[Federal Register Volume 86, Number 196 (Thursday, October 14, 2021)]
[Notices]
[Pages 57219-57221]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-22436]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93276; File No. SR-CboeEDGX-2021-043]


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

October 8, 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 September 30, 2021, Cboe EDGX Exchange, Inc. (the ``Exchange'' 
or ``EDGX'') 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 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 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/), 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 standard 
rate for liquidity removing orders in securities priced at or above 
$1.00, effective October 1, 2021.
    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.
---------------------------------------------------------------------------

    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (September 27, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
---------------------------------------------------------------------------

    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

[[Page 57220]]

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. Now, the Exchange 
proposes to increase the standard fee for liquidity removing orders in 
securities priced at or above $1.00 from a fee of $0.00285 to $0.0030 
per share. The Exchange proposes to reflect this change in the Fee 
Codes and Associated Fee where applicable (i.e., corresponding to 
standard fee codes N, W, 6, BB and ZR). The Exchange notes that the 
proposed standard rate is in line with, yet also competitive with, 
rates assessed by other equities exchanges on orders in securities 
priced at $1.00 or more.\4\
---------------------------------------------------------------------------

    \4\ See Nasdaq Pricing 7, Section 118(a)(1), which, for example, 
assesses a charge of $0.0030 for member orders that execute against 
resting midpoint liquidity, and that that execute in the Nasdaq 
Market Center generally, in securities priced at $1.00 or more; and 
NYSE American Equities Price List, NYSE American Trading Fees and 
Credits, Section I.A.1.a, Standard Rates, which assesses a standard 
rate of $0.0030 per share (unless member adds ADV of at least 10,000 
shares) for orders in securities priced at or above $1 that remove 
liquidity.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\5\ in general, and 
furthers the objectives 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 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) \7\ 
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.
---------------------------------------------------------------------------

    \5\ 15 U.S.C. 78f.
    \6\ 15 U.S.C. 78f(b)(4).
    \7\ 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 proposed rule changes 
reflect 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.
    The Exchange believes that amending the standard rate for orders 
that remove liquidity in securities priced at or above $1.00 is 
reasonable because, as stated above, in order to operate in the highly 
competitive equities markets, the Exchange and its competing exchanges 
seek to offer similar pricing structures, including assessing 
comparable standard fees for orders in securities priced at or above 
$1.00.\8\ Thus, the Exchange believes the proposed standard rate change 
is reasonable as it is generally aligned with and competitive with the 
amounts assessed for the orders in securities at or above $1.00 on 
other equities exchanges.\9\ The Exchange also believes that amending 
this standard rate amount represents an equitable allocation of fees 
and is not unfairly discriminatory because they will continue to 
automatically apply to all Members' orders that remove liquidity in 
securities at or above $1.00 uniformly.
---------------------------------------------------------------------------

    \8\ Supra note 3.
    \9\ Supra note 4.
---------------------------------------------------------------------------

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 changes represent a significant departure from 
previous pricing offered by the Exchange or pricing offered by the 
Exchange's competitors. 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 
rule change to update the standard fee applicable to liquidity removing 
orders in securities priced at or above a $1.00 does not impose any 
burden on intramarket competition because the standard rate will 
continue to apply automatically and uniformly to all liquidity removing 
orders priced at or above $1.00.
    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.\10\ 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 Securities and Exchange Commission 
(the ``SEC'' or 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.'' \11\ 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

[[Page 57221]]

monopoly, regulatory or otherwise, in the execution of order flow from 
broker dealers' . . . .''.\12\ 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.
---------------------------------------------------------------------------

    \10\ Supra note 3.
    \11\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \12\ 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)(ii) of the Act.\13\
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78s(b)(3)(A)(ii).
---------------------------------------------------------------------------

    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: (i) 
Necessary or appropriate in the public interest; (ii) for the 
protection of investors; or (iii) otherwise in furtherance of the 
purposes of the Act. If the Commission takes such action, the 
Commission shall institute proceedings to determine whether the 
proposed rule should be approved or disapproved.

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-2021-043 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-2021-043. 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-2021-043, and should be 
submitted on or before November 4, 2021.
---------------------------------------------------------------------------

    \14\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-22436 Filed 10-13-21; 8:45 am]
BILLING CODE 8011-01-P