[Federal Register Volume 85, Number 48 (Wednesday, March 11, 2020)]
[Notices]
[Pages 14250-14251]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-04906]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-88328 File No. SR-CboeEDGX-2020-011]


Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend its Fee Schedule

March 5, 2020.
    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 March 2, 2020, Cboe EDGX Exchange, Inc. (the ``Exchange'') 
filed with the Securities and Exchange Commission (the ``Commission'') 
the proposed rule change as described in Items I and II 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'' or ``EDGX 
Equities'') is filing with the Securities and Exchange Commission 
(``Commission'') a proposed rule change 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 (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 Exchange proposes to amend its fee schedule in connection with 
its standard removing liquidity fees. The Exchange proposes to 
implement the proposed change to its fee schedule on March 2, 2020.
    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 13 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 
Exchange Act, to which market participants may direct their order flow. 
Based on publicly available information,\3\ no single registered 
equities exchange has more than 17% 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 ``Maker-Taker'' model 
whereby it pays credits 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. Particularly, for 
securities at or above $1.00, the Exchange provides a standard rebate 
of $0.00170 per share for orders that add liquidity and assesses a fee 
of $0.00265 per share for orders that remove liquidity. The Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow, or discontinue or reduce use of certain categories of products, 
in response to fee changes. Accordingly, competitive forces constrain 
the Exchange's transaction fees, and market participants can readily 
trade on competing venues if they deem pricing levels at those other 
venues to be more favorable.
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    \3\ See Cboe Global Markets, U.S. Equities Market Volume Summary 
(February 21, 2020), available at https://markets.cboe.com/us/equities/market_statistics/. This market share percentage is based 
on a Month-to-Date volume summary.
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    As stated above, the Exchange currently provides a standard fee of 
$0.00265 per share for liquidity removing orders (i.e., those yielding 
fee codes N, W, 6, BB, and ZR) in securities priced at or above $1.00. 
Orders in securities priced below $1.00 that remove liquidity are 
assessed a fee of 0.30% of the dollar value. The Exchange now proposes 
to increase the current standard fee of $0.00265 per share to $0.00270 
per share for orders that remove liquidity for securities priced at or 
above $1.00. Orders that remove liquidity in securities priced below 
$1.00 would continue to be assessed a fee of 0.30% of the dollar value. 
Although this proposed standard fee for liquidity removing orders is 
higher than the current base rate for such orders, the proposed fee is 
in line with similar fees for liquidity removing orders in place on 
other exchanges.\4\
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    \4\ E.g., the Nasdaq base fee rate of $0.0030 for liquidity 
removing orders in securities priced at or above $1.00. See https://www.nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act,\5\ in general, and furthers the requirements 
of Section 6(b)(4),\6\ in particular, as it is designed to provide for 
the equitable allocation of reasonable dues, fees and other charges 
among its facilities and does not unfairly discriminate between 
customers, issuers, brokers or dealers. 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 or incentives to be insufficient.
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    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78(b)(4).
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    In particular, the Exchange believes that the proposed amendment is 
reasonable, equitable and non-discriminatory because the proposed 
change represents a modest fee increase and such fee is equally 
applicable to all liquidity removing orders and thus is also equally 
applicable to all Members of the Exchange. Additionally, as noted 
above, the Exchange operates in highly competitive market. The Exchange 
is only one of several equity venues to which market participants may 
direct their order flow, and it represents a small percentage of the 
overall market. Moreover, the proposed standard fee for

[[Page 14251]]

liquidity removing orders is still lower than that offered at other 
exchanges for similar transactions.\7\
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    \7\ See supra note 4.
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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.
    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 
change applies to all liquidity removing orders equally, and thus 
applies to all Members equally. Additionally, 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 
purpose 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 12 
other equities exchanges and 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 17% of the 
market share.\8\ 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.'' \9\ 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 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'. . . .''.\10\ 
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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    \8\ See supra note 3.
    \9\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \10\ NetCoaliton 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 is effective upon filing pursuant to 
Section 19(b)(3)(A) \11\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \12\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such 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 shall institute proceedings under 
Section 19(b)(2)(B) \13\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \13\ 15 U.S.C. 78s(b)(2)(B).
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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 No. SR-CboeEDGX-2020-011 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 No. SR-CboeEDGX-2020-011. 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 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. 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 No. SR-CboeEDGX-2020-011, and should be submitted 
on or before April 1, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30b-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-04906 Filed 3-10-20; 8:45 am]
 BILLING CODE 8011-01-P