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[Federal Register Volume 89, Number 205 (Wednesday, October 23, 2024)]
[Notices]
[Pages 84657-84660]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-24471]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-101377; File No. SR-CboeEDGX-2024-063]

Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend Remove Volume Tier 2 of the Fee Schedule

October 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 October 9, 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. (``EDGX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (``Commission'' or ``SEC'') 
a proposed rule change 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 changing the required 
criteria applicable to Remove Volume Tier 2.\3\ The Exchange proposes 
to implement these changes effective October 1, 2024.
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    \3\ The Exchange initially filed the proposed fee change on 
October 1, 2024 (SR-CboeEDGX-2024-062). On October 9, 2024, the 
Exchange withdrew that filing and submitted this filing.
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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 
Act, to which market participants may direct their order flow. Based on 
publicly available information,\4\ 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.\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 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 (September 23, 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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    Under footnote 1 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers. In particular, the Exchange offers two 
Remove Volume Tiers that each assess a reduced fee for Members' 
qualifying orders yielding fee codes BB,\7\ N,\8\ and W \9\ where a 
Member reaches certain add volume-based criteria. The Exchange now 
proposes to amend the criteria of Remove Volume Tier 2. Currently, the 
criteria for Remove Volume Tier 2 is as follows:
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    \7\ Fee code BB is appended to orders that remove liquidity from 
EDGX (Tape B).
    \8\ Fee code N is appended to orders that remove liquidity from 
EDGX (Tape C).
    \9\ Fee code W is appended to orders that remove liquidity from 
EDGX (Tape A).
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     Remove Volume Tier 2 provides a reduced fee of $0.00285 
per share for securities priced at or above $1.00 to qualifying orders 
(i.e., orders yielding fee codes BB, N, or W) and a reduced fee of 
0.28% of total dollar value for securities priced below $1.00 where: 
(1) Member has an ADAV \10\ of greater than or equal to 0.30% of the 
TCV; \11\ (2) Member has a total remove ADV \12\

[[Page 84658]]

greater than or equal to 0.40% of the TCV; and (3) Member adds a Retail 
Pre Market Order ADV (i.e., yielding fee code ZO) greater than or equal 
to 3 million shares.
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    \10\ ADAV means average daily added volume calculated as the 
number of shares added per day. ADAV is calculated on a monthly 
basis.
    \11\ 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. The Exchange excludes from its calculation of TCV volume 
on any day that the Exchange experiences an Exchange System 
Disruption, on any day with a scheduled early market close, and the 
Russell Reconstitution Day.
    \12\ 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.
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    Now, the Exchange proposes to amend the second and third prongs of 
the criteria in Remove Volume Tier 2 by adding alternative criteria to 
prong 2 and reducing the Retail Pre Market Order ADV requirement to 
prong 3. The proposed criteria is as follows:
     Proposed Remove Volume Tier 2 provides a reduced fee of 
$0.00285 per share for securities priced at or above $1.00 to 
qualifying orders (i.e., orders yielding fee codes BB, N, or W) and a 
reduced fee of 0.28% of total dollar value for securities priced below 
$1.00 where: (1) Member has an ADAV of greater than or equal to 0.30% 
of the TCV; (2) Member has a total remove ADV greater than or equal to 
0.40% of the TCV or Member has a total remove ADV greater than or equal 
to 40 million shares; and (3) Member adds a Retail Pre Market Order ADV 
(i.e., yielding fee code ZO) greater than or equal to 1.5 million 
shares.
    The proposed amendment to Remove Volume Tier 2 is intended to 
slightly decrease the difficulty of achieving an existing opportunity 
to earn a reduced fee by providing an alternative for Members to 
increase their order flow to the Exchange (as provided under proposed 
prong 2) and reducing the volume requirement provided under proposed 
prong 3. Submitting increased order flow to the Exchange will further 
contribute to a deeper, more liquid market and provide even more 
execution opportunities for active market participants. Incentivizing 
an increase in liquidity removing volume, through reduced fee 
opportunities, encourages liquidity removing Members on the Exchange to 
increase transactions and take execution opportunities, and liquidity 
adding Members to contribute to a deeper, more liquid market, on the 
Exchange, together 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.\13\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \14\ 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) \15\ 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) \16\ 
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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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ Id.
    \16\ 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 remove [sic] Retail [sic] 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 proposed criteria for Remove Volume 
Tier 2 is not a significant departure from existing criteria, continues 
to be reasonably correlated to the reduced fee offered by the Exchange 
and other competing exchanges,\17\ 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,\18\ including the Exchange,\19\ 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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    \17\ See e.g., MIAX Pearl Equities Exchange Fee Schedule, Remove 
Volume Tier, available at 
MIAX_Pearl_Equities_Fee_Schedule_12012023.pdf (miaxglobal.com); MEMX 
Equities Fee Schedule, Liquidity Removal Tier, available at MEMX 
Equities Fee Schedule--MEMX Exchanges (memxtrading.com).
    \18\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \19\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
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    The Exchange further believes the proposed modifications to Remove 
Volume Tier 2 will provide a reasonable means to encourage liquidity 
removing orders in Members' order flow to the Exchange and to 
incentivize Members to continue to provide liquidity removing volume to 
the Exchange by offering them an opportunity to receive a reduced fee 
on qualifying orders. Not only is the proposed criteria in proposed 
Remove Volume Tier 2 slightly less difficult than the current criteria 
found in that tier, the proposed criteria is not a significant 
departure from existing criteria, is reasonably correlated to the 
reduced fee offered by the Exchange, and will continue to incentivize 
Members to submit order flow to the Exchange. 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 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 revised tier and 
have the opportunity to meet the revised tier's criteria and receive 
the corresponding reduced fee 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 Remove Volume Tier 2. The

[[Page 84659]]

Exchange also notes that proposed changes will not adversely impact any 
Member's ability to qualify for reduced fees 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 the Remove Volume Tier 2 will apply to all Members equally 
in that all Members are eligible for the proposed revised tier, have a 
reasonable opportunity to meet the proposed tier's criteria and will 
receive the reduced fee on their qualifying orders if such criteria is 
met. The Exchange does not believe the proposed changes burden 
competition, but rather, enhances competition as they are intended to 
increase the competitiveness of EDGX by amending an existing pricing 
incentive in order to attract order flow and incentivize participants 
to increase their participation on the Exchange, providing for 
additional execution opportunities for market participants and improved 
price transparency. Greater overall order flow, trading opportunities, 
and pricing transparency benefits all market participants on the 
Exchange by enhancing market quality and continuing to encourage 
Members to send orders, thereby contributing towards a robust and well-
balanced market ecosystem.
    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.\20\ 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.'' \21\ 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' . . .''.\22\ 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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    \20\ Supra note 3.
    \21\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \22\ 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) (SRNYSEArca-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 \23\ and paragraph (f) of Rule 19b-4 \24\ 
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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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 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-2024-063 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-2024-063. 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

[[Page 84660]]

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-2024-063 and should be 
submitted on or before November 13, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-24471 Filed 10-22-24; 8:45 am]
BILLING CODE 8011-01-P
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