[Federal Register Volume 89, Number 79 (Tuesday, April 23, 2024)]
[Notices]
[Pages 30418-30421]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-08575]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99983; File No. SR-CboeEDGA-2024-014]


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

April 17, 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 April 12, 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 amend the fees 
and increase the maximum cap for Dedicated Cores.\3\
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    \3\ The Exchange initially filed the proposed rule change on 
April 1, 2024 (SR-CboeEDGA-2024-012). On April 12, 2024, the 
Exchange withdrew that filing and submitted this filing.
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    By way of background, the Exchange recently began to allow Users 
\4\ to assign a Single Binary Order Entry (``BOE'') logical order entry 
port \5\ to a single dedicated Central Processing Unit (CPU Core) 
(``Dedicated Core''). Historically, CPU Cores had been shared by 
logical order entry ports (i.e., multiple logical ports from multiple 
firms may connect to a single CPU Core). Use of Dedicated Cores 
however, 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 and is available to all 
Users that wish to purchase Dedicated Cores. Users may utilize BOE 
logical order entry ports on shared CPU Cores, either in lieu of, or in 
addition to, their use of Dedicated Core(s). As such, Users are 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\ Users may currently connect to the Exchange using a logical 
port available through an application programming interface 
(``API''), such as the Binary Order Entry (``BOE'') protocol. A BOE 
logical order entry port is used for order entry.
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    The Exchange currently assesses 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 are assessed and 
applied in their entirety and are not

[[Page 30419]]

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).\6\ The Exchange notes the 
current standard fees assessed for BOE Logical Ports, whether used with 
Dedicated or shared CPU cores, are applicable and unchanged.\7\
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    \6\ The Exchange currently assesses $550 per port per month. See 
Cboe EDGA Equities Fee Schedule.
    \7\ 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 has also prescribed a maximum limit on the 
number of Dedicated Cores that Users may purchase each month. 
Particularly, the Exchange currently provides that Members are limited 
to a maximum number of 10 Dedicated Cores and Sponsoring Members are 
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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    \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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    The Exchange now proposes to amend these fees and maximum limits. 
First the Exchange proposes to provide up to two Dedicated Cores to all 
Users who wish to use Dedicated Cores, at no additional cost. The 
Exchange also proposes to amend the Fees such that it proposes to 
charge: $650 per Dedicated Core for 3-10 Dedicated Cores; $850 per 
Dedicated Core for 11-15 Dedicated Cores; and $1,050 per Dedicated Core 
for 16 or more Dedicated Cores. The Exchange notes the proposed fees 
will continue to be progressive and the Exchange proposes to update the 
current example in the fees schedule to maintain clarity as to how they 
are applied.\9\
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    \9\ Particularly, the Exchange will provide that if a User were 
to purchase 11 Dedicated Cores, it will be charged a total of $6,050 
per month ($0 * 2 + $650 * 8 + $850 * 1).
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    The Exchange also proposes to increase the current maximum number 
of Dedicated Cores that Users may purchase. In particular, the Exchange 
continually monitors market participant demand and resource 
availability and endeavors to adjust the limit if and when the Exchange 
is able to accommodate additional CPU Cores (including Dedicated 
Cores). In response to market participant demand and the ability to now 
accommodate additional Dedicated Cores, the Exchange is proposing to 
double the current maximum of Dedicated Cores that Users may purchase. 
Particularly, the Exchange proposes to provide that Members will be 
limited to a maximum number of 20 Dedicated Cores \10\ and Sponsoring 
Members will be limited to a maximum number of 8 Dedicated Cores for 
each of their Sponsored Access relationships.\11\ The Exchange notes 
that it will continue monitoring Dedicated Core interest by all Users 
and allotment availability with the goal of increasing these limits to 
meet Users' needs.
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    \10\ The prescribed maximum quantity of Dedicated Cores for 
Members applies regardless of whether that Member purchases the 
Dedicated Cores directly from the Exchange 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.
    \11\ The fee tier(s) applicable to Sponsoring Members are 
determined on a per Sponsored Access relationship basis and not on 
the combined total of Dedicated Cores across Sponsored Users. For 
example, under the proposed changes, a Sponsoring Member that has 
two Sponsored Access relationships is entitled to a total of 16 
Dedicated Cores for those 2 Sponsored Access relationships but would 
be assessed fees separately based on the 8 Dedicated Cores for each 
Sponsored User (instead of combined total of 16 Dedicated Core). For 
example, a Sponsoring Member with 2 Sponsored Access relationships 
would be provided 2 Dedicated Cores at no additional cost for each 
Sponsored User under Tier 1 (total of 4 Dedicated Cores at no 
additional cost) and provided an additional 6 Dedicated Cores for 
each Sponsored User under Tier 2 (total 12 Dedicated Cores) at $650 
per month.
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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.\12\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \13\ 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) \14\ 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) \15\ 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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    \12\ 15 U.S.C. 78f(b).
    \13\ 15 U.S.C. 78f(b)(5).
    \14\ Id.
    \15\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed changes are reasonable because 
they provide any Users who wishes to utilize Dedicated Cores up to two 
Dedicated Cores at no additional cost. Additionally, the proposed 
changes generally result in reduced fees for Users. For example, only 
the first three Dedicated Cores are currently assessed the lower $650 
per Dedicated Core rate and Dedicated Core quantities above 3 are 
assessed a higher rate of either $1,050 or $1,450, depending on how 
many Dedicated Cores a User purchased. As proposed, Users not only get 
the first two Dedicated Cores for free, but up to 8 additional 
Dedicated Cores at the lower $650 rate. The Exchange also proposes to 
reduce the fee rates for the next two tiers as well (i.e., $850 per 
Dedicated Cores for 11-15 Dedicated Cores and $1,050 for 16-20 
Dedicated Cores).
    The Exchange also believes the proposed fees are reasonable as 
Dedicated Cores provide a valuable service that can 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. Dedicated Cores continue to 
not be necessary for trading and as noted above, are 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 however, or determines Dedicated Cores

[[Page 30420]]

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 or determine not to purchase additional Dedicated 
Cores. 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 continue to 
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. Further all Users are entitled to up to 2 
Dedicated Cores at no additional cost. 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.\16\ 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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    \16\ See also Cboe U.S. Options Fees Schedule, BZX Options, 
Options Logical Port Fees, Ports with Bulk Quoting Capabilities.
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    The Exchange also believes it's reasonable, equitable and not 
unfairly discriminatory to increase the maximum number of Dedicated 
Cores permitted because Users will be able to avail themselves of 
additional Dedicated Cores should they so choose. As noted above, the 
Exchange continually monitors market participant demand and resource 
availability with the goal to increase the Dedicated Cores limits to 
meet Users' needs if and when the Exchange is able to do so. The 
Exchange proposes to increase the limits for Dedicated Cores based on 
recent market participant demand and the ability to accommodate 
additional Dedicated Cores as compared to when the Exchange first 
launched Dedicated Cores. The Exchange notes that it's reasonable to 
still maintain a maximum number of Dedicated Cores Users can purchase 
because the Exchange continues to have a finite amount of space in its 
data centers. The proposed limits also apply uniformly to similarly 
situated market participants (i.e. all Members are subject to the same 
Exchange-prescribed limit and all Sponsored Participants are subject to 
the same Exchange-prescribed limit, respectively). The Exchange 
believes it's not unfairly discriminatory to provide for different 
limits for different types of users. For example, the Exchange believes 
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.

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 views 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. Finally, all Users will be entitled to two 
Dedicated 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.'' \17\ 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'. . . .''.\18\ 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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    \17\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \18\ 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.

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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 \19\ and paragraph (f) of Rule 19b-4 \20\ 
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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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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-2024-014 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-2024-014. 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 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-2024-014 and should 
be submitted on or before May 14, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-08575 Filed 4-22-24; 8:45 am]
BILLING CODE 8011-01-P