[Federal Register Volume 89, Number 67 (Friday, April 5, 2024)]
[Notices]
[Pages 24046-24049]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-07223]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99875; File No. SR-CboeEDGA-2024-009]


Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Its Fees Schedule To Adopt Fees for Dedicated Cores

April 1, 2024.
    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 March 20, 2024, 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.
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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 EDGA Exchange, Inc. (the ``Exchange'' or ``EDGA Equities'') 
proposes to amend its Fees 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.

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 to adopt fees 
relating to the use of Dedicated Cores.\3\
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    \3\ On March 19, 2024, the Exchange filed a proposal to 
introduce Dedicated Cores (SR-CboeEDGA-2024-008).
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    The Exchange proposes to introduce a new connectivity offering 
relating to the use of Dedicated Cores. By way of background, all 
Central Processing Units (``CPU Cores'') have historically been shared 
by logical order entry ports (i.e., multiple logical ports from 
multiple firms may connect to a single CPU Core). Starting February 26, 
2024, the Exchange began to allow Users \4\ to assign a single BOE 
logical entry port to a single dedicated CPU Core (``Dedicated 
Core'').\5\ Use of Dedicated Cores can provide reduced latency, 
enhanced throughput, and improved performance since a firm using a 
Dedicated Core is utilizing the full processing power of a CPU Core 
instead of sharing that power with other firms. This offering is 
completely voluntary

[[Page 24047]]

and is available to all Users that wish to purchase Dedicated Cores. 
Users will also continue to have the option to utilize BOE logical 
order entry ports on shared CPU Cores as they do today, either in lieu 
of, or in addition to, their use of Dedicated Core(s). As such, Users 
will be able to operate across a mix of shared and dedicated CPU Cores 
which the Exchange believes provides additional risk and capacity 
management. Further, Dedicated Cores are not required nor necessary to 
participate on the Exchange and as such Users may opt not to use 
Dedicated Cores at all.
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    \4\ A User may be either a Member or Sponsored Participant. The 
term ``Member'' shall mean any registered broker or dealer that has 
been admitted to membership in the Exchange. limited liability 
company or other organization which is a registered broker or dealer 
pursuant to Section 15 of the Act, and which has been approved by 
the Exchange. A Sponsored Participant may be a Member or non-Member 
of the Exchange whose direct electronic access to the Exchange is 
authorized by a Sponsoring Member subject to certain conditions. See 
Exchange Rule 11.3.
    \5\ The Exchange notes that firms will not have physical access 
to their Dedicated Core and thus cannot make any modifications to 
the Dedicated Core or server. All Dedicated Cores (including servers 
used for this service) are owned and operated by the Exchange.
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    The Exchange is proposing to assess the following monthly fees for 
those Users that wish to use Dedicated Cores: $650 per Dedicated Core 
for the first 3 Dedicated Cores; $1,050 per Dedicated Core for the 4th-
6th Dedicated Cores; and $1,450 per Dedicated Core for 7 or more 
Dedicated Cores. The proposed fees are progressive, and the Exchange 
proposes to include the following example in the Fees Schedule to 
provide clarity as to how the fees will be applied. In particular, if a 
firm chooses to purchase 5 Dedicated Cores, that firm will be assessed 
a total monthly fee of $4,050 for use of those Dedicated Cores (i.e., 
$650 x 3 Dedicated Cores and $1,050 x 2 Dedicated Cores). The Exchange 
also proposes to make clear in the Fees Schedule that the monthly fees 
are assessed and applied in their entirety and are not prorated. The 
monthly Dedicated Core fees are in addition to the standard per port 
fee assessed to Users for the BOE Logical Port(s) ports assigned to the 
Dedicated Core(s). The Exchange notes the current standard fees 
assessed for BOE Logical Ports, whether used with Dedicated or shared 
CPU cores, will remain applicable and unchanged.\6\
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    \6\ See Cboe U.S. Equities Fees Schedules, EDGA Equities, 
Logical Port Fees.
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    Since the Exchange currently has finite amount of space in its data 
centers in which its servers (and therefore corresponding CPU Cores) 
are located, the Exchange also proposes to prescribe a maximum limit on 
the number of Dedicated Cores that Users may purchase each month. 
Particularly, the Exchange proposes to provide that Members will be 
limited to a maximum number of 10 Dedicated Cores \7\ and Sponsoring 
Members will be limited to a maximum number of 4 Dedicated Cores for 
each of their Sponsored Access relationships.\8\ The purpose of 
establishing these limits is to manage the allotment of Dedicated Cores 
in a fair manner and to prevent the Exchange from being required to 
expend large amounts of resources in order to provide an unlimited 
number of Dedicated Cores.
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    \7\ Members will be limited to 10 Dedicated Cores, regardless of 
whether they purchase the Dedicated Cores directly and/or through a 
Service Bureau. In a Service Bureau relationship, a customer allows 
its MPID to be used on the ports of a technology provider, or 
Service Bureau. One MPID may be allowed on several different Service 
Bureaus.
    \8\ The Exchange announced the initial limit via Exchange Notice 
which was issued on January 29, 2024. https://cdn.cboe.com/resources/release_notes/2024/Cboe-Global-Markets-to-Introduce-Cboe-Dedicated-Cores-for-EDGA-Equities.pdf.
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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.\9\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \10\ 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) \11\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Exchange also believes the proposed rule 
change is consistent with Section 6(b)(4) \12\ of the Act, which 
requires that Exchange rules provide for the equitable allocation of 
reasonable dues, fees, and other charges among its Members and other 
persons using its facilities.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.
    \12\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed fees are reasonable because 
Dedicated Cores provide a valuable service in that it may provide 
reduced latency, enhanced throughput, and improved performance compared 
to use of a shared CPU Core since a firm using a Dedicated Core is 
utilizing the full processing power of a CPU Core. The Exchange also 
emphasizes however, that the use of Dedicated Cores is not necessary 
for trading and as noted above, is entirely optional. Indeed, Users can 
continue to access the Exchange through shared CPU Cores at no 
additional cost. Depending on a firm's specific business needs, the 
proposal enables Users to choose to use Dedicated Cores in lieu of, or 
in addition to, shared CPU Cores (or as noted, not use Dedicated Cores 
at all). The Exchange believes the proposal to operate across a mix of 
shared and dedicated CPU Cores may further provide additional risk and 
capacity management. If a User finds little benefit in having Dedicated 
Cores, or determines Dedicated Cores are not cost-efficient for its 
needs or does not provide sufficient value to the firm, such User may 
continue its use of the shared CPU Cores, unchanged. Indeed, the 
Exchange has no plans to eliminate shared CPU Cores nor to require 
Users to purchase Dedicated Cores.
    The Exchange also believes that the proposed Dedicated Core fees 
are equitable and not unfairly discriminatory because they would be 
assessed uniformly to similarly situated users in that all Users who 
choose to purchase Dedicated Cores will be subject to the same proposed 
tiered fee schedule. The Exchange believes the proposed ascending fee 
structure is also reasonable, equitable and not unfairly discriminatory 
as it is designed so that firms that use a higher allotment of the 
Exchange's finite number of Dedicated Cores pay higher rates, rather 
than placing that burden on market participants that have more modest 
needs who will have the flexibility of obtaining Dedicated Cores at 
lower price points in the lower tiers. As such, the proposed fees do 
not favor certain categories of market participants in a manner that 
would impose a burden on competition; rather, the ascending fee 
structure reflects the resources consumed by the various needs of 
market participants--that is, the lowest Dedicated Core consuming Users 
pay the least, and highest Dedicated Core consuming Users pay the most. 
Other exchanges similarly assess higher fees to those that consume more 
Exchange resources.\13\ It's also designed to encourage firms to manage 
their needs in a fair manner and to prevent the Exchange from being 
required to expend large amounts of resources in order to provide an 
additional number of Dedicated Cores.
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    \13\ See e.g., MIAX Pearl Equities Exchange Fees Schedule, 
Section 2(d) Port Fees. See also Cboe U.S. Options Fees Schedule, 
BZX Options, Options Logical Port Fees, Ports with Bulk Quoting 
Capabilities.

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[[Page 24048]]

    The Exchange believes it is reasonable to limit the number of 
Dedicated Cores Users can purchase because the Exchange has a finite 
amount of space in its data centers and availability of cores. The 
Exchange will continually monitor market participant demand and 
resource availability and endeavor to adjust the limit if and when the 
Exchange is able to accommodate additional CPU Cores (including 
Dedicated Cores). The Exchange monitors its capacity and data center 
space and thus is in the best place to determine these limits and 
modify them as appropriate in response to changes to this capacity and 
space. The proposed limits also apply uniformly to similarly situated 
market participants (i.e. all Members are subject to the same limit and 
all Sponsored Participants are subject to the same limit, 
respectively). The Exchange believes it's not unfairly discriminatory 
to provide for different limits for different types of users. For 
example, the Exchange believe it's not unfairly discriminatory to 
provide for an initial lower limit to be allocated for Sponsored 
Participants because unlike Members, Sponsored Participants are able to 
access the Exchange without paying a Membership Fee. Members also have 
more regulatory obligations and risk that Sponsored Participants do 
not. For example, while Sponsored Participants must agree to comply 
with the Rules of the Exchange, it is the Sponsoring Member of that 
Sponsored Participant that remains ultimately responsible for all 
orders entered on or through the Exchange by that Sponsored 
Participant. The industry also has a history of applying fees 
differently to Members as compared to Sponsored Participants.\14\
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    \14\ See e.g., Securities Exchange Act Release No. 68342 
(December 3, 2012) 77 FR 73096 (December 7, 2012) (SR-CBOE-2012-114) 
and Securities Exchange Act Release No. 66082 (January 3, 2012) 77 
FR 1101 (January 9, 2012) (SR-C2-2011-041).
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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 intramarket competition that is not necessary in 
furtherance of the purposes of the Act because the proposed tiered fee 
structure will apply equally to all similarly situated Users that 
choose to use Dedicated Cores. As discussed above, Dedicated Cores are 
optional and Users may choose to utilize Dedicated Cores, or not, based 
on their view of the additional benefits and added value provided by 
utilizing a Dedicated Core. The Exchange believes the proposed fee will 
be assessed proportionately to the potential value or benefit received 
by Users with a greater number of Dedicated Cores and notes that Users 
may determine at any time to cease using Dedicated Cores. As discussed, 
Users can also continue to access the Exchange through shared CPU Cores 
at no additional cost.
    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, 
including competition for exchange memberships. Market Participants 
have numerous alternative venues that they may participate on, 
including 15 other equities exchanges, as well as off-exchange venues, 
where competitive products are available for trading. Indeed, 
participants can readily choose to submit their order flow 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.'' \15\ 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'. . . .''.\16\ Accordingly, the Exchange does not believe its 
proposed change imposes any burden on competition that is not necessary 
or appropriate in furtherance of the purposes of the Act.
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    \15\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \16\ 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)).
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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 \17\ and paragraph (f) of Rule 19-b4 \18\ 
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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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeEDGA-2024-009 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-2024-009. 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 (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent

[[Page 24049]]

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 a.m. and 3 p.m. Copies of the 
filing also will be available for inspection and copying at the 
principal office of the Exchange. Do not include personal identifiable 
information in submissions; you should submit only information that you 
wish to make available publicly. We may redact in part or withhold 
entirely from publication submitted material that is obscene or subject 
to copyright protection. All submissions should refer to file number 
SR-CboeEDGA-2024-009 and should be submitted on or before April 26, 
2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\19\
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    \19\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-07223 Filed 4-4-24; 8:45 am]
BILLING CODE 8011-01-P