[Federal Register Volume 86, Number 153 (Thursday, August 12, 2021)]
[Notices]
[Pages 44421-44423]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17178]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92593; File No. SR-CboeEDGX-2021-036]


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

August 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 August 2, 2021, 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. (the ``Exchange'' or ``EDGX'' or ``EDGX 
Equities'') proposes 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/) [sic], 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 applicable to its 
equities trading platform (``EDGX Equities'') to modify the fee 
associated with Remove Volume Tier 2.
    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 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 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 $0.00160 per share for orders that add liquidity and assesses 
a fee of $0.00285 per share for orders that remove liquidity. For 
orders in securities priced below $1.00, the Exchange provides a 
standard rebate of $0.00009 per share for orders that add liquidity and 
assesses a fee of 0.30% of total dollar value for orders that remove 
liquidity. Additionally, in response to the competitive environment, 
the Exchange also 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.
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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (July 26, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
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    Pursuant to footnote 1 of the Fee Schedule, the Exchange currently 
offers Remove Volume Tiers that provide Members an opportunity to 
receive a reduced fee from the standard fee assessed for liquidity 
removing orders that yield fee codes BB,\4\ N,\5\ and W.\6\ The Remove 
Volume Tiers offer two different tiers that vary in criteria difficulty 
and incentive opportunities which Members may qualify for reduced fees 
for such orders. For example, the Remove Volume Tier 2 currently 
provides a reduced fee of $.00270 for Members who have either (1) an 
ADAV \7\ greater than or equal to 0.25% of the TCV \8\ with displayed 
orders that yield fee codes B,\9\ V \10\ or Y; \11\ or (2) Retail

[[Page 44422]]

Order ADV \12\ (i.e., yielding fee code ZA \13\) greater than or equal 
to 0.45% of the TCV. The Exchange now proposes to increase the reduced 
fee to $0.00275 provided under the Remove Volume Tier 2. The Exchange 
notes that the Remove Volume Tier 2, as modified, continues to be 
available to all Members and provides Members an opportunity to receive 
a reduced fee, albeit less of a reduced fee than currently offered. 
Further, the Remove Volume Tier 2 continues to be designed to encourage 
Members to increase their order flow on the Exchange which further 
contributes to a deeper, more liquid market and provides even more 
execution opportunities for active market participants at improved 
prices.
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    \4\ Fee code `BB' is appended to orders that remove liquidity 
from EDGX (Tape B) and is assessed a fee of $0.00285 per share.
    \5\ Fee code `N' is appended to orders that remove liquidity 
from EDGX (Tape C) and is assessed a fee of $0.00285 per share.
    \6\ Fee code `W' is appended to orders that remove liquidity 
from EDGX (Tape A) and is assessed a fee of $0.00285 per share.
    \7\ ADAV means average daily added volume calculated as the 
number of shares added per day. ADAV is calculated on a monthly 
basis.
    \8\ 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.
    \9\ Fee code `B' is appended to orders that add liquidity to 
EDGX (Tape B) and is provided a rebate of $0.0016 per share.
    \10\ Fee code `V' is appended to orders that add liquidity to 
EDGX (Tape A) and is provided a rebate of $0.0016 per share.
    \11\ Fee code `Y' is appended to orders that add liquidity to 
EDGX (Tape C) and is provided a rebate of $0.0016 per share.
    \12\ 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.
    \13\ Fee code `ZA' is appended to Retail Orders that add 
liquidity to EDGX and is provided a rebate of $0.0032 per share.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\14\ in general, and 
furthers the objectives of Section 6(b)(4),\15\ 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) \16\ 
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.
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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4).
    \16\ 15 U.S.C. 78f(b)(5).
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    As described above, 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 to 
the Remove Volume Tier 2 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. In particular, the Exchange 
believes the proposed fee change for Remove Volume Tier 2 is reasonable 
because the tier will continue to be available to all Members and 
provide all Members with an additional opportunity to receive a reduced 
fee. The Exchange further believes Remove Volume Tier 2 is a reasonable 
means to encourage growth in Members' overall order flow to the 
Exchange and to incentivize Members to continue to provide liquidity 
adding and liquidity removing on the Exchange by offering them an 
opportunity to receive a reduced fee on qualifying orders. The Exchange 
believes that the proposed tier will generally benefit all market 
participants by incentivizing continuous liquidity and thus, deeper 
more liquid markets as well as increased execution opportunities. This 
overall increase in activity deepens the Exchange's liquidity pool, 
offers additional cost savings, supports the quality of price 
discovery, promotes market transparency and improves market quality, 
for all investors.
    Further, the Exchange believes that the amended Remove Volume Tier 
2 is reasonable as it does not represent a significant departure from 
the criteria or corresponding rates currently offered in the Fee 
Schedule, and that the proposed reduced fee is commensurate with the 
criteria. The Exchange also believes that the proposal represents an 
equitable allocation of fees and rebates and is not unfairly 
discriminatory because all Members are and will continue to be eligible 
for Remove Volume Tiers and have the opportunity to meet the tiers' 
criteria and receive the applicable reduced fee if such criteria is 
met. The Exchange also notes that amended tier will not adversely 
impact any Member's ability to qualify for reduced fees or enhanced 
rebate offered under other tiers. Should a Member not meet the proposed 
new criteria, the Member will merely not receive that corresponding 
reduced fee.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. Rather, as discussed above, the 
Exchange believes that the proposed amendment to the Remove Volume Tier 
2 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 change furthers 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 Remove 
Volume Tiers will continue to apply to all Members equally in that all 
Members are eligible for these tiers, have a reasonable opportunity to 
meet the tiers' criteria and will receive the reduced fee on their 
qualifying orders if such criteria is met. Additionally, the Remove 
Volume Tiers are designed to attract additional order flow to 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 17% of the market share.\17\ 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

[[Page 44423]]

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.'' \18\ 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'. . . .''.\19\ 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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    \17\ Supra note 4.
    \18\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \19\ NetCoalition v. SEC, 615 F.3d 525, 539 (DC 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 \20\ and paragraph (f) of Rule 19b-4 \21\ 
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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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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-2021-036 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-2021-036. 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-CboeEDGX-2021-036 and should be 
submitted on or before September 2, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-17178 Filed 8-11-21; 8:45 am]
BILLING CODE 8011-01-P