[Federal Register Volume 84, Number 35 (Thursday, February 21, 2019)]
[Notices]
[Pages 5515-5517]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02890]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85130; File No. SR-CboeEDGX-2019-004]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend the Fee Schedule as It Relates to Pricing for the Use of Certain
Routing Strategies
February 14, 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 February 1, 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 fee schedule applicable to the EDGX
equities trading platform (``EDGX Equities'') as it relates to pricing
for the use of certain routing strategies. 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 the
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 change the pricing applicable to orders routed
using the ROUC routing strategy in connection with planned changes to
the System routing table.\3\ ROUC is a routing strategy offered by the
Exchange that is used to target certain low cost protected market
centers by routing to those venues after accessing available liquidity
on the EDGX Book and certain non-exchange destinations, and prior to
routing to other trading centers included
[[Page 5516]]
in the System routing table and posting to the EDGX Book, if possible.
The Exchange periodically changes the low cost venues targeted by the
ROUC routing strategy to ensure that the venues prioritized for routing
can be accessed at a low cost. Currently, four exchanges are included
in the System routing table as low cost protected market centers: Cboe
BYX Exchange, Inc. (``BYX''), Cboe EDGA Exchange, Inc. (``EDGA''),
Nasdaq BX, Inc. (``BX''), and New York Stock Exchange LLC (``NYSE'').
Pursuant to Rule 11.11(g), the Exchange has determined to modify System
routing table such that NYSE would no longer be listed as a low cost
protected market center where orders are first routed after seeking
available liquidity on the EDGX Book and certain non-exchange
destinations. In addition, the Exchange has decided to add NYSE
American LLC (``NYSE American'') and NYSE National, Inc. (``NYSE
National'') as low cost protected market centers. These changes to the
System routing table are scheduled to be introduced on February 1,
2019.
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\3\ The term ``System routing table'' refers to the proprietary
process for determining the specific trading venues to which the
System routes orders and the order in which it routes them. See Rule
11.13(b)(3). The Exchange reserves the right to route orders
simultaneously or sequentially, maintain a different System routing
table for different routing options and to modify the System routing
table at any time without notice. Id.
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Currently, orders routed using the ROUC routing strategy are
provided a rebate of $0.00150 per share when routed to BYX,\4\ charged
a fee of $0.00290 per share when routed to Nasdaq PSX (``PSX''),\5\ or
charged a fee of $0.00200 per share when routed to a non-exchange
destination.\6\ Orders routed to other markets may be subject to
different non-ROUC specific pricing. The Exchange proposes to add two
new fee codes, MX and NX, that relate to orders routed to NYSE American
and NYSE National, respectively, using the ROUC routing strategy. In
securities at or above $1.00, orders routed using the ROUC routing
strategy would be charged a fee of $0.00020 per share if executed on
NYSE American, and provided a rebate of $0.00200 per share if executed
on NYSE National. As proposed, the Exchange would not charge a fee or
provide a rebate for orders routed in securities priced below $1.00.
The proposed fees and rebates chosen for routing to these venues
generally reflect the current transaction fees and rebates available
for accessing liquidity on those markets.\7\
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\4\ See EDGX Equities Schedule of Fees, fee code ``BY.'' This
rebate applies to securities priced at or above $1.00. For
securities priced below $1.00, a fee equal to 0.10% of the dollar
value is applied instead. Id.
\5\ See EDGX Equities Schedule of Fees, fee code ``K.'' This fee
applies to securities priced at or above $1.00. For securities
priced below $1.00, a fee equal to 0.30% of the dollar value is
applied instead. Id.
\6\ See EDGX Equities Schedule of Fees, fee code ``Q.'' This fee
applies to securities priced at or above $1.00. For securities
priced below $1.00, a fee equal to 0.30% of the dollar value is
applied instead. Id.
\7\ NYSE American currently charges a fee for removing liquidity
that is $0.00020 per share in securities priced at or above $1.00,
and 0.25% of the total dollar value of the transaction in securities
priced below $1.00. See NYSE American Equities Price List, I.
Transaction Fees. NYSE National currently provides a rebate of
$0.00200 per share in securities priced at or above $1.00 for
members that achieve their taking tier. See NYSE National Schedule
of Fees and Rebates, I. Transaction Fees, B. Tiered Rates. Orders
that remove liquidity in securities below $1.00 are executed without
charge or rebate. See NYSE National, Schedule of Fees and Rebates,
I. Transaction Fees, A. General Rates.
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In addition, pursuant to fee code ``I,'' orders routed to EDGA that
are not otherwise eligible for routing strategy specific rates
specified in the fee schedule are provided a rebate of $0.00240. The
Exchange proposes that this rebate, which is a pass through of the
current rebate available on EDGA, be applied specifically to orders
routed using its low cost routing strategies--i.e., ROUC and ROUE.
Orders routed to EDGA using other routing strategies would continue to
qualify for routing strategy specific rates, which also largely reflect
the current rebate available for orders that remove liquidity on
EDGA,\8\ or in limited circumstances would be charged based on the
Exchange's default routing rate of $0.00300 per share.\9\
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\8\ See e.g., EDGX Equities Schedule of Fees, fee codes ``AA''
and ``RR,'' which similarly provide a rebate of $0.00240 for orders
routed to EDGA using the ALLB and DIRC routing strategies,
respectively.
\9\ See EDGX Equities Schedule of Fees, fee code ``X.''
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6 of the Act,\10\ in general, and furthers the
requirements of Section 6(b)(4),\11\ in particular, 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.
The Exchange believes the proposed routing fee changes are appropriate
as they reflect changes to the System routing table used to determine
the order in which venues are accessed using the ROUC routing strategy.
ROUC specifically targets certain equities exchanges that provide cheap
executions or rebates to liquidity removing orders, and routes to those
venues after trading with the EDGX Book and certain non-exchange
destinations, and prior to accessing liquidity that may be available on
other venues on the System routing table. The Exchange believes that
the proposed changes reflect the intent of members when they submit
routable order flow to the Exchange using the ROUC routing strategy.
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\10\ 15 U.S.C. 78f.
\11\ 15 U.S.C. 78f(b)(4).
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The Exchange believes that it is reasonable and equitable to
provide special pricing for orders routed to NYSE American and NYSE
National using the ROUC routing strategy. As mentioned previously, the
Exchange is adding these two exchanges to its list of low cost
protected market centers, and wishes to provide the benefit of the
rebate or lower fee provided by those markets to EDGX members using the
ROUC routing strategy. The Exchange believes that these changes may
increase interest in the Exchange's ROUC routing strategy, in
particular, by passing on better pricing to EDGX members that choose to
enter such orders on the Exchange, thereby encouraging additional order
flow to be entered to the EDGX Book.
The rebates provided to orders routed to NYSE National using the
ROUC routing strategy would be limited to order price at or above $1.00
in light of the fact that NYSE National does not provide rebates to
liquidity removing orders in securities priced below $1.00. For
securities priced below $1.00, the Exchange would charge no fee and
provide no rebate, which is equivalent to pricing on NYSE National.\12\
Without limiting the proposed rebate for NYSE National to securities
priced at or above $1.00, the Exchange would pay a significant rebate
that would not be recouped via a rebate earned from the execution
venue. The Exchange believes that is reasonable and equitable to limit
routing rebates to circumstances where the Exchange would actually earn
a rebate from the away venue in order to properly recoup the costs of
accessing liquidity on such markets. Similarly, the Exchange would
charge no fee and provide no rebate for orders routed to NYSE American
using the ROUC routing strategy in securities priced below $1.00.
Although such orders are charged a fee by NYSE American equal to 0.25%
of the total dollar value of the transaction, the Exchange has
determined to provide free executions as an additional inducement for
members to send their routable order flow to EDGA.
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\12\ See supra note 8.
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The Exchange also believes that it is reasonable and equitable to
limit fee code I to orders routed to EDGA using the ROUC and ROUE
routing strategies, which are both intended as low cost routing
strategies. This fee code is a catchall for orders routed to EDGA and
applies to a limited subset of routing strategies that are not
otherwise subject to special pricing pursuant to other fee
[[Page 5517]]
codes. The Exchange believes that specifying the routing strategies to
which this fee code would be applied will increase transparency around
the pricing for orders routed using Exchange provided routing
strategies. With this change, only a limited number of routing
strategies would be subject to a higher default routing fee. The
Exchange believes that it is reasonable and equitable to limit its pass
through rebates to specified routing strategies where the Exchange has
determined to offer such pricing as an inducement for members to
utilize such strategies. The Exchange's routing functionality is
offered on a purely voluntary basis and members that utilize routing
strategies that are not subject to such an incentive are free to route
their orders directly to EDGA, or to use other routing strategies where
the Exchange has determined to provide pass through rebates.
Finally, the Exchange believes that the proposed changes are
equitable and not unfairly discriminatory as the proposed fees and
rebates would apply equally to all members that use the Exchange to
route orders using the associated routing strategy. The proposed fees
are designed to reflect the fees charged and rebates offered by certain
away trading centers that are accessed by Exchange routing strategies,
and are being made in conjunction with changes to the System routing
table designed to provide members with low cost executions for their
routable order flow. Furthermore, if members do not favor the proposed
pricing, they can send their routable orders directly to away markets
instead of using routing functionality provided by the Exchange.
Routing through the Exchange is voluntary, and the Exchange operates in
a competitive environment where market participants can readily direct
order flow to competing venues or providers of routing services if they
deem fee levels to be excessive.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended. The
proposed routing fee changes are designed to reflect changes being made
to the System routing table used to determine where to send certain
routable orders, and generally provide better pricing to members for
orders routed to low cost protected market centers using the Exchange's
routing strategies. The Exchange operates in a highly competitive
market in which market participants can readily direct their order flow
to competing venues. In such an environment, the Exchange must
continually review, and consider adjusting, its fees and rebates to
remain competitive with other exchanges. For the reasons described
above, the Exchange believes that the proposed fee changes reflect this
competitive environment.
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 \13\ and paragraph (f) of Rule 19b-4 \14\
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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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 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-2019-004 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-2019-004. 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 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 this filing will also be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeEDGX-2019-004 and should be
submitted on or before March 14, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02890 Filed 2-20-19; 8:45 am]
BILLING CODE 8011-01-P