[Federal Register Volume 84, Number 31 (Thursday, February 14, 2019)]
[Notices]
[Pages 4111-4113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02286]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85078; File No. SR-CboeEDGX-2019-002]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Exchange's Fee Schedule Applicable to Its Equities Trading
Platform (``EDGX Equities'') To Introduce a ``Cross-Asset Volume Tier''
February 8, 2019.
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 January 29, 2019, 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. (``EDGX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (the ``Commission'') a
proposed rule change to amend the Exchange's fee schedule applicable to
its equities trading platform (``EDGX Equities'') to introduce a
``Cross-Asset Volume Tier.'' The text of the proposed rule change is
attached as Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/edgx/), 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 purpose of the proposed rule change is to amend the EDGX
Equities fee schedule to introduce a ``Cross-Asset Volume Tier'' under
Footnote 1, effective February 1, 2019.
Currently, with respect to the Exchange's equities trading
platform, the Exchange determines the liquidity adding rebate that it
will provide to Members using the Exchange's tiered pricing structure.
The EDGX Equities fee schedule currently contains seven Add Volume
Tiers that provide enhanced rebates, ranging from of $0.0025 to $0.0033
per share, for orders yielding fee codes B,\3\ V,\4\ Y,\5\ 3 \6\ and
4.\7\ The Exchange proposes to adopt an eighth tier under Footnote 1
called the Cross-Asset Volume Tier. Particularly, the Exchange proposes
to create a cross-asset tier which is designed to incentivize members
to achieve certain levels of participation on both the Exchange's
equities and options platform (``EDGX Options''). As
[[Page 4112]]
proposed, under the Cross-Asset Volume Tier, a Member would receive a
rebate of $0.0030 per share if that Member (i) adds an ADV \8\ greater
or equal to 0.20% of the TCV \9\ and (ii) has an ADV in Customer orders
on EDGX Options greater or equal to 0.10% of average OCV.\10\ The
Exchange notes that another Exchange has similar cross-asset add volume
tiers.\11\
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\3\ ``B'' is associated with displayed orders that add liquidity
on EDGX for Tape B.
\4\ ``V'' is associated with displayed orders that add liquidity
on EDGX for Tape A.
\5\ ``Y'' is associated with displayed orders that add liquidity
on EDGX for Tape C.
\6\ ``3'' is associated with displayed orders that add liquidity
on EDGX for Tape A or C during the post-market or pre-market trading
sessions.
\7\ ``4'' is associated with displayed orders that add liquidity
on EDGX for Tape B during the post-market or pre-market trading
sessions.
\8\ ``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.
\9\ ``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.
\10\ ``OCV'' means, for purposes of equities pricing, the total
equity and ETF options volume that clears in the Customer range at
the Options Clearing Corporation (``OCC'') for the month for which
the fees apply, excluding volume on any day that the Exchange
experiences an Exchange System Disruption and on any day with a
scheduled early market close, using the definition of Customer as
provided under the Exchange's fee schedule for EDGX Options.
\11\ See Cboe BZX U.S. Equities Exchange Fee Schedule, Footnote
1.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6 of the Act,\12\ in general, and furthers the
requirements of Section 6(b)(4),\13\ in particular, as it is designed
to provide for the equitable allocation of reasonable dues, fees and
other charges among its [sic]
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\12\ 15 U.S.C. 78f.
\13\ 15 U.S.C. 78f(b)(4).
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In particular, the Exchange notes that volume-based discounts such
as those currently maintained on the Exchange have been widely adopted
by options exchanges and are equitable 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 of an exchange's market
quality; (ii) associated with higher levels of market activity, such as
higher levels of liquidity provision and/or growth patterns; and (iii)
introduction of higher volumes of orders into the price and volume
discovery processes. The Exchange believes the proposal to add a new
Cross-Asset Volume Tier under footnote 1 is reasonable because it
provides Members an additional opportunity to receive an enhanced rate
for orders that add liquidity and is a reasonable means to encourage
Members to increase their liquidity on the Exchange in both equities
and options. Deepening the Exchange's liquidity pool benefits investors
by encouraging more price competition and providing additional
opportunities to trade. The Exchange further believes the proposed
threshold is commensurate with the proposed enhanced rebate and that it
will encourage members to add increased liquidity to EDGX each month in
both equities and options. Furthermore, the Exchange believes that the
proposed Cross-Asset Volume Tier is not unfairly discriminatory as it
applies uniformly to all Members.
To the extent a Member participates on the Exchange but not on EDGX
Options, the Exchange does believe that the proposal is still
reasonable, equitably allocated and non-discriminatory with respect to
such Member based on the overall benefit to the Exchange resulting from
the success of EDGX Options. Particularly, the Exchange believes such
success allows the Exchange to continue to provide and potentially
expand its existing incentive programs to the benefit of all
participants on the Exchange, whether they participate on EDGX Options
or not. The proposed pricing program is also fair and equitable in that
membership in EDGX Options is available to all market participants
which would provide them with access to the benefits on EDGX Options
provided by the proposed change, even where a member of EDGX Options is
not necessarily eligible for the proposed increased rebate on the
Exchange. Further, the proposed change will result in Members receiving
either the same or an increased rebate than they would currently
receive. The Exchange also notes that another Exchange has similar
cross-asset volume tiers.\14\
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\14\ See Cboe BZX U.S. Equities Exchange Fee Schedule, Footnote
1.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Rather, the
proposed change is designed to enhance competition by attracting
additional liquidity and increasing the competitiveness of the
Exchange. The proposed rebate tier would apply to all members uniformly
based. 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. The
proposed rule change reflects a competitive pricing structure designed
to encourage market participants to direct their order flow to the
Exchange.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
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 \15\ and paragraph (f) of Rule 19b-4 \16\
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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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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
Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeEDGX-2019-002 on the subject line.
Paper Comments
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-2019-002. 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 (http://www.sec.gov/rules/sro.shtml).
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
[[Page 4113]]
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 10:00 a.m. and 3:00 p.m. Copies of
the filing also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-Cboe-EDGX-2019-002 and should be submitted on or before
March 7, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02286 Filed 2-13-19; 8:45 am]
BILLING CODE 8011-01-P