[Federal Register Volume 87, Number 132 (Tuesday, July 12, 2022)]
[Notices]
[Pages 41371-41374]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-14750]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95203; File No. SR-CboeEDGX-2022-030]


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

July 6, 2022.
    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 July 1, 2022, Cboe EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule

[[Page 41372]]

change as described in Items I, II, and III below, which Items have 
been prepared by the Exchange. The Commission is publishing this notice 
to solicit comments on the proposed rule change from interested 
persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') proposes to 
amend its Fee Schedule. The text of the 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.

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 Equity'') to modify the criteria of 
Add Volume Tier 2. The Exchange proposes to implement these changes 
effective July 1, 2022.
    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 $0.0030 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 the 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 (June 27, 2022), available at https://www.cboe.com/us/equities/market_statistics/.
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Add Volume Tier 2
    Under footnote 1 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers. In particular, the Exchange offers 
four [sic] Add Volume Tiers that each provide an enhanced rebate for 
Members' qualifying orders yielding fee codes B,\4\ V,\5\ Y,\6\ 3 \7\ 
or 4,\8\ where a Member reaches certain add volume-based criteria. 
Specifically, Add Volume Tier 2 offers an enhanced rebate of $0.0027 
per share for qualifying orders (i.e., yielding fee codes B, V, Y, 3 or 
4) where a Member (i) adds an ADV \9\ greater than or equal to 0.28% of 
the TCV; \10\ or (ii) a Member adds and ADV greater than or equal to 
30,000,000 shares. The Exchange proposes to amend the criteria of Add 
Volume Tier 2 to offer an enhanced rebate of $0.0027 per share for 
qualifying orders (i.e., yielding fee codes B, V, Y, 3 or 4) where a 
Member (i) adds an ADV greater than or equal to 0.22% (instead of 
0.28%) of the TCV; or (ii) a Member adds an ADV greater than or equal 
to 25,000,000 shares (instead of 30,000,000 shares).
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    \4\ Orders yielding Fee Code ``B'' are orders adding liquidity 
to EDGX (Tape B).
    \5\ Orders yielding Fee Code ``V'' are orders adding liquidity 
to EDGX (Tape A).
    \6\ Orders yielding Fee Code ``Y'' are orders adding liquidity 
to EDGX (Tape C).
    \7\ Orders yielding Fee Code ``3'' are orders adding liquidity 
to EXGX [sic] in the pre and post market (Tapes A or C).
    \8\ Orders yielding Fee Code ``4'' are orders adding liquidity 
to EDGX in the pre and post market (Tape B).
    \9\ ``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.
    \10\ ``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.
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    The Exchange believes that the proposed lower thresholds in Add 
Volume Tier 2 will incentivize market participants to provide 
additional displayed liquidity on the Exchange, thereby contributing to 
a deeper and more liquid market, which benefits all market participants 
and provides greater execution opportunities on the Exchange. The 
Exchange is not proposing any changes to Add Volume Tier 1 or Add 
Volume Tier 3.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\11\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \12\ 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) \13\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.

[[Page 41373]]

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 change 
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.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
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    In particular, the Exchange believes that the proposed changes to 
Add Volume Tier 2 are reasonable, equitable and not unfairly 
discriminatory because the tier, as modified, continues to be available 
to all Members and provide Members an opportunity to receive an 
enhanced rebate. As noted above, the Exchange operates in a highly 
competitive market. The Exchange is only one of 16 equity venues to 
which market participants may direct their order flow, and it 
represents a small percentage of the overall market. It is also only 
one of several maker-taker exchanges. Competing equity exchanges offer 
similar rates and tiered pricing structures to that of the Exchange, 
including schedules of rebates and fees that apply based upon members 
achieving certain volume thresholds. Specifically, the Exchange notes 
that relative volume-based incentives and discounts have been widely 
adopted by exchanges,\14\ including the Exchange,\15\ 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 or liquidity provision 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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    \14\ See BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \15\ See EDGX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
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    Specifically, the Exchange believes the proposed criteria changes 
for Add Volume Tier 2 are reasonable because the tier will continue to 
provide Members with an opportunity to receive an enhanced rebate or 
reduced fee by encouraging Members to increase their order flow to the 
Exchange. In particular, the Exchange believes that the changes to Add 
Volume Tier 2 will provide reasonable means for Members to receive an 
enhanced rebate for adding liquidity on the Exchange. The Exchange also 
believes that the current enhanced rebate for Add Volume Tier 2 
continues to be commensurate with the proposed criteria. That is, the 
rebate reasonably reflects the difficulty in achieving the applicable 
criteria as amended. Furthermore, the Exchange believes that the 
proposed lower thresholds in Add Volume Tier 2 will incentivize market 
participants to provide additional displayed liquidity on the Exchange, 
thereby contributing to a deeper and more liquid market, which benefits 
all market participants and provides greater execution opportunities on 
the Exchange.
    The Exchange believes the proposed changes to Add Volume Tier 2 
represent an equitable allocation of rebates and fees and are not 
unfairly discriminatory because all Members are eligible for those 
tiers and would have the opportunity to meet a tier's criteria and 
would receive the proposed enhanced rebate or reduced fee if such 
criteria is met. Without having a view of activity on other market and 
off-exchange venues, the Exchange has no way of knowing whether this 
proposed rule change would definitely result in any Members qualifying 
for the proposed tiers. While the Exchange has no way of predicting 
with certainty how the proposed tiers will impact Member activity, the 
Exchange anticipates that two Members will be able to satisfy the 
criteria proposed for Add Volume Tier 2. The Exchange also notes that 
the proposed changes will not adversely impact any Member's ability to 
qualify for other reduced fee or enhanced rebated tiers. Should a 
Member not meet the proposed criteria under the modified tier, the 
Member will merely not receive that corresponding enhanced rebate or 
reduced fee. The Exchange believes that the proposed changes to Add 
Volume Tier 2 will benefit all market participants by incentivizing 
continuous liquidity and, thus, deeper more liquid markets as well as 
increased execution opportunities. Particularly, the proposal is 
designed to incentivize liquidity, which further contributes to a 
deeper, more liquid market and provide even more execution 
opportunities for active market participants at improved prices. This 
overall increase in activity deepens the Exchange's liquidity pool, 
offers additional cost savings, supports the quality of price 
discovery, promotes market transparency and improves market quality, 
for all investors.

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 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 
tier changes will apply to all Members equally in that all Members will 
continue to be eligible for Add Volume Tier 2, have a reasonable 
opportunity to meet the tier's criteria and will receive the enhanced 
rebate on their qualifying orders if such criteria are met.
    The Exchange does not believe the proposed changes burden 
competition, but rather, enhance competition as they are intended to 
increase the competitiveness of EDGX by amending existing pricing 
incentives in order to attract order flow and incentivize participants 
to increase their participation on the Exchange, providing for 
additional execution opportunities for market participants and improved 
price transparency. Greater overall order flow, trading opportunities, 
and pricing transparency benefit 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

[[Page 41374]]

than 16% of the market share.\16\ 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.'' \17\ 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'. . .''.\18\
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    \16\ Supra note 3.
    \17\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \18\ 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 \19\ and paragraph (f) of Rule 19b-4 \20\ 
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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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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> Send an email to <a href="/cdn-cgi/l/email-protection#d1a3a4bdb4fcb2bebcbcb4bfa5a291a2b4b2ffb6bea7"><span class="__cf_email__" data-cfemail="651710090048060a0808000b1116251600064b020a13">[email protected]</span></a>. Please include 
File Number SR-CboeEDGX-2022-030 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-2022-030. 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. 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-2022-030, and 
should be submitted on or before August 2, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-14750 Filed 7-11-22; 8:45 am]
BILLING CODE 8011-01-P


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