[Federal Register Volume 87, Number 30 (Monday, February 14, 2022)]
[Notices]
[Pages 8316-8318]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-03021]


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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94186; File No. SR-CboeEDGX-2022-006]


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

February 8, 2022.
    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 February 1, 2022, 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.
---------------------------------------------------------------------------

    \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 Options'') 
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 by clarifying the 
definition of the existing fee code in connection with trades at the 
EDGX Options open and adopting a fee code in connection with trades at 
the open of the Complex Order Book (``COB''), effective February 1, 
2022.
    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 options venues to which market participants 
may direct their order flow. Based on publicly available information, 
no single options exchange has more than 15% of the market share and 
currently the Exchange represents only approximately 4.5% of the market 
share.\3\ Thus, in such a low-concentrated and highly competitive 
market, no single options exchange,

[[Page 8317]]

including the Exchange, possesses significant pricing power in the 
execution of option 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.
---------------------------------------------------------------------------

    \3\ See Cboe Global Markets U.S. Options Market Monthly Volume 
Summary (January 26, 2022), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------

    The Exchange's Fees Schedule sets forth standard rebates and rates 
applied per contract. For example, the Exchange provides standard 
rebates ranging from $0.01 up to $0.21 per contract for Customer orders 
in both Penny and Non-Penny Securities. The Fee Codes and Associated 
Fees section of the Fees Schedule also provides for certain fee codes 
associated with certain order types and market participants that 
provide for various other fees or rebates. Fee code OO, for example, is 
appended to all orders executed (i.e., in any capacity) as part of the 
EDGX Options opening and assesses no fee. The Exchange proposes to 
amend the definition of fee code OO to clarify that it applies to 
orders executed as part of the EDGX Options opening on the simple order 
book,\4\ and proposes to adopt fee code OC, which applies to all orders 
executed as part of the EDGX Options opening on the COB and assesses no 
fee.\5\ The proposed rule change is merely intended to add clarity 
regarding the fee codes that apply in connection with orders that 
participate in the Exchange's opening processes for its different order 
books. All orders executed on the open, whether the open for the simple 
order book or the COB, will continue to transact free of charge. The 
Exchange notes that the Fee Schedule of the Exchange's affiliated 
options exchange, Cboe C2 Exchange, Inc. (``C2 Options'') applies 
substantively identical fee codes for trades at the open of its simple 
order book and for trades at the open of its complex order book.\6\
---------------------------------------------------------------------------

    \4\ See Securities Exchange Act Release No. 76453 (November 17, 
2015), 80 FR 72999 (November 23, 2015) (SR-EDGX-2015-56), which 
provides that an order that participates in the EDGX Options opening 
process under Exchange Rule 21.7 would yield fee code OO. Rule 21.7 
governs the opening auction process for the Exchange's simple order 
book.
    \5\ The proposed rule change also adds fee code OC to the 
``Complex Order Types'' table under footnote 8 of the Fee Schedule.
    \6\ See C2 Options Fee Schedule, Fee Codes and Associated Fees, 
fee codes OO and OC.
---------------------------------------------------------------------------

2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\7\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
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. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \9\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
---------------------------------------------------------------------------

    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
---------------------------------------------------------------------------

    In particular, the Exchange believes that the proposed rule change 
is reasonable as it is intended to provide additional clarity in the 
Fee Schedule regarding the fee codes that apply in connection with 
orders that participate in the Exchange's opening processes for its 
simple order book and COB and all orders executed on either open may 
transact free of charge. The Exchange again notes that the C2 Options 
Fee Schedule applies substantively identical fee codes for trades at 
the open of its simple order book and for trades at the open of its 
complex order book.\10\ The Exchange believes that the proposed rule 
change is equitable and not unfairly discriminatory as fee codes OO and 
OC apply automatically and uniformly to all orders executed upon the 
open of the simple order book or COB, respectively.
---------------------------------------------------------------------------

    \10\ See supra note 6.
---------------------------------------------------------------------------

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 does not 
believe that the proposed rule change will impose any burden on 
intramarket competition because fee codes OO and OC apply automatically 
and uniformly to all orders executed upon the open of the simple order 
book or COB, respectively. The Exchange does not believe that the 
proposed rule change will impose any burden on intermarket competition 
because the proposed rule change is merely intended to provide 
additional clarity in the Fee Schedule regarding the fee codes that 
apply in connection with orders that participate in the Exchange's 
opening processes for its simple order book and COB and all orders 
executed on either open may continue to transact free of charge. The 
Exchange again notes that the C2 Options Fee Schedule applies 
substantively identical fee codes for trades at the open of its simple 
order book and for trades at the open of its complex order book.\11\ 
Also, as previously discussed, the Exchange operates in a highly 
competitive market. TPHs have numerous alternative venues they may 
participate on and direct their order flow, including 15 other options 
exchanges. 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. Therefore, no 
exchange possesses significant pricing power in the execution of order 
flow. Indeed, participants can readily choose to send their orders to 
other exchanges if they deem fee levels at those other venues to be 
more favorable. As noted above, the Exchange believes that the proposed 
fee changes are comparable to that of other exchanges offering similar 
functionality. 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.'' 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

[[Page 8318]]

market share percentages for granted' because `no exchange possesses a 
monopoly, regulatory or otherwise, in the execution of order flow from 
broker dealers' . . . .''. 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\ See supra note 6.
---------------------------------------------------------------------------

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 \12\ and paragraph (f) of Rule 19b-4 \13\ 
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.
---------------------------------------------------------------------------

    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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-CboeEDGX-2022-006 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-2022-006. 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-2022-006 and should be 
submitted on or before March 7, 2022.
---------------------------------------------------------------------------

    \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. 2022-03021 Filed 2-11-22; 8:45 am]
BILLING CODE 8011-01-P