[Federal Register Volume 89, Number 143 (Thursday, July 25, 2024)]
[Notices]
[Pages 60476-60479]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-16302]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100566; File No. SR-CboeEDGA-2024-027]


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

July 19, 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 July 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

[[Page 60477]]

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 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 modifying the criteria 
associated with certain Add Volume Tiers. The Exchange proposes to 
implement these changes effective July 1, 2024.\3\
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    \3\ The Exchange initially filed the proposed fee change on July 
1, 2024 (SR-CboeEDGA-2024-026). On July 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 
17% 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 
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 (June 24, 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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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/Remove Volume Tiers that each provide a reduced fee for 
Members' qualifying orders yielding fee codes 3,\7\ 4,\8\ B,\9\ V,\10\ 
and Y \11\ where a Member reaches certain add or remove volume-based 
criteria. The Exchange now proposes to modify the criteria associated 
with Add/Remove Volume Tiers 2-4. The current criteria for Add/Remove 
Volume Tiers 2-4 is as follows:
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    \7\ 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.
    \8\ Fee code 4 is appended to orders that add liquidity to EDGA 
in the pre and post market in Tape B securities.
    \9\ Fee code B is appended to orders that add liquidity to EDGA 
in Tape B securities.
    \10\ Fee code V is appended to orders that add liquidity to EDGA 
in Tape A securities.
    \11\ Fee code Y is appended to orders that add liquidity to EDGA 
in Tape C securities.
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     Add Volume Tier 2 provides a reduced fee of $0.0016 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 \12\ >=0.60% of the TCV.\13\
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    \12\ ADV means . . .
    \13\ TCV means . . .
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     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.
     Add Volume Tier 4 provides a reduced fee of $0.0014 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 >=0.90% of the TCV or Member adds or removes an ADV 
>=100,000,000.
    The proposed criteria for Add/Remove Volume Tiers 2-4 is as 
follows:
     Add Volume Tier 2 provides a reduced fee of $0.0016 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 >=0.50% of the TCV or Member adds or removes an ADV 
>=52,000,000.
     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 >=0.65% of the TCV or Member adds or removes an ADV 
>=67,000,000.
     Add Volume Tier 4 provides a reduced fee of $0.0014 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 >=0.80% of the TCV or Member adds or removes an ADV 
>=82,000,000.
    The Exchange believes that the proposed modification to Add/Remove 
Volume Tiers 2-4 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, the 
Exchange believes that the criteria continues to be commensurate with 
the reduced fees offered by the Exchange, is a reflection

[[Page 60478]]

of current market trends, and will continue to encourage Members to 
submit order flow to 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.\14\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \15\ 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) \16\ 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) \17\ 
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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    \14\ 15 U.S.C. 78f(b).
    \15\ 15 U.S.C. 78f(b)(5).
    \16\ Id.
    \17\ 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/Remove Volume Tiers 2-4 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 modify Add/Remove 
Volume Tiers 2-4 is not a significant departure from existing criteria, 
is reasonably correlated to the reduced fees offered by the Exchange 
and other competing exchanges,\18\ and will continue to incentivize 
Members to submit order flow to the Exchange. The criteria proposed by 
the Exchange is intended to reflect current market trends while 
continuing to encourage 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,\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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    \18\ See NYSE National, Inc., Schedule of Fees and Rebates, 
Rates for Adding Liquidity (Per Share), available at https://www.nyse.com/publicdocs/nyse/regulation/nyse/_National_Schedule_of_Fees.pdf.
    \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/
Remove Volume Tiers 2-4 is reasonable because the tiers 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/
Remove Volume Tiers 2-4 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 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.
    The Exchange believes the proposed modified Add/Remove Volume Tiers 
2-4 are reasonable as they do 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 tiers and have the opportunity to meet 
the tiers' 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 month's volume, the Exchange does not 
anticipate that at any Member will be able to satisfy proposed Add/
Remove Volume Tier 2, at least two Members will be able to satisfy 
proposed Add/Remove Volume Tier 3, and no Members will be able to 
satisfy proposed Add/Remove Volume Tier 4. 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 reduced fee.

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/Remove Volume Tiers 2-4 will apply to all Members 
equally in that all Members are eligible for the tiers, have a 
reasonable opportunity to meet the tiers' criteria and will receive the 
reduced fee on their qualifying orders if such criteria are met. The 
Exchange does not believe the proposed changes burden competition, but 
rather, enhances competition as they are intended to increase the 
competitiveness of EDGA 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

[[Page 60479]]

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 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 17% 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 2.
    \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.

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-2024-027 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-2024-027. 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-2024-027 and should 
be submitted on or before August 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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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2024-16302 Filed 7-24-24; 8:45 am]
BILLING CODE 8011-01-P