[Federal Register Volume 89, Number 121 (Monday, June 24, 2024)]
[Notices]
[Pages 52518-52521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-13708]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100357; File No. SR-CboeEDGX-2024-037]


Self-Regulatory Organizations; Cboe EDGX 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 12, 2024, Cboe EDGX Exchange, Inc. (``Exchange'' or ``EDGX'') 
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 EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') 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'') by modifying Retail 
Volume Tier 2. The Exchange proposes to implement these changes 
effective June 3, 2024.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
June 3, 2024 (SR-CboeEDGX-2024-032). On June 12, 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 ``Maker-Taker'' model whereby it pays rebates to 
members that add liquidity and assesses fees to those that remove 
liquidity. 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 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 $0.0030 per 
share for orders that remove liquidity.\5\ For orders in securities 
priced below $1.00, the Exchange provides a standard rebate of $0.00003 
per share for orders that add liquidity and assesses a fee of 0.30% of 
the total dollar value for orders that remove liquidity.\6\ 
Additionally, in response to the competitive environment, the Exchange 
also offers tiered pricing which provides Members opportunities to 
qualify for higher

[[Page 52519]]

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 EDGX Equities Fee Schedule, Standard Rates.
    \6\ Id.
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Retail Volume Tier
    Under footnote 2 of the Fee Schedule, the Exchange currently offers 
various Retail Volume Tiers which provide an enhanced rebate for Retail 
Member Organizations (``RMOs'') \7\ an opportunity to receive an 
enhanced rebate from the standard rebate for Retail Orders \8\ that add 
liquidity (i.e., yielding fee code ZA or ZO). Currently, the Exchange 
offers three Retail Volume Tiers where an RMO is eligible for an 
enhanced rebate for qualifying orders (i.e., yielding fee code ZA or 
ZO) meeting certain add volume-based criteria. The Exchange now 
proposes to modify the criteria of Retail Volume Tier 2. Currently, the 
criteria is as follows:
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    \7\ See EDGX Rule 11.21(a)(1). A ``Retail Member Organization'' 
or ``RMO'' is a Member (or a division thereof) that has been 
approved by the Exchange under this Rule to submit Retail Orders.
    \8\ See EDGX Rule 11.21(a)(2). A ``Retail Order'' is an agency 
or riskless principal order that meets the criteria of FINRA Rule 
5320.03 that originates from a natural person and is submitted to 
the Exchange by a Retail Member Organization, provided that no 
change is made to the terms of the order with respect to price or 
side of the market and the order does not originate from a trading 
algorithm or any other computerized methodology.
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     Retail Volume Tier 2 provides a rebate of $0.0037 for 
securities priced at or above $1.00 for qualifying orders (i.e., orders 
yielding fee codes ZA or ZO) where a Member adds a Retail Order ADV 
(i.e., yielding fee codes ZA or ZO) >=0.45% of the TCV.
    The proposed criteria is as follows:
     Retail Volume Tier 2 provides a rebate of $0.0037 for 
securities priced at or above $1.00 for qualifying orders (i.e., orders 
yielding fee codes ZA or ZO) where a Member adds a Retail Order ADV 
(i.e., yielding fee codes ZA or ZO) >=0.40% of the TCV.
    The proposed modifications to Retail Volume Tier 2 are intended to 
provide Members an opportunity to earn an enhanced rebate by increasing 
their order flow to the Exchange, which further contributes to a 
deeper, more liquid market and provides even more execution 
opportunities for active market participants. While the proposed 
criteria is slightly easier to achieve than the current criteria, the 
Exchange believes lowering the TCV requirement reflects current market 
trends and will incentivize Members who may not currently qualify for 
this tier to increase their order flow to the Exchange in an attempt to 
achieve this tier. Incentivizing an increase in liquidity adding volume 
through enhanced rebate opportunities encourages liquidity adding 
Members on the Exchange to contribute to a deeper, more liquid market, 
providing for overall enhanced price discovery and price improvement 
opportunities on the Exchange. As such, increased overall order flow 
benefits all Members by contributing towards a robust and well-balanced 
market ecosystem.
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.\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 as well as Section 6(b)(4) \12\ 
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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    \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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    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 Retail Volume Tier 2 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. Specifically, the 
Exchange's proposal to introduce slightly lower criteria to Retail 
Volume Tier 2 is not a significant departure from existing criteria, is 
reasonably correlated to the enhanced rebate offered by the Exchange 
and other competing exchanges,\13\ and will continue to incentivize 
Members to submit order flow to the Exchange. The lower criteria 
proposed by the Exchange is intended to reflect current market trends 
while encouraging Members to submit order flow to the Exchange. 
Additionally, the Exchange notes that relative volume-based incentives 
and discounts have been widely adopted by exchanges,\14\ including the 
Exchange,\15\ 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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    \13\ See Nasdaq Price List, Add and Remove Rates, Rebate to Add 
Displayed Liquidity, Shares executed at or Above $1.00, available at 
https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2. See also 
MEMX Equities Fee Schedule, Retail Tier, available at https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/.
    \14\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \15\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
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    In particular, the Exchange believes its proposal to modify Retail 
Volume Tier 2 is reasonable because the revised tiers will be available 
to all Members and provide all Members with an opportunity to receive 
an enhanced rebate. The Exchange further believes its proposal to 
modify Retail Volume Tier 2 will provide a reasonable means to 
encourage liquidity adding displayed and non-displayed orders in 
Members' order flow to the Exchange and to incentivize Members to 
continue to provide liquidity adding and liquidity removing volume to 
the Exchange by offering them an opportunity to receive an enhanced 
rebate on qualifying orders. An overall increase in activity would 
deepen the Exchange's liquidity pool, offer additional cost savings, 
support the quality of price discovery, promote market transparency and 
improve market quality, for all investors.

[[Page 52520]]

    The Exchange believes that its proposed modification to Retail 
Volume Tier 2 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 proposed new tier and have 
the opportunity to meet the tier's criteria and receive the 
corresponding enhanced rebate if such criteria is met. Without having a 
view of activity on other markets and off-exchange venues, the Exchange 
has no way of knowing whether this proposed rule change would 
definitely result in any Members qualifying 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 one Member will be able 
to satisfy proposed Retail Volume Tier 2. The Exchange also notes that 
proposed changes will not adversely impact any Member's ability to 
qualify for 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 
change to Retail Volume Tier 2 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 enhanced 
rebate on their qualifying orders if such criteria is met. The Exchange 
does not believe the proposed change burdens competition, but rather, 
enhances competition as it is intended to increase the competitiveness 
of EDGX by amending existing pricing incentives 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.
    Next, the Exchange believes the proposed rule changes 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 15% of the market share.\16\ 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.'' \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 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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    \16\ Supra note 3.
    \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.

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-

[[Page 52521]]

CboeEDGX-2024-037 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-2024-037. 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-CboeEDGX-2024-037 and should 
be submitted on or before July 15, 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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-13708 Filed 6-21-24; 8:45 am]
BILLING CODE 8011-01-P