[Federal Register Volume 86, Number 174 (Monday, September 13, 2021)]
[Notices]
[Pages 50919-50922]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-19613]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-92892; File No. SR-CboeEDGX-2021-038]


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

September 7, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on September 1, 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.
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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'' or ``EDGX 
Equities'') proposes to amend its Fee Schedule. The text of the 
proposed rule change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/edgx/) [sic], 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.

[[Page 50920]]

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 modify Growth Tier, 
effective September 1, 2021.
    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,\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 $0.00285 per share for orders that remove liquidity. For 
orders in securities priced below $1.00, the Exchange provides a 
standard rebate of $0.00009 per share for orders that add liquidity and 
assesses a fee of 0.30% of total dollar value for orders that remove 
liquidity. 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 30, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
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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 
three Growth Tiers that each provide an enhanced rebate for Members' 
qualifying orders yielding fee codes B, V, Y, 3 and 4,\4\ where a 
Member reaches certain add volume-based criteria, including ``growing'' 
its volume over a certain baseline month. Currently, Growth Tier 1 
provides an enhanced rebated of $0.0026 per share on qualifying orders 
(i.e., orders yielding fee code B, V, Y, 3 and 4) where a Member (1) 
adds an ADV \5\ of greater than or equal to 0.20% of the TCV,\6\ and 
(2) has a Step-Up Add TCV \7\ from March 2019 that is greater than or 
equal to 0.10%. The Exchange proposes to amend the second prong of 
Growth Tier 1 to update the baseline month and provide an alternative 
threshold that Members may meet to satisfy the second prong criteria. 
More specifically, the Exchange proposes to require that in addition to 
a Member needing to add an ADV of greater than or equal to 0.20% of the 
TCV, the Member must (i) have a Step-Up Add TCV from August 2021 
greater than or equal to 0.10% or (ii) must add a Step-Up ADAV \8\ from 
August 2021 greater than or equal to 8,000,000. Overall, the Growth 
tiers, including Growth Tier 1 as amended, are designed to provide 
Members with an additional opportunity to receive an enhanced rebate by 
increasing their order flow to the Exchange, 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 volume, through enhanced rebate opportunities, 
encourages liquidity adding Members on the Exchange to contribute to a 
deeper, more liquid market, and liquidity executing Members on the 
Exchange to increase transactions and take execution opportunities 
provided by such increased liquidity, 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.
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    \4\ B is appended to orders that add liquidity to EDGX in Tape B 
securities, V is appended to order that add liquidity to EDGX in 
Tape A securities, Y is appended to orders that add liquidity to 
EDGX in Tape C securities, 3 is appended to orders that add 
liquidity to EDGX in pre and post market in Tape A or C securities, 
and 4 is appended to orders that add liquidity to EDGX in pre and 
post market in Tape A [sic] or C [sic] securities. Each is provided 
the standard rebate of $0.00160.
    \5\ 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.
    \6\ 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.
    \7\ Step-Up Add TCV means ADAV as a percentage of TCV in the 
relevant baseline month subtracted from current ADAV as a percentage 
of TCV.
    \8\ ``Step-up ADAV'' means ADAV in the relevant baseline month 
subtracted from current ADAV.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\9\ in general, and 
furthers the objectives of Section 6(b)(4),\10\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and issuers and other persons 
using its facilities. The Exchange also believes that the proposed rule 
change is consistent with the objectives of Section 6(b)(5) \11\ 
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, and, particularly, is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ 15 U.S.C. 78f.(b)(5).
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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 proposed rule changes 
reflect 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. Additionally, the Exchange notes that relative volume-based 
incentives and discounts have been widely adopted by exchanges,\12\

[[Page 50921]]

including the Exchange,\13\ 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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    \12\ See generally NYSE Price List, Transaction Fees; Nasdaq 
Equity 7, Section 118(a)(1), Fees for Execution and Routing of 
Orders in Nasdaq-Listed Securities; and BZX Equities Fee Schedule, 
Footnote 1, Add/Remove Volume Tiers.
    \13\ See EDGX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
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    In particular, the Exchange believes the proposed changes to Growth 
Tier 1 is reasonable because the Tier will continue to be available to 
all Members and provide all Members with an additional opportunity to 
receive an enhanced rebate, albeit using slightly modified criteria and 
providing an alternative criteria Members may satisfy. The Exchange 
further believes the Growth Tier 1, even as amended, continues to 
provide a reasonable means to encourage overall growth in Members' 
order flow to the Exchange and to incentivize Members to continue to 
provide liquidity adding volume to the Exchange by offering them an 
additional opportunity to receive an enhanced rebate on qualifying 
orders. An overall increase in activity would deepen the Exchange's 
liquidity pool, offers additional cost savings, support the quality of 
price discovery, promote market transparency and improve market 
quality, for all investors.
    Further, the Exchange believes that the proposed changes are 
reasonable as it does not represent a significant departure from the 
criteria currently offered in the Fee Schedule. For example, the 
Exchange notes similar criteria is offered under the first prong of 
Growth Tier 2 which provides an enhanced rebate where a Member adds a 
Step-Up ADAV from June 2021 of greater than or equal to 0.10% of the 
TCV or adds a Step-Up ADAV from June 2021 greater than or equal to 
8,000,000.\14\ Additionally, the Exchange believes that the proposed 
enhanced rebate under Growth Tier 1, which is not being changed, 
continues to be commensurate with the new criteria.
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    \14\ A Member must also meet the second prong under Growth Tier 
2 which requires the Member to have a total remove ADV of greater 
than or equal to 0.70% of TCV. See EDGX Equities Fees Schedule, 
Footnote 1.
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    The Exchange also believes that the proposal represents an 
equitable allocation of fees and rebates and is not unfairly 
discriminatory because all Members continue to be eligible for Growth 
Tier 1 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 for Growth Tier 1, as 
amended. While the Exchange has no way of predicting with certainty how 
the proposed changes will impact Member activity, the Exchange 
anticipates that at least one Member will be able to satisfy the 
criteria proposed under the Tier (currently, two Members satisfy Growth 
Tier 1). The Exchange also notes that proposed changes will not 
adversely impact any Member's ability to qualify for reduced fees or 
enhanced rebates offered under other tiers. Should a Member not meet 
the proposed new criteria, the Member will merely not receive that 
corresponding enhanced rebate.

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. Rather, as discussed above, the 
Exchange believes that the proposed change 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 change 
furthers 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 change does 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 Growth Tier 1 applies to all Members equally in that all 
Members are eligible for the Tier, have a reasonable opportunity to 
meet the Tier's criteria and will receive the enhanced rebate on their 
qualifying orders if such criteria is met. The Exchange does not 
believe the proposed changes burdens competition, but rather, enhances 
competition as it is 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 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 
than 16% of the market share.\15\ 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.'' \16\ 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-

[[Page 50922]]

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' . . . .''.\17\ 
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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    \15\ Supra note 4.
    \16\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \17\ 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 \18\ and paragraph (f) of Rule 19b-4 \19\ 
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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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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 (http://www.sec.gov/rules/sro.shtml); or
    <bullet<ls-thn-eq> Send an email to <a href="/cdn-cgi/l/email-protection#91e3e4fdf4bcf2fefcfcf4ffe5e2d1e2f4f2bff6fee7"><span class="__cf_email__" data-cfemail="4b393e272e66282426262e253f380b382e28652c243d">[email protected]</span></a>. Please 
include File Number SR-CboeEDGX-2021-038 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-2021-038. 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-
038 and should be submitted on or before October 4, 2021.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-19613 Filed 9-10-21; 8:45 am]
BILLING CODE 8011-01-P


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