[Federal Register Volume 86, Number 90 (Wednesday, May 12, 2021)]
[Notices]
[Pages 26113-26115]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-09970]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91784; File No. SR-CboeEDGA-2021-012]


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

May 6, 2021.
    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 May 3, 2021, Cboe EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe EDGA Exchange, Inc. (the ``Exchange'' or ``EDGA'') is filing 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change to amend 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 (http://markets.cboe.com/us/equities/regulation/rule_filings/edga/), 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

[[Page 26114]]

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 by eliminating Tier 
2 of the Remove Volume Tiers.
    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 
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 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 believes that the ever-shifting market share among 
the exchanges from month to month demonstrates that market participants 
can shift order flow or discontinue to 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. Additionally, in 
response to the competitive environment, the Exchange offers tiered 
pricing which provides Members opportunities to qualify for higher 
rebates or reduced fees where certain volume criteria and thresholds 
are met. Tiered pricing provides an incremental incentive for Members 
to strive for higher tier levels, which provides increasingly higher 
benefits or discounts for satisfying increasingly more stringent 
criteria.
---------------------------------------------------------------------------

    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (April 26, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
---------------------------------------------------------------------------

    Pursuant to footnote 7 of the Fee Schedule, the Exchange offers 
Remove Volume Tiers that provide a rebate to Members meeting certain 
volume thresholds. Specifically, Tier 2 currently provides an 
opportunity for Members to receive an enhanced rebate of $0.0028 per 
share for qualifying liquidity removing orders (i.e., yielding fee 
codes N,\4\ W,\5\ 6,\6\ and BB \7\), where a Member adds or removes an 
ADV \8\ greater than or equal to 0.65% of the TCV.\9\ Now, the Exchange 
proposes to eliminate Tier 2 of the Remove Volume Tiers. The Exchange 
no longer believes Tier 2 is necessary and notes the Exchange is not 
required to maintain such an incentive. Further, the Exchange would 
rather redirect future resources and funding into other programs and 
tiers intended to incentivize increased order flow.
---------------------------------------------------------------------------

    \4\ Fee code N is appended to orders removing liquidity from 
EDGA (Tape C).
    \5\ Fee code W is appended to orders removing liquidity from 
EDGA (Tape A).
    \6\ Fee code 6 is appended to orders removing liquidity from 
EDGA, pre and post market (All Tapes).
    \7\ Fee code BB is appended to orders removing liquidity from 
EDGA (Tape B).
    \8\ ADV means 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.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\10\ in general, and 
furthers the objectives 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 issuers and other persons 
using its facilities. The Exchange also believes that the proposed rule 
change is consistent with the objectives of Section 6(b)(5) \12\ 
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, and, particularly, is not 
designed to permit unfair discrimination 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. The proposed rule change 
reflects a competitive pricing structure designed to incentivize market 
participants to direct their order flow to the Exchange, which the 
Exchange believes would enhance market quality to the benefit of all 
Members.
---------------------------------------------------------------------------

    \10\ 15 U.S.C. 78f.
    \11\ 15 U.S.C. 78f(b)(4).
    \12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    In particular, the Exchange believes eliminating Tier 2 of the 
Remove Volume Tiers is reasonable because the Exchange is not required 
to maintain such a tier, and Members still have a number of other 
opportunities and a variety of ways to receive enhanced rebates. 
Moreover, as noted above, the Exchange would rather redirect future 
resources and funding into other programs and tiers intended to 
incentivize increased order flow. The Exchange believes the proposal to 
eliminate Tier 2 of the Remove Volume Tiers is also equitable and not 
unfairly discriminatory because it applies to all Members.

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. Particularly, the Exchange 
does not believe the proposal to eliminate Tier 2 of the Remove Volume 
Tiers will impose any burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act 
because the proposed change applies to all Members equally, in that no 
Member will continue to be eligible for the tier. As discussed above, 
the Exchange is not required to maintain such an incentive. Also, as 
previously discussed, the Exchange operates in a highly competitive 
market. Members have numerous alternative venues that they may 
participate on and director their order flow, including 15 other 
options exchanges and off-exchange venues. Additionally, the Exchange 
represents a small percentage of the overall market. Based on publicly 
available information, no single options exchange has more than 15% of 
the market share.\13\ Therefore, no exchange possesses significant 
pricing power in the execution of option order flow. Indeed, 
participants can readily choose to send their orders to other exchange 
and off-exchange venues if they deem fee levels

[[Page 26115]]

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.'' \14\ 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' . . . .''.\15\ 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.
---------------------------------------------------------------------------

    \13\ See supra note 3.
    \14\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \15\ 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)).
---------------------------------------------------------------------------

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 \16\ and paragraph (f) of Rule 19b-4 \17\ 
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.
---------------------------------------------------------------------------

    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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-CboeEDGA-2021-012 on the subject line.

Paper Comment

     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-2021-012. 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 Number SR-CboeEDGA-2021-012 and should be 
submitted on or before June 2, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
---------------------------------------------------------------------------

    \18\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-09970 Filed 5-11-21; 8:45 am]
BILLING CODE 8011-01-P