[Federal Register Volume 86, Number 188 (Friday, October 1, 2021)]
[Notices]
[Pages 54494-54497]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-21353]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93130; File No. SR-CboeEDGA-2021-020]


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

September 27, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 13, 2021, Cboe EDGA Exchange, Inc. (``Exchange'' or 
``EDGA'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. 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'' or ``EDGA 
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/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 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.

[[Page 54495]]

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 (``EDGA Equities'') to modify the fee or 
rebate associated with certain routing fee codes and eliminate a 
particular routing fee code.\3\
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed fee changes 
September 1, 2021 (SR-CboeEDGA-2021-019). On September 13, 2021, the 
Exchange withdrew that filing and submitted this proposal.
---------------------------------------------------------------------------

    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,\4\ no single registered 
equities exchange has more than 14% 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, 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.
---------------------------------------------------------------------------

    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (August 26, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
---------------------------------------------------------------------------

    The Exchange assesses fees in connection with orders routed away to 
various exchanges. Now, the Exchange proposes to modify certain routing 
fee codes currently under the Fee Codes and Associated Fees section of 
the Fee Schedule. First, the Exchange proposes to modify fee code C, 
which is appended to orders routed to Nasdaq BX, Inc. (``Nasdaq BX''), 
and currently provides a rebate of $0.00110 per share for securities 
priced at or above $1.00 and 0.10% of the dollar value for securities 
priced below $1.00. Specifically, the Exchange proposes to modify the 
description of the fee code to identify Nasdaq BX and to reduce the 
rebate for securities priced at or above $1.00 to $0.0005 per share.
    Second, the Exchange proposes to modify fee code NX, which is 
appended to orders routed to NYSE National, Inc. (``NYSE National'') 
using the ROBB, ROCO or ROUC routing strategy, and currently provides a 
rebate of $0.00200 per share for securities priced at or above $1.00 
and is free for securities priced below $1.00. The Exchange proposes to 
reduce the rebate for securities priced at or above $1.00 to $0.0005 
per share.
    Third, the Exchange proposes to modify fee code S, which is 
appended to directed intermarket sweep orders (``ISOs''), and currently 
assesses a fee of $0.00320 per share for securities priced at or above 
$1.00 and 0.30% of the dollar value for securities priced below $1.00. 
The Exchange proposes to increase the fee for securities priced at or 
above $1.00 to $.00330.
    Finally, as a result of minimal use in the last months, the 
Exchange proposes to eliminate fee code IX in its entirety. Fee code IX 
is appended to orders routed to the Investors Exchange LLC (``IEX'') 
using the DIRC routing strategy, and currently assesses a fee of 
$0.00300 per share for securities priced at or above $1.00 and 0.30% of 
the dollar value for securities priced below $1.00. The Exchange 
believes that because so few users elect to route their orders with 
specifications to which fee code IX is applicable, the current demand 
does not warrant the infrastructure and ongoing Systems maintenance 
required to support the separate fee code. Therefore, the Exchange now 
proposes to delete fee code IX in the Fee Schedule. The Exchange notes 
that users will continue to be able to choose to route their orders 
with the same specifications to which fee codes IX currently applies--
such orders will simply be assessed the fees currently in place for 
routed orders generally.\5\ That is, if any of the routed orders to 
which fee code IX currently apply fee code X will be appended to such 
orders, which also assesses a fee of $0.00300 per share for securities 
priced at or above $1.00 and 0.30% of the dollar value for securities 
priced below $1.00.
---------------------------------------------------------------------------

    \5\ The Exchange notes that there are other fee codes that apply 
to certain other routing specifications, however, those routed 
orders not otherwise specified in such other routing fee code 
descriptions yield the general routing fee code X.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\6\ in general, and 
furthers the objectives of Section 6(b)(4),\7\ 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) \8\ 
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.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4).
    \8\ 15 U.S.C. 78f.(b)(5).
---------------------------------------------------------------------------

    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 Exchange believes that 
its proposal to reduce the rebates applicable to fee codes C and NX and 
to increase the fee applicable to fee code S is fair, equitable, and 
reasonable because the proposed fees and rebate remain consistent with 
pricing offered by the Exchange's affiliates and competitors and does 
not represent a significant departure from the Exchange's general 
pricing structure. Specifically, the proposed fee applicable to fee 
code S is equal to the fee currently charged for directed ISOs on the 
Exchange's affiliate, Cboe BZX Exchange, Inc. (``BZX Equities'').\9\ 
Similarly, the proposed rebates applicable to fee codes C and NX are 
more than that offered by the Nasdaq Stock Market LLC (``Nasdaq''), 
which does not provide a standard rebate for similar orders.\10\ 
Therefore, the Exchange believes the proposed fees and rebates 
associated with fee codes C, NX, and S remain consistent with pricing 
previously

[[Page 54496]]

offered by the Exchange's affiliates and other exchanges and does not 
represent a significant departure from such pricing.
---------------------------------------------------------------------------

    \9\ See the standard rate associated with fee code S, appended 
to Directed ISOs, on the BZX Equities fee schedule at https://www.cboe.com/us/equities/membership/fee_schedule/bzx/.
    \10\ See ``Route Rates'' on the Nasdaq fee schedule at http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
---------------------------------------------------------------------------

    The Exchange believes the proposed rule change to remove fee code 
IX is reasonable as the Exchange has observed a minimal amount of 
volume in orders yielding the fee code and, therefore, the continuation 
of this fee code does not warrant the infrastructure and ongoing 
Systems maintenance required to support separate fee codes for specific 
routed orders. As such, the Exchange also believes that is reasonable 
and equitable to assess routed orders which meet the specifications to 
which fee code IX are currently applicable the standard routing fee 
currently in place for all other routed orders--via fee code X, which 
also assesses a fee of $0.00300 per share for securities priced at or 
above $1.00 and 0.30% of the dollar value for securities priced below 
$1.00. The Exchange believes that the proposed rule change is equitable 
and not unfairly discriminatory because Members will continue to have 
the option to elect to route their orders in the same manner (i.e., 
routed to IEX using the DIRC strategy) and will be automatically and 
uniformly assessed the applicable standard rates in place for generally 
all other routed orders. Further, if members do not favor the 
Exchange's pricing for routed orders, they can send their routable 
orders directly to away markets instead of using routing functionality 
provided by the Exchange. Routing through the Exchange is optional, 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 changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
that the proposed modifications represent a significant departure from 
previous pricing offered by the Exchange or pricing offered by the 
Exchange's competitors. Further, while the Exchange is proposing to 
eliminate fee code IX, orders that meet specifications of fee code IX 
going forward will be assessed the rate for orders routed generally. 
Members may opt to disfavor the Exchange's pricing if they believe that 
alternatives offer them better value. Accordingly, the Exchange does 
not believe that the proposed change will impair the ability of Members 
or competing venues to maintain their competitive standing in the 
financial markets.
    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 
fee and rebate modifications will continue to apply to all Members 
equally, and as noted above, orders currently meeting the 
specifications of fee code IX will be assessed the rate for orders 
routed generally under fee code X. 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 14% of the market share.\11\ 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.'' \12\ 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' . . . .''.\13\ 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.
---------------------------------------------------------------------------

    \11\ Supra note 3.
    \12\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \13\ 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 upon filing pursuant 
to Section 19(b)(3)(A) \14\ of the Act and paragraph (f)(2) of Rule 
19b-4 \15\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange. 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) \16\ 
of the Act to determine whether the proposed rule change should be 
approved or disapproved.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 17 CFR 240.19b-4(f)(2).
    \16\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-

[[Page 54497]]

CboeEDGA-2021-020 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-CboeEDGA-2021-020. 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 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-CboeEDGA-2021-020 and should be 
submitted on or before October 22, 2021.
---------------------------------------------------------------------------

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

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21353 Filed 9-30-21; 8:45 am]
BILLING CODE 8011-01-P