[Federal Register Volume 89, Number 183 (Friday, September 20, 2024)]
[Notices]
[Pages 77214-77218]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-21492]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101034; File No. SR-CboeEDGX-2024-058]


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

September 16, 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 September 3, 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

[[Page 77215]]

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: (1) introducing a new 
Market Quality Tier and (2) revising the criteria of Non-Displayed Add 
Volume Tier 3. The Exchange proposes to implement these changes 
effective September 3, 2024.
    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 [sic] responsibilities under 
the Securities Exchange Act of 1934 (the ``Act''), to which market 
participants may direct their order flow. Based on publicly available 
information,\3\ no single registered equities exchange has more than 
16% 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.\4\ 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.\5\ 
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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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (August 22, 2024), available at https://www.cboe.com/us/equities/market_statistics/.
    \4\ See EDGX Equities Fee Schedule, Standard Rates.
    \5\ Id.
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Market Quality Tier
    Under footnote 1 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers that provide enhanced rebates for 
orders yielding fee codes B,\6\ V,\7\ Y,\8\ 3,\9\ and 4.\10\ In 
particular, the Exchange offers two Market Quality Tiers that provide 
an enhanced rebate where a Member reaches certain add and remove 
volume-based criteria. The Exchange now proposes to introduce a new 
Market Quality Tier. The proposed criteria for proposed Market Quality 
Tier 3 is as follows:
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    \6\ Fee code B is appended to orders that add liquidity to EDGX 
in Tape B securities.
    \7\ Fee code V is appended to orders that add liquidity to EDGX 
in Tape A securities.
    \8\ Fee code Y is appended to orders that add liquidity to EDGX 
in Tape C securities.
    \9\ Fee code 3 is appended to orders that add liquidity to EDGX 
in Tape A or Tape C securities during the pre and post market.
    \10\ Fee code 4 is appended to orders that add liquidity to EDGX 
in Tape B securities during the pre and post market.
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    <bullet> Proposed Market Quality Tier 3 provides a rebate of 
$0.0030 per share for securities priced above $1.00 for qualifying 
orders (i.e., orders yielding fee codes B, V, Y, 3, or 4) where (1) 
Member adds an ADV \11\ (excluding fee codes ZA \12\ and ZO \13\) >= 
0.30% of the TCV; \14\ and (2) Member adds an ADV >= 0.11% of the TCV 
as Non-Displayed orders that yield fee codes DM,\15\ HA,\16\ HI,\17\ 
MM,\18\ or RP; \19\ and (3) Member adds a Tape B ADV >= 0.40% of the 
Tape B TCV.
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    \11\ 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.
    \12\ Fee code ZA is appended to Retail Orders that add liquidity 
to EDGX.
    \13\ Fee code ZO is appended to Retail Orders that add liquidity 
to EDGX in the pre- and post-market.
    \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.
    \15\ Fee code DM is appended to orders that add liquidity to 
EDGX using MidPoint Discretionary orders and execute within the 
discretionary range.
    \16\ Fee code HA is appended to non-displayed orders that add 
liquidity to EDGX.
    \17\ Fee code HI is appended to non-displayed orders that add 
liquidity to EDGX and receive price improvement.
    \18\ Fee code MM is appended to non-displayed orders that add 
liquidity to EDGX using Mid-Point Peg.
    \19\ Fee code RP is appended to non-displayed orders that add 
liquidity to EDGX using Supplemental Peg.
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Non-Displayed Add/Remove Volume Tiers
    Also under footnote 1, the Exchange offers various Non-Displayed 
Add/Remove Volume Tiers. In particular, the Exchange offers five Non-
Displayed Add Volume Tiers that provide enhanced rebates for orders 
yielding fee codes DM, HA, MM and RP, where a Member reaches certain 
add or remove volume-based criteria. The Exchange now proposes to 
revise the criteria of Non-Displayed Add Volume Tier 3. The current 
criteria for Non-Displayed Add Volume Tier 3 is as follows:
    <bullet> Non-Displayed Add Volume Tier 3 provides a rebate of 
$0.0025 per share for securities priced above $1.00 for qualifying 
orders (i.e., orders yielding fee codes DM, HA, MM, or RP) where a 
Member has an ADAV \20\ >= 0.12% of TCV for Non-Displayed orders that 
yield fee codes DM, HA, HI, MM or RP.
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    \20\ ADAV means average daily added volume calculated as the 
number of shares added per day, calculated on a monthly basis.
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    The proposed criteria for Non-Displayed Add Volume Tier 3 is as 
follows:
    <bullet> Non-Displayed Add Volume Tier 3 provides a rebate of 
$0.0025 per share for securities priced above $1.00 for qualifying 
orders (i.e., orders yielding fee codes DM, HA, MM, or RP) where a 
Member has an ADAV >= 0.11% of TCV for Non-Displayed orders that yield 
fee codes DM, HA, HI, MM or RP.
    The proposed introduction of proposed Market Quality Tier 3 and

[[Page 77216]]

proposed modification to Non-Displayed Add Volume Tier 3 are intended 
to provide Members an opportunity to earn an enhanced rebate by 
increasing their order flow to the Exchange in both displayed and non-
displayed orders, which further contributes to a deeper, more liquid 
market and provides even more execution opportunities for active market 
participants. Incentivizing an increase in liquidity adding and 
removing volume through enhanced rebate opportunities encourages 
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.\21\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \22\ 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) \23\ 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) \24\ 
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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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
    \23\ Id.
    \24\ 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 introduce a new Market Quality Tier 3 and revise the 
criteria of Non-Displayed 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. Specifically, the 
Exchange's proposal to introduce a new Market Quality Tier 3 and revise 
the criteria of Non-Displayed Add Volume Tier 3 is not a significant 
departure from existing criteria, is reasonably correlated to the 
enhanced rebates offered by the Exchange and other competing 
exchanges,\25\ and will continue to incentivize 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,\26\ including the Exchange,\27\ 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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    \25\ 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, Liquidity Provision Tiers, available at 
https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/.
    \26\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \27\ 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 introduce a 
new Market Quality Tier 3 and revise the criteria of Non-Displayed Add 
Volume Tier 3 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 
introduce a new Market Quality Tier 3 and revise the criteria of Non-
Displayed Add Volume Tier 3 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.
    The Exchange believes that its proposed introduction of proposed 
Market Quality Tier 3 and proposed revision of Non-Displayed 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 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 
Market Quality Tier 3 and at least one Member will be able to satisfy 
proposed Non-Displayed Add Volume Tier 3. 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

[[Page 77217]]

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 
introduction of proposed Market Quality Tier 3 and the revised criteria 
of Non-Displayed Add Volume Tier 3 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 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 16% of the market share.\28\ 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.'' \29\ 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' . . . .'' \30\ 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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    \28\ Supra note 3.
    \29\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \30\ 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 \31\ and paragraph (f) of Rule 19b-4 \32\ 
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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    \31\ 15 U.S.C. 78s(b)(3)(A).
    \32\ 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

    <bullet> Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
    <bullet> Send an email to <a href="/cdn-cgi/l/email-protection#6b191e070e46080406060e051f182b180e08450c041d"><span class="__cf_email__" data-cfemail="3b494e575e16585456565e554f487b485e58155c544d">[email protected]</span></a>. Please include 
file number SR-CboeEDGX-2024-058 on the subject line.

Paper Comments

    <bullet> 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-2024-058. 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-2024-058 and should 
be submitted on or before October 11, 2024.


[[Page 77218]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\33\
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    \33\ 17 CFR 200.30-3(a)(12).
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Vanessa A. Countryman,
Secretary.
[FR Doc. 2024-21492 Filed 9-19-24; 8:45 am]
 BILLING CODE 8011-01-P


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