Notice2025-06520
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule by Introducing an NBBO Setter Program Under Proposed New Fee Code SS and Introducing a Definitions Section to the Fee Schedule
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Published
April 17, 2025
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 90 Issue 73 (Thursday, April 17, 2025)</title>
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[Federal Register Volume 90, Number 73 (Thursday, April 17, 2025)]
[Notices]
[Pages 16356-16359]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-06520]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102842; File No. SR-CboeEDGA-2025-009]
Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule by Introducing an NBBO Setter Program Under
Proposed New Fee Code SS and Introducing a Definitions Section to the
Fee Schedule
April 11, 2025.
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 April 9, 2025, Cboe EDGA Exchange, Inc. (the ``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 by introducing an NBBO Setter Program under
proposed new fee code SS and introducing a Definitions section to the
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 the
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 introducing an NBBO
Setter Program under proposed new fee code SS and introducing a
Definitions section to the Fee Schedule. The Exchange proposes to
implement these changes effective April 1, 2025.\3\
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\3\ The Exchange originally proposed to amend its Fee Schedule
on April 1, 2025 (SR-CboeEDGA-2025-008). On April 9, 2025, 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
[[Page 16357]]
``Maker-Taker'' model whereby it pays rebates to members that add
liquidity and assesses fees to those that remove liquidity. The
Exchange's Fee Schedule sets forth the standard rebates and rates
applied per share for orders that provide and remove liquidity,
respectively. Currently, for orders in securities priced at or above
$1.00, the Exchange provides a standard rebate of $0.00270 per share
for orders that add liquidity and assesses a fee of $0.0030 per share
for orders that remove liquidity.\5\ For orders in securities priced
below $1.00, the Exchange provides a standard rebate of 0.15% of the
dollar value and assesses a fee of 0.15% of the dollar value.\6\
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\4\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (March 20, 2025), available at <a href="https://www.cboe.com/us/equities/_statistics/">https://www.cboe.com/us/equities/_statistics/</a>.
\5\ See EDGA Equities Fee Schedule, Standard Rates.
\6\ Id.
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Fee Codes and Associated Rates
The Exchange offers various fee codes applicable to orders that add
or remove liquidity on EDGA. The Exchange now proposes to introduce a
new incentive program, referred to by the Exchange as the NBBO Setter
Program (the ``Program'') under new proposed fee code SS, which is
designed to improve market quality in illiquid securities on the
Exchange. As proposed, the Program would provide a rebate of $0.00300
in securities priced at or above $1.00 and a rebate of 0.15000% of the
dollar value in securities priced below $1.00 for orders that set the
Setter NBBO \7\ in securities not included in the NBBO Setter Excluded
Securities List (``NBBO Setter Securities''). As proposed, the NBBO
Setter Excluded Securities List means a list of securities not eligible
for the rebate provided under proposed fee code SS. The securities
included in the NBBO Setter Excluded Securities List will be determined
by the Exchange on a quarterly basis and published in a Notice
distributed to Members and on the Exchange's website. At the outset,
the NBBO Setter Excluded Securities List will include those securities
included in the S&P 500 Index, the Nasdaq 100 Index, and certain ETPs
that the Exchange believes have high levels of liquidity. The initial
NBBO Setter Excluded Securities List will be comprised of approximately
550 securities, leaving approximately 9,700 NBBO Setter Securities in
which Members may earn a rebate under proposed fee code SS. The
Exchange also proposes to introduce a Definitions section to the Fee
Schedule in order to codify the terms ``NBBO Setter Securities'' and
``Setter NBBO.'' The Exchange believes that providing a Definitions
section will provide Members additional clarity on the terms applicable
to the proposed NBBO Setter Program available under proposed fee code
SS.
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\7\ As proposed, ``Setter NBBO'' means a quotation of at least
100 shares that is better than the NBBO or a quotation of a notional
size of at least $10,000.00 that is better than the NBBO. A
quotation of at least 100 shares or a quotation of at least
$10,000.00 that merely joins the NBBO (i.e., is ``at the NBBO'')
will not qualify as a Setter NBBO.
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The Exchange notes that there are no volume requirements for the
proposed NBBO Setter Program and the Program will be available to all
Members and will provide Members an opportunity to earn a higher rebate
than what is currently provided under the Exchange's standard rebate.
Moreover, the Program is designed to encourage Members that provide
displayed liquidity on the Exchange to increase overall volume and
order flow in illiquid names, which would benefit all Members by
providing greater execution opportunities on the Exchange and
contribute to a deeper, more liquid market, benefiting all investors.
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.\8\ Specifically, the Exchange believes the proposed rule change is
consistent with the Section 6(b)(5) \9\ 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) \10\ 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) \11\
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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\8\ 15 U.S.C. 78f(b).
\9\ 15 U.S.C. 78f(b)(5).
\10\ Id.
\11\ 15 U.S.C. 78f(b)(4)
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In particular, the Exchange believes that the proposed fee code SS
and corresponding NBBO Setter Program is reasonable, equitable, and not
unfairly discriminatory. The proposed fee code and Program reflects a
competitive pricing structure designed to incentivize participants to
direct their order flow to the Exchange and enhance market quality in
NBBO Setter Securities. The Exchange believes the proposed Program,
which provides a higher rebate to Members that set the Setter NBBO in
NBBO Setter Securities, provides a reasonable means to encourage
overall growth in order flow that establishes a Setter NBBO in the
approximately 9,700 securities traded on EDGA that the Exchange
believes are illiquid. An overall increase in activity would deepen the
Exchange's liquidity pool, offer more narrow spreads, support the
quality of price discovery, promote market transparency, and improve
market quality for all investors.
The Exchange believes that limiting its Program to NBBO Setter
Securities is reasonable, equitable, and not unfairly discriminatory
because the Exchange has identified such securities as securities for
which it would like to inject additional quoting competition, which it
believes will generally act to narrow spreads, increase size at the
inside, and increase liquidity depth in such securities. The Exchange
also believes that the proposed definition of Setter NBBO is reasonable
in that it provides Members alternative ways to qualify for the rebate
under the Program and encourages Members to quote the NBBO in higher-
priced securities in which Members might not otherwise quote at least
100 shares due to the higher notional value associated with securities
priced over $100.00. For example, if a Member wanted to set the NBBO in
hypothetical symbol XYZ, the Member would, under the Exchange's
standard definition of NBBO,\12\ have to provide a round lot quotation
priced better than the hypothetical price of $967.99, which equates to
a notional value of $96,799. Under the Exchange's proposed Setter NBBO
definition, however, the Member could qualify for the rebate under
proposed fee code SS by providing an odd lot quotation in hypothetical
symbol XYZ with a notional value of at least $10,000.00 that ``sets''
(i.e., is better than) the NBBO. The Exchange believes that by allowing
Members to qualify for the rebate under the Program by satisfying the
definition of Setter NBBO with either a quotation of at least 100
shares better than the NBBO or an odd lot quotation better than the
NBBO with a notional value of
[[Page 16358]]
at least $10,000.00 will promote price discovery and market quality in
NBBO Setter Securities and, further, that the tightened spreads and
increased liquidity from the Program will benefit all investors by
deepening the Exchange's liquidity pool, offering the potential for
executions at more aggressive prices, supporting the quality of price
discovery, enhancing quoting competition across exchanges, promoting
market transparency, and improving investor protection.
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\12\ See Exchange Rule 1.5(o) (``NBB, NBO, and NBBO'').
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Additionally, the Exchange's introduction of a Definitions section
to the Fee Schedule is reasonable, equitable, and not unfairly
discriminatory because it serves to provide all Members additional
clarity surrounding proposed fee code SS. Particularly, the proposed
Definitions section will contain the relevant terms that will enable
Members to potentially earn the proposed higher rebate under proposed
fee code SS. The Definitions section will be available on the Fee
Schedule to all Members, equally.
The Exchange notes that the proposed NBBO Setter Program is not
dissimilar from other programs incentivizing quoting at the NBBO
offered by other exchanges.\13\ The Exchange's proposed Program differs
from the MEMX NBBO Program and MIAX NBBO Program in that the Exchange's
proposed Program is not a volume-based tier, but rather an incentive
earned simply by setting the Setter NBBO in NBBO Setter Securities.
Additionally, the Exchange's proposed NBBO Setter Program will pay a
rebate of 0.15000% of the dollar value in securities priced below
$1.00, while the MEMX NBBO Program and MIAX NBBO Program are both
limited to securities priced at or above $1.00. The Exchange's proposed
NBBO Setter Program also includes an alternative method for ``setting''
the NBBO through its Setter NBBO definition, which is not offered under
the MEMX NBBO Program or the MIAX NBBO Program. Under the Setter NBBO,
a Member may ``set'' the NBBO by providing an odd lot quotation with a
notional value of at least $10,000.00, which the Exchange believes will
assist Members in ``setting'' the NBBO in securities with prices
greater than $100.00. Further, the Exchange's proposed Program is
equitable and not unfairly discriminatory because it is open to all
Members on an equal basis and provides a higher rebate reasonably
related to the value of the Exchange's market quality. In fact, the
Exchange believes its program is less discriminatory than those offered
by other exchanges in that there is no minimum volume requirement in
order to qualify for the higher rebate offered under proposed fee code
SS, whereas both the MEMX NBBO Program and MIAX NBBO Program each
require a minimum amount of volume in addition to setting the NBBO in
order to earn an additive rebate. Much like volume-based tiers are
generally designed to incentivize higher levels of liquidity provision
and/or growth patterns on exchanges, the proposed NBBO Setter Program
is designed to incentivize enhanced market quality on the Exchange
through tighter spreads, greater size at the inside, and greater
quoting depth in NBBO Setter Securities by offering a higher rebate
under fee code SS. As such, the Exchange believes the proposed higher
rebate will act to enhance liquidity and competition across exchanges
in NBBO Setter Securities by providing a rebate reasonably related to
such enhanced market quality to the benefit of all investors, thereby
promoting the principles discussed in Section 6(b)(5) of the Act.\14\
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\13\ See, e.g., MEMX Equities Fee Schedule, NBBO Setter Tier
(``MEMX NBBO Program''). See also, MIAX Pearl Equities Fee Schedule,
NBBO Setter Plus Program (``MIAX NBBO Program'').
\14\ Supra note 8.
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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 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 change does not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the proposed
introduction of an NBBO Setter Program does not impose an unnecessary
burden as all Members will be eligible to earn the rebate offered under
proposed fee code SS should they set the Setter NBBO in NBBO Setter
Securities. Additionally, the proposed introduction of a Definitions
section does not impose an unnecessary burden upon Members as all
Members will be able to view the relevant definitions applicable to the
Program. 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 existing pricing
incentives in order to attract order flow and incentivize participants
to increase their participation on the Exchange. 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 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.
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.\15\ 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.'' \16\ 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
[[Page 16359]]
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'. . . .''.\17\ 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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\15\ Supra note 4.
\16\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\17\ 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 \18\ and paragraph (f) of Rule 19b-4 \19\
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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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 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#b6c4c3dad39bd5d9dbdbd3d8c2c5f6c5d3d598d1d9c0"><span class="__cf_email__" data-cfemail="b5c7c0d9d098d6dad8d8d0dbc1c6f5c6d0d69bd2dac3">[email protected]</span></a>. Please include
file number SR-CboeEDGA-2025-009 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-2025-009. 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 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-2025-009 and should
be submitted on or before May 8, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-06520 Filed 4-16-25; 8:45 am]
BILLING CODE 8011-01-P
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