[Federal Register Volume 89, Number 121 (Monday, June 24, 2024)]
[Notices]
[Pages 52525-52528]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-13707]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100356; File No. SR-CboeEDGA-2024-023]


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

 June 17, 2024
    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 June 10, 2024, Cboe EDGA Exchange, Inc. (``Exchange'' or ``EDGA'') 
filed with the Securities and Exchange Commission (``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'') 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.

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'') by: (1) modifying the 
description of fee code MT; and (2) modifying the criteria associated 
with Add Volume Tier 3. The Exchange proposes to implement these 
changes effective June 3, 2024.\3\
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    \3\ The Exchange initially filed the proposed fee change on June 
3, 2024 (SR-CboeEDGA-2024-019). On June 10, 2024, the Exchange 
withdrew that filing and submitted this proposal.
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    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 
Securities Exchange Act of 1934 (the ``Act''), to which market 
participants may direct their order flow. Based on publicly available 
information,\4\ no single registered equities exchange has more than 
15% 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 ``Taker-Maker'' model whereby it pays credits to 
members that remove liquidity and assesses fees to those that add 
liquidity. The Exchange's Fee Schedule sets forth the standard rebates 
and rates applied per share for orders that remove and provide 
liquidity, respectively. Currently, for orders in securities priced at 
or above $1.00, the Exchange provides a standard rebate of $0.0014 per 
share for orders that remove liquidity and assesses a fee of $0.0030 
per share for orders that add liquidity.\5\ For orders in securities 
priced below $1.00, the Exchange does not assess any fees or provide 
any rebates for orders that add or remove liquidity.\6\ Additionally, 
in response to the competitive environment, the Exchange also offers 
tiered pricing which provides Members opportunities to qualify for

[[Page 52526]]

higher rebates or reduced fees where certain volume criteria and 
thresholds are met. Tiered pricing provides an incremental incentive 
for Members to strive for higher tier levels, which provides 
increasingly higher benefits or discounts for satisfying increasingly 
more stringent criteria.
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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (May 22, 2024), available at https://www.cboe.com/us/equities/market_statistics/.
    \5\ See EDGA Equities Fee Schedule, Standard Rates.
    \6\ Id.
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Fee Code MT
    Fee code MT is appended to orders that remove Mid-Point Peg 
liquidity from EDGA. A MidPoint Peg Order is a non-displayed Market 
Order or Limit Order with an instruction to execute at the midpoint of 
the NBBO, or, alternatively, pegged to the less aggressive of the 
midpoint of the NBBO or one minimum price variation inside the same 
side of the NBBO as the order.\7\ Based on customer feedback, the 
Exchange proposes to amend the description of fee code MT in order to 
clarify when the fee code is appended to orders. The Exchange believes 
that amending the description of fee code MT to state that it will be 
appended to orders that remove liquidity designated as Mid-Point Peg 
orders more accurately captures the alternative scenario described in 
Rule 11.8 where a MidPoint Peg Order is pegged to one minimum price 
variation inside the same side of the NBBO as the order. This change 
will not affect when fee code MT is appended to an order and only 
serves to clarify to Members when an order may be designated with fee 
code MT.
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    \7\ See EDGA Rule 11.8(d).
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Add/Remove Volume Tiers
    Under footnote 7 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers. In particular, the Exchange offers 
four Add Volume Tiers that each provide a reduced fee for Members' 
qualifying orders yielding fee codes 3,\8\ 4,\9\ B,\10\ V,\11\ and Y 
\12\ where a Member reaches certain add volume-based criteria. The 
Exchange now proposes to modify the criteria associated with Add Volume 
Tier 3. The current criteria for Add Volume Tier 3 is as follows:
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    \8\ Fee code 3 is appended to orders that add liquidity to EDGA 
in the pre and post market in Tape A or Tape C securities.
    \9\ Fee code 4 is appended to orders that add liquidity to EDGA 
in the pre and post market in Tape B securities.
    \10\ Fee code B is appended to orders that add liquidity to EDGA 
in Tape B securities.
    \11\ Fee code V is appended to orders that add liquidity to EDGA 
in Tape A securities.
    \12\ Fee code Y is appended to orders that add liquidity to EDGA 
in Tape C securities.
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     Add Volume Tier 3 assesses a reduced fee of $0.0015 per 
share for securities priced at or above $1.00 to qualifying orders 
(i.e., orders yielding fee codes 3, 4, B, V, or Y) where a Member adds 
or removes an ADV \13\ >=0.75% of the TCV.\14\
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    \13\ ``ADV'' means average daily volume calculated as the number 
of shares added to, removed from, or routed by, the Exchange, or any 
combination or subset thereof, per day. ADV is calculated on a 
monthly basis.
    \14\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply.
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    The proposed criteria for Add Volume Tier 3 is as follows:
     Add Volume Tier 3 provides a reduced fee of $0.0015 per 
share for securities priced at or above $1.00 to qualifying orders 
(i.e., orders yielding fee codes 3, 4, B, V, or Y) where a Member adds 
or removes an ADV >= 0.75% of the TCV or Member adds or removes an ADV 
>= 80,000,000.
    The Exchange believes that the proposed modification to Add Volume 
Tier 3 will incentivize Members to add volume to and remove volume from 
the Exchange, thereby contributing to a deeper and more liquid market, 
which benefits all market participants and provides greater execution 
opportunities on the Exchange. While the proposed criteria is slightly 
easier to achieve than the current criteria in that it provides an 
alternative manner in which to receive the reduced fee provided by Add 
Volume Tier 3, the Exchange believes that the criteria continues to be 
commensurate with the reduced fees offered by the Exchange for Members 
who satisfy the proposed criteria of other Add Volume Tiers offered by 
the Exchange.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\15\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \16\ 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) \17\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \18\ 
as it is designed to 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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    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(5).
    \17\ Id.
    \18\ 15 U.S.C. 78f(b)(4).
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    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 modify Add Volume Tier 3 reflects 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. Additionally, the 
Exchange notes that relative volume-based incentives and discounts have 
been widely adopted by exchanges,\19\ including the Exchange,\20\ and 
are reasonable, equitable and non-discriminatory because they are open 
to all Members on an equal basis and provide additional benefits or 
discounts that are reasonably related to (i) the value to an exchange's 
market quality and (ii) associated higher levels of market activity, 
such as higher levels of liquidity provision and/or growth patterns. 
Competing equity exchanges offer similar tiered pricing structures, 
including schedules of rebates and fees that apply based upon members 
achieving certain volume and/or growth thresholds, as well as assess 
similar fees or rebates for similar types of orders, to that of the 
Exchange.
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    \19\ See e.g., BYX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \20\ See e.g., EDGA Equities Fee Schedule, Footnote 7, Add/
Remove Volume Tiers.
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    In particular, the Exchange believes its proposal to modify Add 
Volume Tier 3 is reasonable because the tier will be available to all 
Members and provide all Members with an opportunity to receive a 
reduced fee. The Exchange further believes that modified Add Volume 
Tier 3 will provide a reasonable means to encourage adding liquidity to 
and removing liquidity from the Exchange and to incentivize Members to 
continue to provide volume to the Exchange by offering them an 
additional opportunity to receive a reduced fee on qualifying orders. 
An overall increase in activity

[[Page 52527]]

would deepen the Exchange's liquidity pool, offers additional cost 
savings, support the quality of price discovery, promote market 
transparency and improve market quality, for all investors.
    In addition, the Exchange believes that its proposal to amend the 
description associated with fee code MT is reasonable, equitable, and 
consistent with the Act because such change is designed to provide 
additional clarity to Members as to which orders may be appended with 
fee code MT without changing how fee code MT is currently applied to 
orders. The Exchange further believes that the proposed amendment to 
the description associated with fee code MT is not unfairly 
discriminatory because it applies to all Members equally, in that the 
amended description will apply to all Members and fee code MT will be 
applied to all orders matching the revised description.
    The Exchange believes the proposed modified Add Volume Tier 3 is 
reasonable as it does not represent a significant departure from the 
criteria currently offered in the fee schedule. The Exchange also 
believes that the proposal represents an equitable allocation of fees 
and rebates and is not unfairly discriminatory because all Members will 
be eligible for the revised tier and have the opportunity to meet the 
tier's criteria and receive the corresponding reduced fee if such 
criteria are met. Without having a view of activity on other markets 
and off-exchange venues, the Exchange has no way of knowing whether 
these proposed rule changes would definitely result in any Members 
qualifying for the new proposed tiers. While the Exchange has no way of 
predicting with certainty how the proposed changes will impact Member 
activity, based on the prior months volume, the Exchange anticipates 
that at least two Members will be able to satisfy proposed Add Volume 
Tier 3. The Exchange also notes that the proposed changes will not 
adversely impact any Member's ability to qualify for reduced fees or 
enhanced rebates offered under other tiers. Should a Member not meet 
the proposed new criteria, the Member will merely not receive that 
corresponding enhanced rebate.

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. Rather, as discussed above, 
the Exchange believes that the proposed changes would encourage the 
submission of additional order flow to a public exchange, thereby 
promoting market depth, execution incentives and enhanced execution 
opportunities, as well as price discovery and transparency for all 
Members. As a result, the Exchange believes that the proposed changes 
further the Commission's goal in adopting Regulation NMS of fostering 
competition among orders, which promotes ``more efficient pricing of 
individual stocks for all types of orders, large and small.''
    The Exchange believes the proposed rule changes do not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
changes to Add Volume Tier 3 will apply to all Members equally in that 
all Members are eligible for the tier, have a reasonable opportunity to 
meet the tier's criteria and will receive the reduced fee on their 
qualifying orders if such criteria are met. The Exchange does not 
believe the proposed change burdens competition, but rather, enhances 
competition as it is intended to increase the competitiveness of EDGA 
by amending an existing pricing incentive in order to attract order 
flow and incentivize participants to increase their participation on 
the Exchange, providing for additional execution opportunities for 
market participants and improved price transparency. Greater overall 
order flow, trading opportunities, and pricing transparency benefits 
all market participants on the Exchange by enhancing market quality and 
continuing to encourage Members to send orders, thereby contributing 
towards a robust and well-balanced market ecosystem.
    Further, the Exchange believes the proposed revised description 
associated with fee code MT does not impose any burden on intramarket 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act. The proposed description associated with fee code 
MT would apply to all Members equally in that all Members would be 
subject to the revised definition and fee code MT will be applied to 
all orders matching the revised description.
    Next, the Exchange believes the proposed rule changes do 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 15% of the market share.\21\ 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.'' \22\ 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'. . . .''.\23\ 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.
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    \21\ Supra note 3.
    \22\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \23\ 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.

[[Page 52528]]

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 \24\ and paragraph (f) of Rule 19b-4 \25\ 
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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    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 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-2024-023 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-2024-023. 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-2024-023 and should 
be submitted on or before July 15, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-13707 Filed 6-21-24; 8:45 am]
BILLING CODE 8011-01-P