Federal Register / Vol. 86, No. 144 / Friday, July 30, 2021 / Notices 41129 

1 15 U.S.C. 78s(b)(1). 

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4 The Exchange initially filed the proposed fee 

changes July 1, 2021 (SR–CboeEDGX–2021–032). 

On July 13, 2021, the Exchange withdrew that filing 

and submitted this proposal. 

5 See Cboe Global Markets, U.S. Equities Market 

Volume Summary, Month-to-Date (June 29, 2021), 

available at https://markets.cboe.com/us/equities/ 

market_statistics/. 

6 The Exchange proposes to relocate the existing 

Retail Volume Tier program from Footnote 3 to 

Footnote 2 of the Fee Schedule (which currently is 

‘‘Reserved’’) and codify the new Retail Equities 

Membership Program under Footnote 3. The 

Exchange proposes to append a reference to 

Footnote 2 to fee code ZA in the Fee Codes and 

Associated Fee Table to reflect this change. 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92493; File No. SR– 

CboeEDGX–2021–034] 

Self-Regulatory Organizations; Cboe 

EDGX Exchange, Inc.; Notice of Filing 

and Immediate Effectiveness of a 

Proposed Rule Change To Amend the 

Fee Schedule 

July 26, 2021. 

Pursuant to Section 19(b)(1) 1 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on July 13, 

2021, Cboe EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Cboe EDGX Exchange, Inc. (the 

‘‘Exchange’’ or ‘‘EDGX’’) is filing with 

the Securities and Exchange 

Commission (‘‘Commission’’) a 

proposed rule change to amend the 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’’) to 

introduce a new Retail Membership 

Program (the ‘‘Program’’), which offers 

discounted membership fees, port fees 

and market data fees, along with the 

opportunity to receive enhanced rebates 

under new retail volume tiers, for up to 

18 months for new retail member 

organizations.4

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 Exchange Act, 

to which market participants may direct 

their order flow. Based on publicly 

available information,5 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. 

Additionally, the competition for retail 

order flow is even more intense, 

particularly as it relates to exchange 

versus off-exchange venues. 

The purpose of this filing is to 

encourage smaller, retail-oriented 

market participants that are not 

currently EDGX Equities members to 

become members by discounting certain 

fixed costs associated with EDGX 

Equities membership and providing an 

opportunity to receive enhanced rebates 

for retail transactions. By way of 

background, the Exchange currently 

charges member organizations certain 

fixed costs related to Exchange 

membership, including the membership 

fees and port fees, and also assesses fees 

for market data products, all of which 

are filed with the Commission and set 

forth in the Exchange’s Fee Schedule. 

Also, by way of background, the 

Exchange 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. 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. 

As discussed more fully below, the 

Exchange proposes to introduce the 

Program, which would offer significant 

discounts for up to 18 months following 

approval as a new member on 

membership fees, port fees and certain 

market data fees for new member 

organizations, subject to specific 

restrictions. These discounts would be 

available to smaller New Members for 

the duration of the Program but would 

be phased out the last six months of the 

Program as the New Member grows. The 

Program would also provide an 

opportunity for new members to receive 

enhanced rebates on their retail order 

flow, as described more fully below. 

The Exchange believes that the 

proposed Program would make 

membership easier for a greater number 

of market participants and provide 

increased incentives for retail equity 

trading firms that are not currently 

Exchange members to apply for 

Exchange membership. The Exchange 

believes that having more members 

trading on the Exchange would benefit 

investors through the additional display 

of liquidity and increased execution 

opportunities on the Exchange. In 

addition, the Exchange believes that 

incentivizing specifically smaller, retail 

broker-dealers to become members 

could increase the amount of retail 

order flow sent to a public exchange, 

thereby encouraging greater 

participation and liquidity. 

The Exchange proposes to codify the 

Program under Footnote 3 of the Fee 

Schedule.6 The Exchange also notes that 


lotter on DSK11XQN23PROD with NOTICES1
41130 Federal Register / Vol. 86, No. 144 / Friday, July 30, 2021 / Notices 

7 See Securities Exchange Act Release No. 91626, 

(April 21, 2021) 86 FR 22287 (April 27, 2001) (SR– 

NYSE–2021–22). See also New York Stock 

Exchange Price List 2021, NYSE Membership OnRamp Program. 

8 A ‘‘Retail Member Organization’’ or ‘‘RMO’’ is 

a Member (or a division thereof) that has been 

approved by the Exchange under this Rule to 

submit Retail Orders. See EDGX Rule 11.21(a)(1). 

9 A ‘‘Retail Order’’ is an agency or riskless 

principal order that meets the criteria of FINRA 

Rule 5320.03 that originates from a natural person 

and is submitted to the Exchange by a Retail 

Member Organization, provided that no change is 

made to the terms of the order with respect to price 

or side of market and the order does not originate 

from a trading algorithm or any other computerized 

methodology. See EDGX Rule 11.21(a)(2). The 

Exchange will exclude from its calculation the 90% 

Retail Order threshold shares added, removed or 

routed on any day the Exchange’s system 

experiences a disruption that lasts for more than 60 

minutes during Regular Trading Hours (‘‘Exchange 

System Disruption’’), on any day with a scheduled 

early market close, and on the last Friday in June 

(the ‘‘Russell Reconstitution Day’’), consistent with 

the Exchange’s calculation of ADAV and ADV. See 

Exchange Fee Schedule, Definitions. 

10 An eligible RMO that was approved between 

January 1, 2021 and June 30, 2021 would be eligible 

to start receiving discounts and enhanced rebates 

beginning July 2021 (i.e., would not apply to fees 

assessed prior to July 1, 2021) and the Program 

would terminate 18 months after July 2021 (i.e., 

December 2022 would be the last month the firm 

is eligible to receive the discounts and enhanced 

rebates under the Program). 

11 However, if a Member is pending a voluntary 

termination of rights as a Member pursuant to 

Exchange Rule 2.8 prior to the date any 

Membership Fee for a given year will be assessed, 

and the Member does not utilize the facilities of 

Exchange during such time, then the Member is not 

obligated to pay the annual Membership Fee. 

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. 13 ‘‘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. 14 For example, for a New Member that is still 

in the Program between 13–18 months during 2022, 

the Exchange would use the New Member’s Retail 

ADV as a percentage of TCV in the month of 

December 2022 to determine what discount the 

New Member is eligible to receive for the annual 

Membership Fee assessed for 2023. 

15 The Exchange notes that the credit provided for 

physical ports shall not be in excess of the cost of 

one 1 Gb physical port nor in excess of the total 

amount actually billed to a New Member as and for 

physical ports each month. For example, if a New 

Member purchases a 10 Gb physical port midmonth such that the New Member would be 

assessed a prorated rate of $2,000 (instead of the 

full monthly $7,500 fee), the Exchange will only 

credit the New Member $2,000 (the amount the 

New Member was billed by the Exchange that 

month) and not $2,500 (the cost of one 1 Gb 

physical port). 

the Program is similar to a program 

adopted by another exchange that 

similarly provides discounts on 

membership, connectivity and market 

data fees for new members for the 

similar purpose of encouraging smaller, 

retail-oriented market participants to 

become members of the exchange.7

General Eligibility and Restrictions 

To be eligible to participate in the 

Program, a new member organization 

must be approved as a Retail Member 

Organization 8 and must not have been 

approved as an EDGX Equities member 

organization within the eighteen (18) 

months prior to approval (‘‘New 

Member’’) as an RMO. Members that 

were approved as an RMO on or after 

January 1, 2021 are still eligible for the 

Program provided they were not 

approved as an EDGX Equities RMO 

member within the 18 months prior to 

their approval as an RMO. Additionally, 

at least 90% of a New Member’s 

submitted orders to EDGX Equities each 

month must be Retail Orders 9 in order 

to maintain eligibility in the program for 

that month. Eligibility for discounts 

begins in the month that a new 

membership application is approved.10

A New Member is only eligible to enroll 

in the Program once. A New Member 

that is, or becomes, an ‘‘affiliate’’ of an 

existing member organization, defined 

as having at least 75% common 

ownership between the two entities as 

reflected on each entity’s Form BD, is 

ineligible to participate in the Program. 

The Program would terminate after the 

18th month of membership in the 

Program and the discounted fees 

discussed below will be charged to that 

member at the regular rate set forth in 

the Exchange’s fee schedule, as 

applicable, from that point forward. 

Membership Fee 

The Exchange currently assesses a 

yearly Membership Fee of $2,500, 

which is generally assessed at the end 

of each year for membership in the 

following calendar year. For any month 

in which a firm is approved for 

membership with the Exchange after the 

renewal period, the Firm Membership 

Fee is pro-rated beginning on the date 

on which membership is approved. The 

pro-rated fee is calculated based on the 

remaining trading days in that year and 

assessed in the month following 

membership approval. The fee is also 

non-refundable in the event that the 

firm ceases to be a Member following 

the date on which fees are assessed.11

The Exchange proposes to reduce the 

Membership Fee for a New Member as 

follows: 

• 1–12 Months: The Exchange 

proposes to waive the annual 

Membership Fee in its entirety for any 

New Member. 

• 13–18 months: For New Members 

that are still in the program at 13 

months, the proposed discount will be 

based on a New Member’s Retail ADV 12

as a percentage of TCV 13 in December 

of the year the annual fee is assessed 14

as follows: 

Æ A New Member that has Retail ADV 

of less than 0.10% of TCV will receive 

100% discount on its annual 

Membership Fee (i.e., the Exchange will 

waive the annual Membership Fee in its 

entirety) 

Æ A New Member that has a Retail 

ADV greater than or equal to 0.10% of 

TCV will receive a 50% of the annual 

Membership Fee. 

Æ A New Member that has a Retail 

ADV greater than or equal to 0.20% of 

TCV will not receive any discount on 

the annual Membership Fee. 

Physical Ports 

The Program would next provide 

discounts on physical ports. By way of 

background, a physical port is utilized 

by a Member or non-Member to connect 

to the Exchange at the data centers 

where the Exchange’s servers are 

located. The Exchange currently 

assesses the following non-Disaster 

Recovery physical connectivity fees for 

Members and non-Members on a 

monthly basis: $2,500 per physical port 

for a 1 gigabyte (‘‘Gb’’) circuit and 

$7,500 per physical port for a 10 Gb 

circuit. The Exchange proposes to 

provide New Members the following 

physical port discounts: 

• 1–12 Months: The Exchange 

proposes to provide a 100% discount for 

one 1 Gb physical port (i.e., waive the 

entire fee for one 1 Gb physical port 

each month). If a New Member 

purchases a 10 Gb physical port in lieu 

of a 1 Gb physical port, the Exchange 

will provide a credit in the amount of 

the fee for one 1 Gb physical port 

(currently $2,500 per month).15

• 13–18 months: For New Members 

that are still in the program at 13 

months, the proposed discount each 

month will be based on a New 

Member’s Retail ADV as a percentage of 

TCV in that month as follows: 

Æ A New Member that has Retail ADV 

of less than 0.10% of TCV will receive 

100% discount on one 1 Gb physical 

port (if a New Member purchases a 10 

Gb physical port in lieu of a 1 Gb 

physical port, the Exchange will provide 

a credit in the amount of the fee for one 

1 Gb physical port). 

Æ A New Member that has a Retail 

ADV greater than or equal to 0.10% of 

TCV will receive a 50% discount on one 

1 Gb physical port (if a New Member 

purchases a 10 Gb physical port in lieu 

of a 1 Gb physical port, the Exchange 

will provide a credit in the amount of 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 86, No. 144 / Friday, July 30, 2021 / Notices 41131 

16 The 50% discount rate will be based upon the 

amount of fees billed for up to one 1 Gb Physical 

Port. For example, if a New Member qualifies only 

for a 50% discount one month, and that New 

Member is assessed $750 for physical port fees that 

month due to proration, the New Member will be 

credited $375. 

17 If a New Member purchases more than 20 

logical ports, the Exchange will calculate the 

average cost per port and provide a credit based on 

the average cost for 20 ports. For example, if an 

Exchange member were to purchase 18 order entry 

Logical Ports and 4 Purge Ports, that member would 

normally be assessed $12,500 per month for logical 

port fees (i.e., $9,900 for Logical Ports ($550 × 18) 

+ $2,600 for Purge Ports ($650 × 4)). Under the 

Program, if a New Member purchased 18 order 

entry Logical Ports and 4 Purge Ports (and qualified 

for the 100% discount), that New Member would 

receive a discount of approximately $11,363 (i.e., 

average rate of $568.18 ($12,500 divided by 22 

ports) × 20 ports) and therefore would only be 

assessed $1,137 (i.e., average rate of $568.18 × 2 

remaining ports) as and for logical ports that month. 

18 Cboe One Summary Feed is a data feed that 

disseminates, on a real-time basis, the aggregate best 

bid and offer (‘‘BBO’’) of all displayed orders for 

securities traded on EDGX and its affiliated equities 

exchanges and also contains individual last sale 

information for the EDGX and its affiliated equities 

exchanges. 

19 Cboe One Premium Feed is a data feed that 

disseminates, on a real-time basis, the aggregate best 

bid and offer (‘‘BBO’’) of all displayed orders for 

securities traded on EDGX and its affiliated 

exchanges and contains optional functionality 

which enables recipients to receive aggregated twosided quotations from EDGX and its affiliated 

equities exchanges for up to five (5) price levels. 

20 EDGX Depth is a data feed that contains all 

displayed orders for listed securities trading on the 

Exchange, order executions, order cancellations, 

order modifications, order identification numbers, 

and administrative messages. 

21 EDGX Top Feed is an uncompressed data feed 

that offers both top-of-book quotations and 

execution information based on equity orders 

entered into the System. 

22 See Cboe EDGX Equities Fee Schedule, Market 

Data Fees. 

50% of the fee for one 1 Gb physical 

port (i.e., $1,250 per month)).16

Æ A New Member that has a Retail 

ADV greater than or equal to 0.20% of 

TCV will not receive any discount on its 

physical port fees. 

Logical Ports 

The Program would next provide 

discounts on its logical port fees. 

Currently, EDGX market participants 

may utilize a variety of logical 

connectivity ports. A logical port 

provides 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. Currently, the 

Exchange assesses the following fees for 

the following logical ports (collectively 

referred to as ‘‘logical ports’’): 

Service Cost per month 

Logical Ports (excluding Purge Port, Multicast PITCH Spin Server Port or GRP Port) ................................... $550 per port. 

Purge Ports ........................................................................................................................................................ $650 per port. 

Multicast PITCH GRP Ports ............................................................................................................................... $550/primary (A or C Feed). 

Multicast PITCH Spin Server Ports ................................................................................................................... $550/set of primary (A or C feed). 

The Exchange proposes to provide 

New Members the following logical port 

discounts (for up to 20 logical ports): 17

• 1–12 Months: The Exchange 

proposes to provide a 100% discount for 

up to 20 logical ports (i.e., waive all fees 

for up to 20 logical ports). 

• 13–18 months: For New Members 

that are still in the program at 13 

months, the proposed discount each 

month will be based on a New 

Member’s Retail ADV as a percentage of 

TCV in that month as follows: 

Æ A New Member that has Retail ADV 

of less than 0.10% of TCV will receive 

100% discount on up to 20 logical ports. 

Æ A New Member that has a Retail 

ADV greater than or equal to 0.10% of 

TCV will receive a 50% discount on up 

to 20 logical ports. 

Æ A New Member that has a Retail 

ADV greater than or equal to 0.20% of 

TCV will not receive any discount on its 

logical port fees. 

Market Data 

By way of background, the Exchange 

offers various market data products, 

including the following, to new member 

organizations on a voluntary, 

subscription basis: Cboe One Summary 

Feed,18 Cboe One Premium Feed,19

EDGX Depth Feed 20 and EDGX Top 

Feed 21 (‘‘Market Data Product’’). Each 

market data product allows a vendor to 

redistribute certain data elements 

included in the data feed on a real-time 

basis. For each product, the Exchange 

charges associated fees set forth in the 

Exchange’s Fee Schedule.22 The market 

data fees that would be eligible for the 

Program are External Distribution Fees 

for Cboe One Summary Feed, Cboe One 

Premium Feed, EDGX Depth Feed and 

EDGX Top Feed and the Data 

Consolidation Fee for the Cboe One 

Summary Feed (‘‘Eligible Market Data 

Fees’’). The current fees for Eligible 

Market Data Fees are as follows: 

Market data product External distribution fee Data consolidation fee 

Cboe One Summary .......................................... $5,000/mo ......................................................... $1,000/mo. 

Cboe One Premium ........................................... 12,500/mo ......................................................... N/A. 

EDGX Depth ...................................................... 2,500/mo ........................................................... N/A. 

EDGX Top ......................................................... 1,500/mo ........................................................... N/A. 

The Exchange proposes to provide 

New Members the following market data 

discounts: 

• 1–12 Months: The Exchange 

proposes to provide a 100% discount on 

Eligible Market Data Fees for Cboe One 

Summary, EDGX Depth and EDGX Top 

Data Fees and 44% discount on Eligible 

Market Data Fees for Cboe One Premium 

Data Feed. 

• 13–18 months: For New Members 

that are still in the program at 13 

months, the proposed discount each 

month will be based on a New 

Member’s Retail ADV as a percentage of 

TCV in that month as follows: 

Æ A New Member that has Retail ADV 

of less than 0.10% of TCV will receive 

100% discount on Eligible Market Data 

Fees for Cboe One Summary, EDGX 

Depth and EDGX Top Data Fees and 

44% discount on Eligible Market Data 

Fees for Cboe One Premium Data Feed. 

Æ A New Member that has a Retail 

ADV greater than or equal to 0.10% of 

TCV will receive a 50% discount on 

Eligible Market Data Fees for Cboe One 

Summary, EDGX Depth and EDGX Top 

Data Fees and 22% discount on Eligible 


lotter on DSK11XQN23PROD with NOTICES1
41132 Federal Register / Vol. 86, No. 144 / Friday, July 30, 2021 / Notices 

23 See Cboe EDGX Equities Fee Schedule, Market 

Data Fees, Small Retail Broker Distribution 

Program. 

24 Orders yielding fee code ‘‘ZA’’ are Retail 

Orders that add liquidity and are assessed a 

standard rebate of $0.00320 per share. 

25 The Exchange notes that should a New Member 

qualify for a higher rebate under the existing Retail 

Volume Tiers, the New Member would receive that 

higher rebate (e.g., if a New Member adds a Retail 

Order ADV (i.e., yielding fee code ZA) of greater 

than or equal to 0.45%, the New Member would 

receive the enhanced rebate of $0.0037 per share 

under Retail Volume Tier 2). 

26 15 U.S.C. 78f. 

27 15 U.S.C. 78f(b)(4) and (5). 

Market Data Fees for Cboe One Premium 

Data Feed. 

Æ A New Member that has a Retail 

ADV greater than or equal to 0.20% of 

TCV will not receive any discount on 

Eligible Market Data Fees. 

A New Member that was a subscriber 

to any of the Eligible Market Data Fees 

within the prior 18 months before 

becoming approved as an RMO is 

ineligible for Program’s Market Data fee 

discounts. Program discounts cannot be 

combined with any other discounts 

applicable to Eligible Market Data Fees. 

For example, the Exchange offers certain 

discounts under the Small Retail Broker 

Distribution Program.23 As proposed, 

the discounts under the Small Retail 

Broker Distribution Program could not 

be used if a new Member is receiving 

the discounts under the Program for 

Eligible Market Data Fees. 

Volume Tier Rebates 

The Exchange next proposes to adopt 

new Retail Membership Program 

Volume Tiers that would provide an 

additional opportunity for New 

Members to receive enhanced rebates 

from the standard rebate for Retail 

Orders that add liquidity (i.e., yielding 

fee code ‘‘ZA’’) 24 if the New Member 

meets certain volume thresholds. The 

proposed new tiers would be available 

to New Members for the duration of the 

18-month program and is designed to 

encourage New Members to increase 

their order flow in order to receive an 

enhanced rebate on their liquidity 

adding retail orders. The Exchange first 

proposes to adopt Retail Membership 

Program Volume Tier 1 which would 

provide an enhanced rebate of $0.0033 

per share where a New Member adds a 

Retail Order ADV (i.e., yielding fee code 

ZA) greater than or equal to 0.10% of 

the TCV. The Exchange also proposes to 

adopt Retail Membership Program 

Volume Tier 2 which would provide an 

enhanced rebate of $0.0034 per share 

where a Member adds a Retail Order 

ADV (i.e., yielding fee code ZA) of 

greater than or equal to 0.20%.25 The 

proposed new tiers are designed to 

encourage New Members to increase 

retail order flow on the Exchange which 

further contributes to a deeper, more 

liquid market and provides even more 

execution opportunities for active 

market participants at improved prices. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the objectives of Section 6 of the Act,26

in general, and furthers the objectives of 

Section 6(b)(4) and 6(b)(5),27 in 

particular, as it is designed to provide 

for the equitable allocation of reasonable 

dues, fees and other charges among its 

Members, issuers and other persons 

using its facilities. 

The Exchange operates in a highly 

competitive market in which market 

participants can and do move order flow 

or discontinue or reduce use of certain 

categories of products, in response to fee 

changes. Moreover, in the current 

competitive market environment, 

market participants also have a choice 

of where to become members. 

Accordingly, the Exchange believes that 

it is reasonable to offer discounted 

membership fees, physical and logical 

port fees and certain market data fees for 

up to 18 months for new RMOs in order 

to provide an incentive for smaller retail 

broker-dealers to apply for Exchange 

membership. The Exchange believes 

that providing an incentive for retail 

broker-dealers that are not currently 

Exchange members to apply for 

membership would encourage market 

participants to become members of the 

Exchange and bring additional liquidity 

to a public market. In addition, the 

Exchange believes that the proposal 

could result in additional retail liquidity 

to a public exchange, to the benefit of 

all market participants. The Exchange 

believes creating incentives and 

opportunities for new retail members on 

the Exchange protects investors and the 

public interest by increasing the 

competition and liquidity on a 

transparent public market. 

The Exchange also notes that relative 

volume-based incentives and discounts 

have been widely adopted by 

exchanges, including the Exchange, and 

are reasonable, equitable and nondiscriminatory because they are open on 

an equal basis to similarly situated 

members 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. 

Accordingly, the Exchange believes the 

proposed New Retail Membership 

Program Volume Tiers are reasonable as 

they provide New Members an 

opportunity to receive enhanced rebates 

for their liquidity adding retail orders. 

The Exchange believes that the 

proposed enhanced rebates under the 

Retail Membership Program Volume 

Tiers 1 and 2 are reasonable as they are 

in line with existing rebates under the 

existing Retail Volume Tiers, which 

similarly provide enhanced rebates to 

RMOs on their liquidity adding retail 

orders if they meet certain thresholds. 

Additionally, the Exchange believes the 

proposed rebates are commensurate 

with the proposed criteria. That is, the 

rebate reasonably reflects the difficulty 

in achieving the corresponding criteria 

as amended. The proposed Retail 

Membership Program Volume Tiers are 

designed as an incentive to any and all 

New Members interested in meeting the 

proposed tier criteria to submit 

additional adding retail order flow to 

the Exchange. The Exchange notes that 

greater add volume order flow provides 

for deeper, more liquid markets and 

execution opportunities, and greater 

remove volume order flow increases 

transactions on the Exchange, which 

incentivizes liquidity providers to 

submit additional liquidity and 

execution opportunities, thus, providing 

an overall increase in price discovery 

and transparency on the Exchange. 

The Exchange believes that the 

proposal is also equitable and not 

unfairly discriminatory. In the 

prevailing competitive environment, 

members, including retail-focused 

members, are free to disfavor Exchange 

membership and the Exchange’s pricing 

if they believe that alternatives offer 

them better value. The proposed 

discounted access to Exchange services 

for up to 18 months and proposed New 

Retail Membership Program Volume 

Tiers do not permit unfair 

discrimination because the proposed 

changes would apply to all similarly 

situated members, who would all 

benefit from the lower and discounted 

fees, as well as proposed enhanced 

rebates, on an equal basis. Indeed, the 

Exchange believes the proposed 

Program is equitable and not unfairly 

discriminatory because it’s open to all 

eligible New Members. The Exchange 

also believes it’s equitable and not 

unfairly discriminatory to apply the 

Program only to qualifying New 


lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 86, No. 144 / Friday, July 30, 2021 / Notices 41133 

28 For example, the Exchange offers a higher 

standard rebate for Retail Orders that add liquidity 

(i.e., orders yielding fee code ‘‘ZA’’) of $0.00320 per 

share in lieu of the standard liquidity adding rebate 

of $0.00160 per share. The Exchange also offers 

further enhanced rebates for qualifying RMOs under 

the existing Retail Volume Tiers. See EDGX Equities 

Fees Schedule, Fee Codes and Associated Fees and 

current Footnote 3, respectively. 

29 For example, the Exchange provides 

opportunities to all Members to receive an 

enhanced rebate on their order flow under the 

existing Add/Remove Volume Tiers. See EDGX Fee 

Schedule, Footnote 1. Additionally, RMOs may 

receive enhanced rebates for retail order flow under 

the existing Retail Volume Tiers. See EDGX Fee 

Schedule, current Footnote 3. 30 See note 7, supra. 

31 See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 

Members because it is designed to 

encourage new retail market 

participants to become RMOs on the 

Exchange that may not otherwise do so 

due in part to the costs associated with 

becoming members of an exchange. 

Also, the Exchange believes it’s 

equitable and not unfairly 

discriminatory to apply the proposed 

Program only to RMOs. As noted above, 

competition for retail order flow is 

intense and the Exchange has 

historically adopted a variety of 

incentives to encourage retail 

participation on the Exchange, 

including offering enhanced rebates for 

retail order flow.28 Moreover the 

proposed Program is designed to 

incentivize increased Retail Order flow 

on the Exchange, which orders are 

generally submitted in smaller sizes and 

tend to attract Market Makers, as smaller 

size orders are easier to hedge. Increased 

Market Maker activity facilitates tighter 

spreads, signaling an additional 

corresponding increase in order flow 

from other market participants, which 

contributes towards a robust, wellbalanced market ecosystem. Increased 

overall order flow benefits all investors 

by deepening the Exchange’s liquidity 

pool, potentially providing even greater 

execution incentives and opportunities, 

offering additional flexibility for all 

investors to enjoy cost savings, 

supporting the quality of price 

discovery, promoting market 

transparency and improving investor 

protection. The Exchange additionally 

notes that while the Program is 

applicable only to New Members (that 

are RMOs), the Exchange does not 

believe this application is 

discriminatory as the Exchange offers 

alternative incentives for non-RMO 

order flow and also provides existing 

RMOs opportunities to receive 

enhanced rebates under existing volume 

tiers.29 Similarly, the Exchange believes 

it’s equitable and not unfairly 

discriminatory to reduce the available 

discounts for membership, physical and 

logical ports, and market data fees for 

New Members that reach a certain 

threshold of Retail ADV as a percentage 

of TCV during months 13–18 of the 

Program. As noted above, the proposed 

Program is designed to encourage new 

smaller, retail-oriented broker dealers to 

become members of the Exchange to 

become RMOs on the Exchange. The 

Exchange therefore believes it is 

reasonable and appropriate to reduce 

available discounts for non-transaction 

fees once a New Member has become 

more established and has grown to such 

degree that they are able to achieve the 

specified levels of Retail ADV as a 

percentage of TCV. Moreover, the 

Exchange notes that such members 

continue to be eligible to receive the 

enhanced rebates under the new Retail 

Membership Program Volume Tiers, as 

well as the further enhanced rebates 

under the existing Retail Volume Tiers, 

which directly corresponds to increased 

Retail ADV as a percentage of TCV. 

Accordingly, the Exchange believes that 

once a New Member is able to meet the 

specified thresholds, such New 

Members have less need to avail 

themselves of non-transaction fee 

discounts. 

Lastly, the Exchange notes another 

exchange has adopted a similar 18- 

month program that provides for similar 

discounts on membership, connectivity 

and market data fees for the purpose of 

incentivizing smaller, retail-oriented 

broker dealers to become members of 

the Exchange.30 For the foregoing 

reasons, the Exchange believes that the 

proposal is consistent with the Act. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule changes will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. Instead, as 

discussed above, the Exchange believes 

that the proposed changes would 

increase competition by reducing the 

cost of operating as an Exchange 

member, which the Exchange believes 

will enhance market quality through the 

submission of additional retail liquidity 

to a public exchange, thereby promoting 

market depth, price discovery and 

transparency and enhancing order 

execution opportunities for members. 

As a result, the Exchange believes that 

the proposed change furthers the 

Commission’s goal in adopting 

Regulation NMS of fostering integrated 

competition among orders, which 

promotes ‘‘more efficient pricing of 

individual stocks for all types of orders, 

large and small.’’ 31

Intramarket Competition. The 

proposed changes are designed to attract 

additional Members and retail order 

flow to the Exchange. The Exchange 

believes that the proposed changes 

would continue to incentivize market 

participants to become Exchange 

members and direct order flow, 

especially retail order flow, to the 

Exchange. As discussed above, greater 

liquidity benefits all market participants 

on the Exchange by encouraging market 

participants to become Exchange 

members and send orders to the 

Exchange, thereby providing more 

trading opportunities and contributing 

to robust levels of liquidity on the 

Exchange, which benefits all market 

participants. The proposed lower fees 

and discounts would be available to all 

similarly situated market participants, 

and, as such, the proposed change 

would not impose a disparate burden on 

competition among market participants 

on the Exchange. As noted, the proposal 

would apply to all similarly situated 

members on the same and equal terms, 

who would benefit from the changes on 

the same basis. Moreover, the Exchange 

believes that it is appropriate to limit 

the proposed Program to New Member 

RMOs as the Exchange is attempting to 

increase retail participation and as 

discussed above, the presence of Retail 

Orders on EDGX has the potential to 

benefit all market participants. The 

Exchange notes that competition for 

retail order flow is particularly fierce 

and in that context, the Exchange 

believes that it is appropriate to provide 

additional incentives for retail-oriented 

broker dealers to become Members 

submit retail order flow. Accordingly, 

the proposed change would not impose 

a disparate burden on competition 

among market participants on the 

Exchange. 

Intermarket Competition. Next, the 

Exchange believes the proposed rule 

change 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 


lotter on DSK11XQN23PROD with NOTICES1
41134 Federal Register / Vol. 86, No. 144 / Friday, July 30, 2021 / Notices 

32 Supra note 4. [sic]. 

33 See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 

34 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)). 

35 15 U.S.C. 78s(b)(3)(A). 36 17 CFR 240.19b–4(f). 

37 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

than 16% of the market share.32

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 offexchange 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.’’ 33 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 brokerdealers 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’. . . .’’.34 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. 

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 35 and paragraph (f) of Rule 

19b–4 36 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. 

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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an email to rule-comments@

sec.gov. Please include File Number SR– 

CboeEDGX–2021–034 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–2021–034. 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 (http://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 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–CboeEDGX–2021–034, and 

should be submitted on or before 

August 20, 2021. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.37

J. Matthew DeLesDernier, 

Assistant Secretary. 

[FR Doc. 2021–16228 Filed 7–29–21; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–92496; File No. SR–Phlx– 

2021–42] 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend the Opening 

Process 

July 26, 2021. 

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 19, 

2021, Nasdaq PHLX LLC (‘‘Phlx’’ or 

‘‘Exchange’’) 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend 

Phlx Options 3, Section 8, ‘‘Options 

Opening Process.’’ 

The text of the proposed rule change 

is available on the Exchange’s website at 

https://listingcenter.nasdaq.com/ 

rulebook/phlx/rules, at the principal 

office of the Exchange, and at the 

Commission’s Public Reference Room. 


lotter on DSK11XQN23PROD with NOTICES1