[Federal Register Volume 90, Number 60 (Monday, March 31, 2025)]
[Notices]
[Pages 14312-14315]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2025-05454]
[[Page 14312]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-102729; File No. SR-CboeEDGX-2025-025]
Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice
of Filing and Immediate Effectiveness of a Proposed Rule Change To
Amend Its Fee Schedule To Modify Logical Port Fees
March 25, 2025.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on March 14, 2025, Cboe EDGX Exchange, Inc. (the ``Exchange'' or
``EDGX Options'') 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 EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX Options'')
proposes to amend its Fee Schedule to modify logical port fees. 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 for its equity
options platform (``EDGX Options'') relating to logical connectivity
fees.\3\
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\3\ The Exchange initially filed the proposed fee change on
January 2, 2024 (SR-CboeEDGX-2024-006). On March 1, 2024, the
Exchange withdrew that filing and submitted SR-CboeEDGX-2024-017. On
April 30, 2024, the Exchange withdrew that filing and submitted SR-
CboeEDGX-2024-023. On June 28, 2024, the Exchange withdrew that
filing and submitted SR-CboeEDGX-2024-040. On August 26, 2024, the
Exchange withdrew that filing and submitted SR-CboeEDGX-2024-055. On
October 23, 2024, the Exchange withdrew that filing and submitted
SR-CboeEDGX-2024-070. On December 17, 2024, the Exchange withdrew
that filing and submitted SR-CboeEDGX-2024-084. On December 30,
2024, the Exchange withdrew that filing and submitted SR-CboeEDGX-
2024-089. On February 28, 2025, the Exchange withdrew that filing
and submitted SR-CboeEDGX-2025-016. On March 14, 2025, the Exchange
withdrew that filing and submitted this filing.
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By way of background, the Exchange offers a variety of logical
ports, which provide users with the ability within the Exchange's
System to accomplish a specific function through a connection, such as
order entry, data receipt or access to information. The Exchange
currently assesses, among other things, the following logical port
connectivity fees on a monthly basis: $500 per port for Logical Ports;
\4\ $500 per port for Multicast PITCH Spin Server Ports (``Spin
Ports'') and GRP Ports; \5\ and $600 per port for Ports with Bulk
Quoting Capabilities \6\ (``Bulk Ports''). The Exchange proposes to
increase the monthly fees for the forgoing ports to the following
rates: $750 per port for Logical Ports, Spin Ports and GRP Ports and
$1,000 per port for Bulk Ports. The Exchange notes the proposed fee
change better enables it to continue to maintain and improve its market
technology and services. Additionally, the proposed fee amounts for
Logical Ports, Spin Ports and GRP Ports are the same as the fees
assessed on one of the Exchange's affiliated options exchanges with
similar market share for the same corresponding logical connectivity
and the proposed fee amount for Bulk Ports is even lower than the fees
assessed by the same affiliated options exchange for the same
corresponding Bulk Port connectivity.\7\ The proposed fees are also
similar to or less than amounts assessed by other exchanges for similar
connections.\8\
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\4\ Logical Ports include FIX and BOE ports (used for order
entry), drop logical port (which grants users the ability to receive
and/or send drop copies) and ports that are used for receipt of
certain market data feeds.
\5\ Spin Ports and GRP Ports are used to request and receive a
retransmission of data from the Exchange's Multicast PITCH data
feeds.
\6\ Bulk Quoting Capabilities Ports provide users with the
ability to submit and update multiple bids and offers in one message
through logical ports enabled for bulk-quoting.
\7\ See Cboe BZX Options Exchange Fee Schedule, Options Logical
Port Fees and Cboe Exchange Fees Schedule, Logical Connectivity
Fees, which assesses a monthly fee of $750 per port for Logical
Ports, Spin Ports and GRP Ports and between $1,500-$2,500 per port
for Bulk Ports.
\8\ See, e.g., The Nasdaq Stock Market Options 7: Pricing
Schedule, Section 3 Nasdaq Options Market--Ports and Other Services,
which assesses a monthly fee of $650 per port for FIX Ports (which
are analogous to the Exchange's Logical Ports) and up to $1,500 per
port for SQF Ports (which are similar to the Exchange's Bulk Ports);
and BOX Exchange LLC (``BOX'') Fee Schedule, Section III, B.
(Technology Fees), which assesses $1,080 for Market Making SOLA
Access Information Language (``SAIL'') Ports (which are analogous to
the Exchange's Bulk Ports).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \11\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. The Exchange also believes the proposed rule
change is consistent with Section 6(b)(4) \12\ of the Act, which
requires that Exchange rules provide for the equitable allocation of
reasonable dues, fees, and other charges among its Members and other
persons using its facilities.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
\12\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the proposed fees are reasonable as they are
the same, or lower than, the amounts assessed by affiliated options
exchanges for the same functionality (and which were
[[Page 14313]]
similarly adopted via the rule filing process and filed with the
Commission). The proposed fees are also similar to or less than fees
assessed by other exchanges, for analogous connections.\13\ Further,
the Exchange notes that an affiliated options exchange and other
exchanges that offer similar pricing for similar or the same
connections have a comparable, or even lower, market share as the
Exchange, as detailed further below. Indeed, the Exchange has reviewed
the U.S. options market share for each of the eighteen options markets
utilizing total options contracts traded in 2025 through February 27,
2025, as set forth in the following graph: \14\
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\13\ Supra notes 7 and 8.
\14\ Market share is the percentage of volume on a particular
exchange relative to the total volume across all exchanges, and
indicates the amount of order flow directed to that exchange. High
levels of market share enhance the value of trading and ports. Total
contracts include both multi-list options and proprietary options
products. Proprietary options products are products with
intellectual property rights that are not multi-listed. The Exchange
does not currently list proprietary products.
[GRAPHIC] [TIFF OMITTED] TN31MR25.000
The Exchange notes that the proposed Logical Port fee of $750 per
port is comparable to fees charged by at least two other exchanges with
comparable (indeed, even lower) market share, particularly by Cboe BZX
Exchange, Inc. (``BZX Options'') and The Nasdaq Stock Market LLC
(``Nasdaq Options''), as summarized in Table 1:
Table 1
------------------------------------------------------------------------
Market
Exchange share Monthly fee
(%) per port
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EDGX Options...................................... 6.47 $750
BZX Options....................................... 4.25 750
Nasdaq Options.................................... 4.75 650
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The proposed Spin and GRP Port fees of $750 per port are also the
same as those currently charged by the Exchange's affiliate BZX Options
for the same ports, notwithstanding BZX Options' lower market share, as
summarized in Table 2:
Table 2
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Market
Exchange share Monthly fee
(%) per port
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EDGX Options...................................... 6.47 $750
BZX Options....................................... 4.25 750
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Finally, the Exchange notes that the proposed Bulk Port fee is
lower than the fees charged for analogous ports by at least three
exchanges with similar or even lower market share including BOX
Exchange LLC (``BOX''), BZX Options, and Nasdaq Options as summarized
in Table 3:
Table 3
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Market
Exchange share Monthly fee per port
(%)
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EDGX Options....................... 6.47 $1,000.
BOX................................ 6.79 $1,080.
BZX Options........................ 4.25 $1,500-$2,500.
Nasdaq Options..................... 4.75 Up to $1,500.
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The Exchange believes the above comparisons therefore supports the
proposition that the proposed logical connectivity fees are comparable
to those of other exchanges for the same or analogous connectivity
offerings and are reasonable.
Additionally, the Exchange believes the proposed fee increase is
reasonable in light of recent and anticipated connectivity-related
upgrades and changes. The Exchange and its affiliated exchanges
recently launched a multi-year initiative to improve Cboe Exchange
Platform performance and capacity requirements, including for its U.S.
options markets, to increase competitiveness, support growth and
advance a consistent world class platform. The goal of the project,
among other things, is to provide faster and more consistent order
handling and matching performance for options, while ensuring quicker
processing time and supporting increasing volumes. For example, the
Exchange is currently performing order handler and matching engine
hardware upgrades across its markets to advance this goal. The Exchange
anticipates that upgrades to its matching engines may result in a
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latency reduction up to 40% to 50% on the Exchange and that upgrades to
its order handlers may offer lower variability in the processing of
message, which can reduce the time a message takes to get to the
matching engine. The Exchange expended, and will continue to expend,
resources to innovate and modernize technology so that it may benefit
its Members and continue to compete among other options markets. The
Exchange also notes that neither it--nor its options exchange
affiliates--have passed through or offset current or projected costs
associated with these upgrades. The ability to continue to innovate
with technology and offer new products to market participants allows
the Exchange to remain competitive in the options space which currently
has 18 options markets and potential new entrants.
Moreover, the Exchange notes that the amount and type of logical
ports a Member chooses to purchase is ultimately determined by factors
relevant and specific to each market participant, including its
business model, costs of connectivity, how its business is segmented
and allocated and volume of messages sent to the Exchange. There is
also no requirement that any market participant maintain a specific
number of logical ports and a market participant may choose to maintain
as many or as few of such ports as each deems appropriate. Further,
market participants may reduce or discontinue use of these ports in
response to the proposed fees. The Exchange also does not assess any
termination fee for a market participant to drop its connectivity or
membership, nor is the Exchange aware of any other costs that would be
incurred by a market participant to do so.
The Exchange finally believes that the proposed fee changes are not
unfairly discriminatory because they are assessed uniformly across all
market participants that purchase the respective logical ports. All
Members have the option to select any connectivity option, and there is
no differentiation among Members with regard to the fees charged for
the services offered by the Exchange.
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. The Exchange believes the
proposed fee change will not impact intramarket competition because it
will apply to all similarly situated market participants equally (i.e.,
all market participants that choose to purchase the relevant logical
ports).
The Exchange believes the proposed fees will not impact intermarket
competition because they are also similar to or lower than some fees
for similar connectivity on other exchanges, and therefore may
stimulate intermarket competition by attracting additional firms to
connect to the Exchange or at least should not deter interested
participants from connecting directly to the Exchange. Further, if the
changes proposed herein are unattractive to market participants, the
Exchange can, and likely will, see a decline in usage of these ports as
a result. The Exchange operates in a highly competitive market in which
market participants can determine whether or not to connect directly to
the Exchange based on the value received compared to the cost of doing
so. Indeed, market participants have numerous alternative venues that
they may participate on and direct their order flow, including 14 non-
Cboe affiliated options markets, as well as off-exchange venues, where
competitive products are available for trading. Moreover, the
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. Specifically, in Regulation NMS, the
Commission highlighted the importance of market forces in determining
prices and SRO revenues and, also, recognized that current regulation
of the market system ``has been remarkably successful in promoting
market competition in its broader forms that are most important to
investors and listed companies.'' \15\ The fact that this market is
competitive has also long been recognized by the courts. In
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit
stated as follows: ``[n]o one disputes that competition for order flow
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market
system, buyers and sellers of securities, and the broker-dealers that
act as their order-routing agents, have a wide range of choices of
where to route orders for execution'; [and] `no exchange can afford to
take its market share percentages for granted' because `no exchange
possesses a monopoly, regulatory or otherwise, in the execution of
order flow from broker dealers'. . . .''.\16\ Accordingly, the Exchange
does not believe its proposed change imposes any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.
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\15\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\16\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \17\ and paragraph (f) of Rule 19b-4 \18\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-CboeEDGX-2025-025 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-2025-025. 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/
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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-2025-025 and
should be submitted on or before April 21, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
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\19\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-05454 Filed 3-28-25; 8:45 am]
BILLING CODE 8011-01-P