Document ID: SEC-2020-1118-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe EDGX Exchange, Inc.
Posted Date: 2020-07-15T04:00Z

[Federal Register Volume 85, Number 136 (Wednesday, July 15, 2020)]
[Notices]
[Pages 42946-42951]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-15214]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-89282; File No. SR-CboeEDGX-2020-033]

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

July 9, 2020.
    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, 2020, 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 the 
Substance of the Proposed Rule Change

    Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX Options'') is 
filing with the Securities and Exchange Commission (``Commission'') a 
proposed rule change to amend its Fees 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

[[Page 42947]]

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 Fees Schedule for its options 
platform (EDGX Options), specifically, certain Customer Volume Tiers 
and Market Maker Volume Tiers, effective July 1, 2020.
    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 options venues to which market participants 
may direct their order flow. Based on publicly available information, 
no single options exchange has more than 18% of the market share and 
currently the Exchange represents only approximately 4% of the market 
share.\3\ Thus, in such a low-concentrated and highly competitive 
market, no single options exchange, including the Exchange, possesses 
significant pricing power in the execution of option order flow. The 
Exchange believes that the ever-shifting market share among the 
exchanges from month to month demonstrates that market participants can 
shift order flow or discontinue to reduce use of certain categories of 
products, in response to fee changes. Accordingly, competitive forces 
constrain the Exchange's transaction fees, and market participants can 
readily trade on competing venues if they deem pricing levels at those 
other venues to be more favorable.
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    \3\ See Cboe Global Markets U.S. Options Market Monthly Volume 
Summary (June 25, 2020), available at https://markets.cboe.com/us/options/market_statistics/.
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    The Exchange's Fees Schedule sets forth standard rebates and rates 
applied per contract. For example, the Exchange provides standard 
rebates ranging from $0.01 up to $0.21 per contract for Customer orders 
in both Penny and Non-Penny Securities and assesses fees ranging from 
$0.01 up to $0.75 per contract for Market Maker, Away Market Maker, 
Broker Dealer, Firm, Joint Back Office, and Professional orders in both 
Penny and Non-Penny Securities. The Exchange also offers tiered pricing 
which provides Members \4\ opportunities to qualify for higher rebates 
or reduced fees where certain volume criteria and thresholds are met. 
Footnote 1 of the Fee Schedule currently offers four Customer Volume 
Tiers which provide enhanced rebates between $0.10 and $0.21 per 
contract for qualifying Customer orders which meet certain liquidity 
thresholds and yield fee code PC \5\ or NC.\6\ Footnote 2 of the Fee 
Schedule currently offers eight Market Maker Volume Tiers which provide 
reduced fees between $0.17 and $0.03 per contract for qualifying Market 
Maker orders which meet certain liquidity thresholds and yield fee code 
PM \7\ or NM.\8\ Under the current Customer Volume and Market Maker 
Volume Tiers, a Member may receive an enhanced rebate where the Member 
meets certain thresholds of ADV \9\ that are greater than or equal to a 
percentage of average OCV \10\ for respective qualifying orders. The 
Exchange now proposes to amend Customer Volume Tiers 1 through 4 and 
Market Maker Volume Tiers 7 and 8.
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    \4\ See Exchange Rule 1.5(n).
    \5\ Fee code PC is appended to Customer, Penny orders and 
receive a standard rebate of $0.01.
    \6\ Fee code NC is appended to Customer Non-Penny orders and 
receive a standard rebate of $0.01.
    \7\ Fee code PM is appended to liquidity adding Market Maker, 
Penny orders and are assessed a standard fee of $0.20.
    \8\ Fee code NM is appended to liquidity adding Market Maker, 
Non-Penny orders and are assessed a standard fee of $0.20.
    \9\ ``ADV'' means average daily volume calculated as the number 
of contracts added or removed, combined, per day. ADV is calculated 
on a monthly basis, excluding contracts added or removed on any day 
that the Exchange's system experiences a disruption that lasts for 
more than 60 minutes during regular trading hours (``Exchange System 
Disruption'') and on any day with a scheduled early market close.
    \10\ ``OCV'' is Options Clearing Corporation (``OCC'') Customer 
Volume which is the total equity and ETF options volume that clears 
in the Customer range at the OCC for the month for which the fees 
apply, excluding volume on any day that the Exchange experiences an 
Exchange System Disruption and on any day with a scheduled early 
market close.
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    The Exchange proposes to amend Customer Volume Tier 1 and 2 to 
specify that a Member must reach an ADV in Customer orders that are 
Non-Crossing orders (that is, orders not executed in a two sided 
auction mechanism such as the Automated Improvement Mechanism (``AIM'') 
or the Solicitation Auction Mechanism (``SAM'') or in a crossing 
mechanism such as a Qualified Contingent Cross (``QCC'')). Currently, 
both Tier 1 and Tier 2 provide that Members may achieve the respective 
tiers if they achieve an ADV in Customer orders as a certain percentage 
that is greater than or equal to average OCV. The Exchange proposes to 
specify that, for these two tiers, Members receive the enhanced rebates 
currently in place if they achieve an ADV in Customer Non-Crossing 
orders as a certain percentage that is greater than or equal to average 
OCV. The Exchange notes that the ADV thresholds of average OCV will 
remain the same for these tiers. The Exchange is proposing to specify 
that Customer Non-Crossing orders may be submitted in order to achieve 
Customer Volume Tier 1 and Tier 2 as the Fee Schedule already provides 
for opportunities for which Customer Crossing orders, specifically, may 
achieve enhanced rebates comparable to the enhanced rebates offered 
under Tiers 1 and 2.\11\ In this way, the Exchange believes the 
proposed change will incentivize Members to submit more Non-Crossing 
orders into the EDGX Options Book (as opposed to submitting more 
Customer orders into the Exchange's crossing auctions/mechanisms to 
achieve the tiers' criteria, which, as stated, already receive 
comparable enhanced rebates and reduced fees under the Fee Schedule) in 
order to achieve Customer Volume Tiers 1 and 2.
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    \11\ See Fee Schedule, Footnote 6, AIM and SAM Pricing, which 
provides an enhanced rebate of $0.11 (or does not assess a fee) for 
qualifying Customer orders executed via the Exchange's crossing 
auctions.; see also Footnote 7, QCC Initiator/Solicitation Rebate 
Tiers, which provide enhanced rebates between $0.05 and $0.11 for 
QCC Agency Orders or Solicitation Agency Orders.
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    The Exchanges next proposes to amend Customer Volume Tiers 3 and 4 
by increasing, in each, a percentage of ADV into average OCV within 
existing criteria and adding to each tier a new, additional criteria 
that a Member must meet to receive the existing enhanced rebate. The 
Exchange notes that the proposed changes do not alter the current 
enhanced rebates provided under Customer Volume Tier 3 and 4. 
Specifically, Tier 3 currently provides an enhanced rebate of $0.21 for 
Members that have an ADV in Customer

[[Page 42948]]

orders greater than or equal to 0.75% of average OCV. Tier 4 currently 
also provides enhanced rebate of $0.21 for Members that have (1) an ADV 
in Customer orders greater than or equal 0.60% of average OCV and (2) 
an ADV in Customer or Market Maker orders greater than or equal to 
1.00% of average OCV. The Exchange proposes to first increase the ADV 
in Customer orders from greater than or equal to 0.75% to 1.00% 
threshold of average OCV in Tier 3 and from greater than or equal to 
0.60% to 0.75% threshold of average OCV in prong 1 in Tier 4. The 
Exchange also proposes to add an additional prong of criteria in each 
Tier 3 and Tier 4. As proposed, a Member may receive the existing 
enhanced rebate under Tier 3 if the Member meets the current criteria 
and, also, has an ADV in Customer Non-Crossing orders of greater than 
or equal to 0.40% of average OCV. Likewise, a Member may receive the 
existing enhanced rebate under Tier 4 if the Member meets the current 
(two) criteria and, as proposed, has an ADV in Customer Non-Crossing 
orders of greater than or equal to 0.40% of average OCV. The proposed 
increases in Customer order ADV as a percentage of average OCV in Tier 
3 and Tier 4 are intended to incrementally increase the level of 
difficulty in achieving each of these tiers, thus, incentivizing 
Members to increase their overall Customer order flow to the Exchange 
by encouraging those Members to strive for the different, incrementally 
more difficult tier criteria under the proposed tiers to receive the 
enhanced rebates. The proposed additional prongs of criteria per each 
tier are also designed to incrementally increase the level of 
difficulty in achieving Tier 3 and Tier 4, while, like the proposed 
changes to Tier 1 and Tier 2 described above, specifically 
incentivizing Members to submit Non-Crossing Customer orders to the 
Exchange's Order Book.
    Likewise, the Exchange also proposes to amend Market Maker Volume 
Tiers 7 and 8 by increasing, in each, certain percentages of ADV into 
average OCV within existing criteria. Currently, Tier 7 provides a 
reduced fee of $0.04 for Members that have (1) an ADV in Customer 
orders greater than or equal to 0.30% of average OCV, (2) an ADV in 
Customer or Market Maker orders greater than or equal to 0.50% of 
average OCV, (3) an ADV in AIM Agency Orders greater than or equal to 
0.15% of average OCV, and (4) an ADV in complex Customer orders 
(yielding fee codes ZA, ZB, ZC, or ZD) \12\ greater than or equal to 
5,000 contracts. Currently, Tier 8 provides a reduced fee of $0.03 for 
Members that have (1) an ADV in Customer orders greater than or equal 
to 0.70% of average OCV, (2) an ADV in Customer or Market Maker orders 
greater than or equal to 1.10% of average OCV, (3) an ADV in AIM Agency 
Orders greater than or equal to 0.15% of average OCV, and (4) an ADV in 
complex Customer orders (yielding fee codes ZA, ZB, ZC, or ZD) greater 
than or equal to 0.20% of average OCV. Regarding Tier 7, the Exchange 
proposes to increase the percentage of ADV in Customer orders from 
0.30% to 0.70%,of average OCV in prong 1, to increase the percentage of 
ADV in AIM Agency Orders from 0.15% to 0.30% of average OCV in prong 3, 
and to update prong 4 from ADV in complex Customer orders as greater 
than or equal to 5,000 to greater than or equal to 0.10% of average 
OCV. Regarding Tier 8, the Exchange proposes to increase the percentage 
of ADV in Customer orders from 0.70% to 1.00% in prong 1, and to 
increase the percentage of ADV in AIM Agency Orders from 0.15% to 0.75% 
in prong 3. Like the proposed changes to Customer Volume Tiers 3 and 4, 
the Exchange notes that the proposed changes to criteria in Market 
Maker Volume Tiers 7 and 8 incrementally increase the level of 
difficulty in achieving these tiers, thus, are designed to incentivize 
Members to increase their Customer and/or AIM Agency order flow to the 
Exchange by encouraging those Members to strive for the different, 
incrementally more difficult tier criteria under the proposed tiers to 
receive the reduced rates.
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    \12\ Fee code ZA is appended to Complex Customer (contra Non-
Customer), Penny orders and receives a standard rebate of $0.45; fee 
code ZB is appended to Complex Customer (contra Non-Customer), Non-
Penny orders and received a standard rebate of $0.80; fee code ZC is 
appended to Complex Customer (contra Customer) orders and is 
assessed no charge; and fee code ZD is appended to Complex Customer 
order that legs into Simple Book and is assessed no charge.
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    The Exchange believes that almost all of the proposed fee changes 
are designed to incentivize more Customer order flow and, particularly, 
a majority of the proposed changes are intended to direct an increase 
of Customer order flow to the EDGX Options Order Book. An increase in 
Customer order flow will create more trading opportunities, which, in 
turn attracts Market-Makers. A resulting increase in Market-Maker 
activity may facilitate tighter spreads, which may lead to an 
additional increase of order flow from other market participants, 
further contributing to a deeper, more liquid market to the benefit of 
all market participants by creating a more robust and well-balanced 
market ecosystem. Additionally, the proposed change in connection with 
the AIM Agency order ADV threshold in Market Maker Volume Tier 8 is 
intended to incentivize an increase in AIM Agency orders submitted to 
an AIM auction in order to achieve the proposed tier. The Exchange 
believes increased AIM Agency order flow results in price improvement 
opportunities for customers.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\13\ in general, and 
furthers the objectives of Section 6(b)(4),\14\ 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) \15\ 
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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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
    \15\ 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 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.
    In particular, the Exchange believes the proposed tiers are 
reasonable because they amend existing opportunities in a manner that 
incentivizes increased Customer or AIM Agency order flow via 
incrementally more challenging criteria in order to receive the same 
enhanced rebates or reduced fees on a Member's qualifying

[[Page 42949]]

orders. The Exchange notes that relative volume-based incentives and 
discounts have been widely adopted by exchanges,\16\ including the 
Exchange,\17\ 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. Additionally, as noted above, the Exchange operates in 
a highly competitive market. The Exchange is only one of several 
options venues to which market participants may direct their order 
flow, and it represents a small percentage of the overall market. 
Competing options exchanges offer similar tiered pricing structures to 
that of the Exchange, including schedules of rebates and fees that 
apply based upon members achieving certain volume and/or growth 
thresholds and offer comparable pricing to members for achieving such 
tiers.\18\
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    \16\ See e.g., MIAX Options Fee Schedule, Section 1(a)(i), which 
provides reduced fees (ranging from $0.03 to $0.30) for Market Maker 
orders that reach various percentage thresholds of volume; and 
Section 1(a)(iii), which provides certain credits (ranging from 
$0.00 to $0.28) for Customer orders, including agency orders 
submitted to an exchange auction, that reach various percentage 
thresholds; and Cboe BZX U.S. Options Exchange Fee Schedule, 
Footnote 1, Customer Penny Pilot Add Tiers; Footnote 6, Market Maker 
Penny Pilot Add Volume Tiers; Footnote 7, Market Maker Non-Penny 
Pilot Add Volume Tiers; and Footnote 12, Customer Non-Penny Pilot 
Add Volume Tier, all of which provide various tier with different, 
incrementally more difficult criteria, many of which are based on 
average volumes as a percentage of average OCV.
    \17\ See i.e., Cboe EDGX U.S. Options Exchange Fee Schedule, 
Footnote 1, Customer Volume Tiers; and Footnote 2, Market Maker 
Volume Tiers.
    \18\ See supra note 16.
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    The Exchange believes the proposed modification to specify that 
Non-Crossing Customer order may be submitted in achieving the existing 
criteria in Customer Volume Tiers 1 and 2, as well as the proposed 
additional criteria in Customer Volume Tiers 3 and 4 for which a Member 
must submit Non-Crossing Customer order ADV as a percentage of average 
OCV, in order to receive the current enhanced rebates under Customer 
Volume Tiers 1 through 4 is reasonable because it is designed to direct 
Customer order flow to the Exchange's Order Book, as opposed to into 
the Exchange's crossing auctions/mechanisms to achieve the tiers' 
criteria, which already receive comparable enhanced rebates and reduced 
fees under the Fee Schedule.\19\ An increase in Customer order flow to 
the Order Book results in an increase of transaction opportunities 
within the Order Book, attracting Market Maker quotes which, in turn, 
facilitates tighter spreads on the Exchange and signals additional 
corresponding increase in order flow from other market participants. 
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. Similarly, the proposed increases in overall Customer order 
and AIM Agency order ADV as a percentage of OCV (as proposed within 
Customer Volume Tiers 3 and 4 and Market Maker Volume Tiers 7 and 8) 
are reasonable modifications to the existing criteria because they are 
designed to incrementally increase the difficulty in achieving these 
tiers, thereby incentivizing Members to increase their overall Customer 
order flow and/or AIM Agency order flow, which benefits customers by 
resulting in increased price improvement opportunities within the 
auctions, to receive the exiting enhanced rebates and/or reduced fees.
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    \19\ See supra note 11.
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    Further, the Exchange believes that the proposed rule changes are 
reasonable as they do not represent a significant departure from the 
current criteria offered in the Fee Schedule and represent proportional 
increases in difficulty per adjacent tiers. For example, the Exchange 
proposes to simultaneously increase the Customer order ADV thresholds 
of average OCV in Customer Volume Tier 3 and Tier 4 and provide the 
same additional criteria in each. As a result, the Exchange believes 
the level of difficulty in achieving Tier 3 and Tier 4 will remain 
approximately the same. Likewise, the Exchange proposes to 
simultaneously increase the ADV thresholds in the corresponding prongs 
between Tier 7 and Tier 8. That is, prong 1 under both Tier 7 and Tier 
8, criteria of which consists of Customer order ADV as a percentage of 
average OCV, and prong 3 under both Tier 7 and Tier 8, criteria of 
which consists of AIM Agency order ADV as a percentage of average OCV, 
will experience incremental increases of ADV as a percentage of average 
OCV. Thus, the step up in difficulty from Tier 7 to Tier 8 will remain 
approximately the same. Additionally, the Exchange notes that the 
proposed change in prong 4 under Tier 7 to amend the threshold of 5,000 
contracts to 0.10% of average OCV is better aligned with, and is a 
proportional step down from, the 0.20% of average OCV in corresponding 
prong 4 under Tier 8. The Exchange again notes that the proposed rule 
changes do not alter the amount of any of the current rebates or fees 
in place.
    The Exchange believes that the proposal represents an equitable 
allocation of rebates and is not unfairly discriminatory because all 
Members will continue to be eligible for Customer Volume Tiers 1 
through 4 and Market Maker Volume Tiers 7 and 8, as amended. The 
proposed changes to the tiers' criteria are designed as an incentive to 
any and all Members interested in meeting the tier criteria to submit 
additional Customer orders (with opportunities to achieve such tiers 
via crossing and non-crossing orders), or AIM Agency orders to the 
Exchange. Each will have the opportunity to submit the requisite order 
flow and will receive the applicable existing enhanced rebate or 
reduced fee if the tier criteria are 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 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 
approximately three or four Members will be able to compete for and 
achieve the amended criteria in each of Customer Volume Tier 1, 2, 3, 
and 4, and at least four Members will be able to compete for and 
achieve the amended criteria in each of Market Maker Volume Tier 7 and 
Tier 8. The Exchange also notes that the proposed tiers will not 
adversely impact any Member's pricing or their ability to qualify for 
other rebate tiers. Rather, should a Member not meet the proposed 
criteria for a tier, the Member will merely not receive the 
corresponding enhanced rebate or reduced fee. Furthermore, the existing 
rebate and fees will continue to uniformly apply to all Members that 
meet the required criteria, as amended, per each respective tier.

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 intramarket or intermarket 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

[[Page 42950]]

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.'' \20\
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    \20\ Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    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 
change applies to all Members equally in that all Members are eligible 
to achieve the tiers' proposed criteria, have a reasonable opportunity 
to meet the tiers' proposed criteria and will all receive the existing 
enhanced rebates or reduced fees if such criteria is met. Overall, the 
proposed change is designed to attract additional Customer and AIM 
Agency order flow to the Exchange. The Exchange believes that the 
modified tier criteria would incentivize market participants to strive 
to increase such order flow to the Exchange to meet the proposed 
criteria and, as a result, increase trading opportunities and attract 
further Market-Maker activity, which would further incentivize the 
provision of liquidity and continued order flow and improve price 
transparency on the Exchange. Greater overall order flow and pricing 
transparency benefits all market participants on the Exchange by 
generally providing more trading opportunities, enhancing market 
quality, and continuing to encourage Members to send orders, thereby 
contributing towards a robust and well-balanced market ecosystem, which 
benefits all market participants.
    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 15 other options exchanges and 
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 options exchange has more 
than 18% of the market share.\21\ 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.'' \22\ 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' . . . .''.\23\ 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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    \21\ See supra note 3.
    \22\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \23\ 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 \24\ and paragraph (f) of Rule 19b-4 \25\ 
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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    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 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 (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CboeEDGX-2020-033 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-2020-033. 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

[[Page 42951]]

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-2020-033, and should be submitted on or before August 5, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-15214 Filed 7-14-20; 8:45 am]
BILLING CODE 8011-01-P