exchange, generally pays its members a per share
rebate to provide (i.e., ``make'') liquidity in securities and
assesses on them a fee to remove (i.e., ``take'') liquidity. Id.
\11\ ROUC is a routing option under which an order checks the
System for available shares and then is sent to destinations on the
System routing table, Nasdaq OMX BX, and NYSE. If shares remain
unexecuted after routing, they are posted on the EDGX Book, unless
otherwise instructed by the User. See Rule 11.11(g)(1).
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Similarly, orders routed to EDGA using routing option, DIRC,\12\
received a rebate of $0.00160 for removing liquidity from the EDGA
Book. Again, because EDGA will be transitioning to a maker-taker fee
model, orders removing liquidity from the EDGA Book will no longer
receive a rebate, but instead will be charged a remove fee. Therefore,
the Exchange has chosen to discontinue this fee code, as users of the
DIRC routing option that append their order with fee code, RR, and
direct their orders to EDGA, will no longer receive a rebate for
removing liquidity, and EDGX does not desire to assess such orders a
fee.
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\12\ DIRC is a routing option under which an order checks the
System for available shares, and then utilizes the DRT routing
option to access alternative trading systems, as well as directed
immediate or cancel/directed intermarket sweep orders (ISO) to
access venues specified by the Member.
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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.\13\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \14\ 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) \15\ 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) \16\
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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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(5).
\15\ Id.
\16\ 15 U.S.C. 78f(b)(4).
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Adjusting fee code AA from paying a rebate to assessing a removal
fee, is necessary to reflect the economics of a maker-taker fee model.
Prior to the November 1, 2024, orders entered onto EDGX, that were
appended with fee code, AA, and were routed to EDGA using routing
option ALLB, received a rebate \17\ of $0.0016 for removing liquidity
from the EDGA Book. However, given EDGA's transition to a maker-taker
fee model, orders that remove liquidity will now need to pay a
liquidity removal fee, rather than receive a rebate. Accordingly,
removal of the current $0.00160 rebate associated with fee code, AA,
and implementation of a $0.0030 remove fee is appropriate and
consistent with the economics of a maker-taker model, as well as the
expectations of Members that remove liquidity from EDGA (i.e., Members
would expect to pay a fee to remove liquidity). Moreover, the proposed
fee is not unfairly discriminatory because it applies to all Members
equally, in that all Members will pay the same fee for orders routed to
EDGA using the ALLB routing strategy, and appended with fee code, AA.
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\17\ The Exchange notes that prior to November 1, 2024, there is
no fee or rebate for removing liquidity from EDGA using routing
option, ALLB, for securities priced below $1.00. Moreover, the
Exchange is not proposing to add a fee or rebate for removing
liquidity from EDGA using routing strategy, ALLB, for securities
priced below $1.00.
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The Exchange further believes that its proposal to now charge a fee
to orders appended with the fee code, AA, 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. Moreover, the proposed fee ($0.0030 per share for securities
priced above $1.00) is reasonable and appropriate because it is
consistent with EDGA's passthrough fee of $0.0030,\18\ and the remove
fee assessed to the Exchange by other trading venues.\19\
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\18\ See Cboe U.S. Equities Fee Schedules, EDGA Equities,
``Standard Rates--Removing Liquidity'' is $0.0030.
\19\ NYSE Arca charges a removal fee of $0.0030. See Section
III--Standard Rates--Transactions (applicable when Tier Rates do not
apply), Removing Liquidity, pg. 3, available at: <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf</a>; NYSE charges a removal fee of
$0.0030 for orders that remove midpoint liquidity. See NYSE Stock
Exchange Price List, ``Equity per Share Charge--per transaction--MPL
orders that remove liquidity from the NYSE (Adding Tier Credits do
not apply) and with no Retail Modifier, as defined in Rule 13
(``Retail Modifier'')), pg. 5, available at <a href="https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf">https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Price_List.pdf</a>; Nasdaq charges a
removal fee of $0.0030. See Fees to Remove Liquidity, Shares
Executed at or above $1.00, available at: <a href="https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2">https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2</a>.
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The Exchange also believes that its proposal to remove fee codes I
and RR, from the Fee Schedule, is reasonable, equitable, and not
unfairly discriminatory as it does not change the fees or rebates
assessed by the Exchange. Rather, these proposed changes merely remove
fee codes that the Exchange no longer desires to support because EDGA's
transition to a maker-taker fee model would result in Members that
utilize these fee codes being assessed a fee for removing liquidity,
and this is contrary to what Members would expect when utilizing ROUC
and DIRC, which are routing strategies typically used to achieve low-
cost executions when removing liquidity. Moreover, the Exchange is not
required to offer fee codes I and RR to its Members. Therefore, the
proposed rule change is reasonably designed to update the Fee Schedule
to accurately reflect the Exchange's current product
[[Page 93376]]
offerings and is designed to reduce any potential confusion regarding
the routing of orders from EDGX to EDGA, using routing options ROUC or
DIRC.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act because the proposed rule
change merely updates the Fee Schedule to reflect that fee code, AA, is
now attached to a passthrough fee rather than payment of a rebate, as
well as remove fee codes that the Exchange no longer wishes to, nor is
required to, maintain. In this regard, the proposed changes are
necessary and appropriate because they are designed to make the Fee
Schedule more accurate and to reduce any potential confusion without
having any impact on competition.
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 \20\ and paragraph (f) of Rule 19b-4 \21\
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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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 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#5f2d2a333a723c3032323a312b2c1f2c3a3c71383029"><span class="__cf_email__" data-cfemail="8dfff8e1e8a0eee2e0e0e8e3f9fecdfee8eea3eae2fb">[email protected]</span></a>. Please include
file number SR-CboeEDGX-2024-076 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-2024-076. 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-2024-076 and should
be submitted on or before December 17, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-27616 Filed 11-25-24; 8:45 am]
BILLING CODE 8011-01-P
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