Document ID: SEC-2023-0568-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe EDGX Exchange, Inc.
Posted Date: 2023-05-30T04:00Z

[Federal Register Volume 88, Number 103 (Tuesday, May 30, 2023)]
[Notices]
[Pages 34550-34556]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-11356]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97547; File No. SR-CboeEDGX-2023-036]

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

May 23, 2023.
    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 May 10, 2023, Cboe EDGX Exchange, Inc. (``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'') 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/), 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'') as follows: (1) by 
modifying and introducing certain Add/Remove Volume Tiers; (2) by 
eliminating certain Growth Tiers; (3) by modifying the criteria of the 
Non-Displayed Add Volume Tiers; (4) by eliminating certain Non-
Displayed Step-Up Tiers; (5) by eliminating certain Retail Growth 
Tiers; and (6) by introducing new fee code DX and modifying the 
description and fee associated with fee code DQ. The Exchange proposes 
to implement these changes effective May 1, 2023.\3\
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    \3\ The Exchange initially filed the proposed fee changes on May 
1, 2023 (SR-CboeEDGX-2023-034). On May 10, 2023, the Exchange 
withdrew that filing and submitted this proposal.
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    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues 
that do not have similar self-regulatory responsibilities under the 
Securities Exchange Act of 1934 (the ``Act''), to which market 
participants may direct their order flow. Based on publicly available 
information,\4\ no single registered equities exchange has more than 
16% of the market share. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. The Exchange in 
particular operates a ``Maker-Taker'' model whereby it pays rebates to 
members that add liquidity and assesses fees to those that remove 
liquidity. The Exchange's Fee Schedule sets forth the standard rebates 
and rates applied per share for orders that provide and remove 
liquidity, respectively. Currently, for orders in securities priced at 
or above $1.00, the Exchange provides a standard rebate of $0.00160 per 
share for orders that add liquidity and assesses a fee of $0.0030 per 
share

[[Page 34551]]

for orders that remove liquidity.\5\ 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.\6\ Additionally, 
in response to the competitive environment, the Exchange also offers 
tiered pricing which provides Members opportunities to qualify for 
higher rebates or reduced fees where certain volume criteria and 
thresholds are met. Tiered pricing provides an incremental incentive 
for Members to strive for higher tier levels, which provides 
increasingly higher benefits or discounts for satisfying increasingly 
more stringent criteria.
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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (April 21, 2023), available at https://www.cboe.com/us/equities/market_statistics/.
    \5\ See EDGX Equities Fee Schedule, Standard Rates.
    \6\ Id.
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Add/Remove Volume Tiers
    Under footnote 1 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers. In particular, the Exchange offers 
three Add Volume Tiers that each provide an enhanced rebate for 
Members' qualifying orders yielding fee codes B,\7\ V,\8\ Y,\9\ 3,\10\ 
and 4,\11\ where a Member reaches certain add volume-based criteria. 
First, the Exchange is proposing to introduce a new Add Volume Tier 2 
and a new Add Volume Tier 5 to provide Members an additional manner in 
which they could receive an enhanced rebate if certain criteria is met. 
The proposed criteria for proposed Add Volume Tier 2 is as follows:
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    \7\ Fee code B is appended to orders adding liquidity to EDGX in 
Tape B securities.
    \8\ Fee code V is appended to orders adding liquidity to EDGX in 
Tape A securities.
    \9\ Fee code Y is appended to orders adding liquidity to EDGX in 
Tape C securities.
    \10\ Fee code 3 is appended to orders adding liquidity to EDGX 
in the pre and post market in Tapes A or C securities.
    \11\ Fee code 4 is appended to orders adding liquidity to EDGX 
in the pre and post market in Tape B securities.
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     Add Volume Tier 2 provides a rebate of $0.0025 per share 
for securities priced above $1.00 to qualifying orders (i.e., orders 
yielding fee B, V, Y, 3, or 4) where Member adds an ADV \12\ (excluding 
fee codes ZA \13\ or ZO \14\) >=0.18% of the TCV \15\ or Members adds 
an ADV (excluding fee codes ZA or ZO) >=20,000,000.
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    \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\ Fee code ZA is appended to Retail Orders that add 
liquidity.
    \14\ Fee code ZO is appended to Retail orders that adds 
liquidity during the pre- and post-market.
    \15\ ``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 criteria for proposed Add Volume Tier 5 is as follows:
     Add Volume Tier 5 provides a rebate of $0.0029 per share 
for securities priced above $1.00 to qualifying orders (i.e., orders 
yielding fee codes B, V, Y, 3, or 4) where Member adds a Retail Order 
ADV (i.e., yielding fee codes ZA or ZO) >=0.45% of the TCV.
    The Exchange believes proposed Add Volume Tier 2 and proposed Add 
Volume Tier 5 provide rebates commensurate with the difficulty of 
meeting the criteria associated with the proposed tiers.
    Second, the Exchange proposes to modify the criteria of existing 
Add Volume Tier 1. Currently, the criteria for Add Volume Tier 1 is as 
follows:
     Add Volume Tier 1 provides a rebate of $0.0020 per share 
for securities priced above $1.00 to qualifying orders (i.e., orders 
yielding fee B, V, Y, 3, or 4) where Member adds an ADV >=0.20% of the 
TCV.
    Now, the Exchange proposes to exclude retail orders from the 
calculation of ADV, lower the TCV threshold, and add an additional 
prong of criteria that Members may satisfy to achieve the enhanced 
rebate. The proposed criteria is as follows:
     Add Volume Tier 1 provides a rebate of $0.0020 per share 
for securities priced above $1.00 to qualifying orders (i.e., orders 
yielding fee B, V, Y, 3, or 4) where Member adds an ADV (excluding fee 
codes ZA and ZO) >=0.15% of the TCV or Member adds an ADV (excluding 
fee codes ZA and ZO) >=16,000,000.
    Third, the Exchange proposes to renumber current Add Volume Tiers 2 
and 3 and modify the criteria of proposed Add Volume Tiers 3 and 4 
(current Add Volume Tiers 2 and 3). Currently, Add Volume Tiers 2 and 3 
(proposed Add Volume Tiers 3 and 4) read as follows:
     Add Volume Tier 2 provides a rebate of $0.0027 per share 
to qualifying orders (i.e., orders yielding fee codes B, V, Y, 3, or 4) 
where (1) Member adds an ADV >=0.22% of the TCV; or (2) Member adds an 
ADV >=25,000,000.
     Add Volume Tier 3 provides a rebate of $0.0029 per share 
to qualifying orders (i.e., orders yielding fee codes B, V, Y, 3, or 4) 
where Member adds an ADV >=0.65% of the TCV.
    Now, the Exchange proposes to exclude retail orders from the 
calculation of ADV. The proposed criteria for current Add Volume Tiers 
2 and 3 (proposed Add Volume Tiers 3 and 4) is as follows:
     Proposed Add Volume Tier 3 provides a rebate of $0.0027 
per share to qualifying orders (i.e., orders yielding fee codes B, V, 
Y, 3, or 4) where (1) Member adds an ADV (excluding fee codes ZA and 
ZO) >=0.22% of the TCV; or (2) Member adds an ADV (excluding fee codes 
ZA and ZO) >=25,000,000.
     Proposed Add Volume Tier 4 provides a rebate of $0.0029 
per share to qualifying orders (i.e., orders yielding fee codes B, V, 
Y, 3, or 4) where Member adds an ADV (excluding fee codes ZA and ZO) 
>=0.65% of the TCV.
    The proposed modifications to current Add Volume Tier 1 and 
proposed Add Volume Tiers 3 and 4 removes retail orders from the 
calculation of ADV. By removing retail orders from the calculation of 
ADV, the Exchange is limiting the amount of orders that qualify for 
ADV. However, in Add Volume Tier 1 the Exchange has also proposed to 
lower the TCV percentage and provided additional criteria by which 
Members may receive an enhanced rebate. The Exchange has also proposed 
to introduce a new Add Volume Tier 2, which offers a slightly higher 
rebate for achieving criteria that is slightly more difficult than Add 
Volume Tier 1. The Exchange believes that by introducing proposed Add 
Volume Tier 2, decreasing the difficulty of the criteria under Add 
Volume Tier 1, and removing retail orders from the calculation of ADV 
in proposed Add Volume Tiers 3 and 4, Members are still incentivized to 
add volume 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.
Growth Tiers
    In addition to the Add/Remove Volume Tiers offered under footnote 
1, the Exchange also offers Growth Tiers that each provide an enhanced 
rebate for Members' qualifying orders yielding fee codes B, V, Y, 3, 
and 4, where a Member reaches certain add volume-based criteria, 
including ``growing'' its volume over a certain baseline month. The 
Exchange now proposes to discontinue Growth Tiers 1-3, as no Members 
have satisfied the criteria within the past six months and the Exchange 
no longer wishes to, nor is required to, maintain such tiers.\16\ More

[[Page 34552]]

specifically, the proposed change removes these tiers as the Exchange 
would rather redirect future resources and funding into other programs 
and tiers intended to incentivize increased order flow. The Exchange 
notes that it proposed a new Growth Tier 1 in its April 2023 fee filing 
(the ``April Filing'') \17\ and the tier proposed in the April Filing 
shall remain in effect following the suspension of its March 2023 
proposed fees. As a result of the Notice, existing Growth Tiers 1 and 
2, which were proposed in the Exchange's March Filing, shall revert 
back to Growth Tiers 4 and 5 as they originally appeared in February 
2023, prior to the Exchange's March Filing.\18\
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    \16\ On April 28, 2023, the Commission issued Securities 
Exchange Act Release No. 97406 (the ``Notice''), which temporarily 
suspended File Number SR-CboeEDGX-2023-016 (the ``March Filing''). 
As a result of the Notice, the Exchange's proposed changes to its 
fee schedule as detailed in SR-CboeEDGX-2023-016 have been 
temporarily suspended, and all proposed changes to the Growth Tiers 
mentioned in this paragraph refer to the Growth Tiers as they 
appeared on the Exchange's fee schedule on February 28, 2023.
    \17\ See Securities Exchange Act Release No. 97393 (April 27, 
2023); SR-CboeEDGX-2023-030 (April 17, 2023) (``Notice of Filing and 
Immediate Effectiveness of a Proposed Rule Change to Amend its Fee 
Schedule'').
    \18\ Id.
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Non-Displayed Add Volume Tiers
    In addition to the Add/Remove Volume Tiers and Growth Tiers offered 
under footnote 1, the Exchange also offers Non-Displayed Add Volume 
Tiers that each provide an enhanced rebate for Members' qualifying 
orders yielding fee codes DM,\19\ HA,\20\ MM,\21\ and RP,\22\ where a 
Member reaches certain volume-based criteria offered in each tier. The 
Exchange now proposes to amend the criteria of current Non-Displayed 
Add Volume Tiers 1-3. Currently, the criteria for Non-Displayed Add 
Volume Tiers 1-3 is as follows:
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    \19\ Fee code DM is appended to orders that add liquidity using 
MidPoint Discretionary Order within discretionary range.
    \20\ Fee code HA is appended to non-displayed orders that add 
liquidity.
    \21\ Fee code MM is appended to non-displayed orders that add 
liquidity using Mid-Point Peg.
    \22\ Fee code RP is appended to non-displayed orders that add 
liquidity using Supplemental Peg.
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     Non-Displayed Add Volume Tier 1 provides a rebate of 
$0.0015 per share to qualifying orders (i.e., orders yielding fee code 
DM, HA, MM, or RP) where (1) Member has an ADAV \23\ >=0.05% of TCV for 
Non-Displayed orders that yield fee codes DM, HA, HI, MM or RP; or (2) 
Member has an ADAV >=4,000,000 for Non-Displayed orders that yield fee 
codes DM, HA, HI, MM or RP.
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    \23\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day. ADAV is calculated on a monthly 
basis.
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     Non-Displayed Add Volume Tier 2 provides a rebate of 
$0.0020 per share to qualifying orders (i.e., orders yielding fee code 
DM, HA, MM, or RP) where (1) Member has an ADAV >=0.08% of TCV for Non-
Displayed orders that yield fee codes DM, HA, HI, MM or RP; or (2) 
Member has an ADAV >=7,000,000 for Non-Displayed orders that yield fee 
codes DM, HA, HI, MM or RP.
     Non-Displayed Add Volume Tier 3 provides a rebate of 
$0.0025 per share to qualifying orders (i.e., orders yielding fee code 
DM, HA, MM, or RP) where (1) Member has an ADAV >=0.10% of TCV for Non-
Displayed orders that yield fee codes DM, HA, HI, MM or RP; or (2) 
Member has an ADAV >=9,000,000 for Non-Displayed orders that yield fee 
codes DM, HA, HI, MM or RP.
    Now, the Exchange proposes to revise the second prong of criteria 
in Non-Displayed Add Volume Tiers 1-3. The proposed criteria for Non-
Displayed Add Volume Tiers 1-3 is as follows:
     Non-Displayed Add Volume Tier 1 provides a rebate of 
$0.0015 per share to qualifying orders (i.e., orders yielding fee code 
DM, HA, MM, or RP) where (1) Member has an ADAV \24\ >=0.05% of TCV for 
Non-Displayed orders that yield fee codes DM, HA, HI, MM or RP; or (2) 
Member has an ADAV >=5,000,000 for Non-Displayed orders that yield fee 
codes DM, HA, HI, MM or RP.
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    \24\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day. ADAV is calculated on a monthly 
basis.
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     Non-Displayed Add Volume Tier 2 provides a rebate of 
$0.0020 per share to qualifying orders (i.e., orders yielding fee code 
DM, HA, MM, or RP) where (1) Member has an ADAV >=0.08% of TCV for Non-
Displayed orders that yield fee codes DM, HA, HI, MM or RP; or (2) 
Member has an ADAV >=8,000,000 for Non-Displayed orders that yield fee 
codes DM, HA, HI, MM or RP.
     Non-Displayed Add Volume Tier 3 provides a rebate of 
$0.0025 per share to qualifying orders (i.e., orders yielding fee code 
DM, HA, MM, or RP) where (1) Member has an ADAV >=0.10% of TCV for Non-
Displayed orders that yield fee codes DM, HA, HI, MM or RP; or (2) 
Member has an ADAV >=10,000,000 for Non-Displayed orders that yield fee 
codes DM, HA, HI, MM or RP.
    The proposed modifications to Non-Displayed Add Volume Tiers 1-3 is 
intended to incentivize Members to add non-displayed retail volume on 
the Exchange by slightly increasing the difficulty of the criteria that 
must be achieved in order to receive an enhanced rebate. By increasing 
the difficulty of a criteria while keeping the enhanced rebate the 
same, the proposed criteria slightly increases the difficulty required 
for Members to meet the applicable tier threshold while continuing to 
encourage Members to add non-displayed liquidity to the Exchange, 
thereby contributing to a deeper and more liquid market, which benefits 
all market participants and provides greater execution opportunities on 
the Exchange.
Non-Displayed Step-Up Tiers
    In addition to the Add/Remove Volume Tiers, Growth Tiers, and the 
Non-Displayed Add Volume Tiers under footnote 1, the Exchange also 
offers Non-Displayed Step-Up Volume Tiers that each provide an enhanced 
rebate for Members' qualifying orders yielding fee codes DM, HA, MM, 
and RP, where a Member reaches certain volume-based criteria, including 
``growing'' its volume over a certain baseline month. The Exchange now 
proposes to discontinue Non-Displayed Step-Up Tiers 1 and 2, as no 
Members have satisfied the criteria within the past six months and the 
Exchange no longer wishes to, nor is required to, maintain such 
tiers.\25\ More specifically, the proposed change removes these tiers 
as the Exchange would rather redirect future resources and funding into 
other programs and tiers intended to incentivize increased order flow. 
As a result of the Notice, existing Non-Displayed Step-Up Volume Tier 
1, which was proposed in the Exchange's March Filing, shall revert back 
to Non-Displayed Step-Up Volume Tier 3 as it originally appeared in 
February 2023, prior to the Exchange's March Filing.\26\
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    \25\ Pursuant to the Notice issued by the Commission on April 
28, 2023 (supra note 16), the Exchange's proposed changes to its fee 
schedule as detailed in SR-CboeEDGX-2023-016 have been temporarily 
suspended, and all proposed changes to the Non-Displayed Step-Up 
Tiers mentioned in this paragraph refer to the Non-Displayed Step-Up 
Tiers as they appeared on the Exchange's fee schedule on February 
28, 2023. The Exchange notes that current Non-Displayed Step-Up Tier 
1 (as of April 1, 2023) will be renumbered back to Non-Displayed 
Step-Up Tier 3 as the Notice stays the implementation of the fees as 
described in SR-CboeEDGX-2023-016.
    \26\ Supra note 16.

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[[Page 34553]]

Retail Growth Tiers
    Pursuant to footnote 2 of the Fee Schedule, the Exchange offers 
Retail Volume Tiers which provide Retail Member Organizations 
(``RMOs'') \27\ an opportunity to receive an enhanced rebate from the 
standard rebate for Retail Orders \28\ that add liquidity (i.e., 
yielding fee code ZA or ZO). Currently, the Retail Volume Tiers offer 
three Retail Growth Tiers, where a Member is eligible for an enhanced 
rebate for qualifying orders (i.e., yielding fee code ZA or ZO) meeting 
certain add volume-based criteria, including ``growing'' its volume 
over a certain baseline month. The Exchange now proposes to eliminate 
Retail Growth Tiers 1 and 2, as Members have not consistently satisfied 
the criteria of these tiers over the past six months and the Exchange 
no longer wishes to, nor is required to, maintain such tiers. More 
specifically, the proposed change removes these tiers as the Exchange 
would rather redirect future resources and funding into other programs 
and tiers intended to incentivize increased order flow.
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    \27\ See EDGX Rule 11.21(a)(1). 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.
    \28\ See EDGX Rule 11.21(a)(2). 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.
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Fee Codes DQ and DX
    In the Exchange's March Filing, the Exchange proposed an amendment 
to fee code DQ, which is appended to Midpoint Discretionary Orders 
(``MDOs'') \29\ entered with a Quote Depletion Protection (``QDP'') 
\30\ order instruction. QDP is designed to provide enhanced protections 
to MDOs by tracking significant executions that constitute the best bid 
or offer on the EDGX Book \31\ and enabling Users to avoid potentially 
unfavorable executions by preventing MDOs entered with the optional QDP 
instruction from exercising discretion to trade at more aggressive 
prices when QDP has been triggered.\32\ The Exchange proposed amending 
fee code DQ to be appended to MDOs entered with a QDP instruction that 
added liquidity to the Exchange. There was no proposed change to the 
fee associated with fee code DQ. At the time of the March Filing, MDOs 
entered with the QDP instruction were appended fee code DQ and assessed 
a flat fee of $0.00040 per share in securities at or above $1.00 and 
0.30% of dollar value for securities priced below $1.00. Also in its 
March Filing, the Exchange proposed to introduce fee code DX, which 
would be appended to MDOs with a QDP instruction that remove liquidity 
from the Exchange. Orders appended with fee code DX would be assessed a 
fee of $0.00100 per share in securities at or above $1.00 and 0.30% of 
dollar value for securities priced below $1.00. As a result of the 
Notice issued by the Commission on April 28, 2023, the Exchange's March 
Filing was temporarily suspended and all proposed changes to fee codes 
DX and DQ mentioned in this paragraph refer to the fee codes as they 
appeared on the Exchange's fee schedule on February 28, 2023.\33\
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    \29\ See Exchange Rule 11.8(g).
    \30\ See Exchange Rule 11.8(g)(10).
    \31\ See Exchange Rule 1.5(d).
    \32\ See Securities Exchange Act Release No. 89007 (June 4, 
2020), 85 FR 35454 (June 10, 2020) (SR-CboeEDGX-2020-010) (``Notice 
of Filing of Amendment No. 1 and Order Granting Accelerated Approval 
of a Proposed Rule Change, as Modified by Amendment No. 1, to Amend 
the Rule Relating to MidPoint Discretionary Orders to Allow Optional 
Offset or Quote Depletion Protection Instructions'').
    \33\ Supra note 16.
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    As a result of the reversion back to the February 28, 2023, fee 
schedule, the Exchange now proposes to amend fee code DQ to be appended 
to MDOs entered with a QDP instruction that add liquidity to the 
Exchange. There would be no change to the fee associated with fee code 
DQ. Also as a result of the reversion back to the February 28, 2023, 
fee schedule, the Exchange also now proposes to introduce fee code DX, 
which would be appended to MDOs with a QDP instruction that remove 
liquidity from the Exchange. Orders appended with fee code DX would be 
assessed a fee of $0.0010 per share in securities at or above $1.00 and 
0.30% of dollar value for securities priced below $1.00.\34\ While the 
Exchange notes the difference between the fees assessed for fee codes 
DX and DQ, the Exchange believes that charging a lower fee for MDOs 
entered with a QDP instruction that add liquidity to the Exchange under 
fee code DQ will incentivize Users to submit liquidity-adding MDOs 
containing a QDP instruction, thereby contributing to a deeper and more 
liquid market, which benefits all market participants and provides 
greater execution opportunities on the Exchange.
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    \34\ The Exchange notes that its April Filing proposed an 
amendment of the rate associated with fee code DX from $0.00060 to 
$0.0010. The rate of $0.0010 proposed above is in-line with the rate 
of $0.0010 proposed in the April Filing and the Exchange is merely 
re-introducing the proposed rate of $0.0010 as a result of the 
Notice and subsequent suspension of the proposed changes contained 
within its March Filing.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\35\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \36\ 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) \37\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \38\ 
as it is designed to provide for the equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities.
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    \35\ 15 U.S.C. 78f(b).
    \36\ 15 U.S.C. 78f(b)(5).
    \37\ Id.
    \38\ 15 U.S.C. 78f(b)(4).
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    As described above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. The Exchange believes that 
its proposal to: (1) introduce new Add Volume Tiers 2 and 5 and modify 
current Add Volume Tiers 1, 2, and 3; and (2) modify Non-Displayed Add 
Volume Tiers 1-3 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. Additionally, the Exchange notes that 
relative volume-based incentives and discounts have been widely adopted 
by exchanges,\39\ including the Exchange,\40\ and are reasonable, 
equitable and non-discriminatory because they are open to

[[Page 34554]]

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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    \39\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \40\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
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    In particular, the Exchange believes its proposal to: (1) introduce 
new Add Volume Tiers 2 and 5 and modify current Add Volume Tiers 1, 2, 
and 3; and (2) modify Non-Displayed Add Volume Tiers 1-3 is reasonable 
because the revised tiers will be available to all Members and provide 
all Members with an additional opportunity to receive an enhanced 
rebate or a reduced fee. The Exchange further believes the proposed 
modifications to its Add/Remove Volume Tiers and Non-Displayed Add 
Volume Tiers will provide a reasonable means to encourage liquidity 
adding displayed orders and liquidity adding non-displayed orders, 
respectively, 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 or reduced fee 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.
    The Exchange believes that its proposal to eliminate Growth Tiers 
1-3,\41\ Non-Displayed Step-Up Volume Tiers 1 and 2,\42\ and Retail 
Growth Tiers 1 and 2 is reasonable because the Exchange is not required 
to maintain these tiers or provide Members an opportunity to receive 
enhanced rebates. The Exchange believes the proposal to eliminate these 
tiers is also equitable and not unfairly discriminatory because it 
applies to all Members (i.e., the tiers will not be available for any 
Member). The Exchange notes that Members have not consistently 
satisfied the criteria over the past six months. The Exchange also 
notes that the proposed rule change to remove these tiers merely 
results in Members not receiving an enhanced rebate, which, as noted 
above, the Exchange is not required to offer or maintain. Furthermore, 
the proposed rule change to eliminate Growth Tiers 1-3, Non-Displayed 
Step-Up Volume Tiers 1 and 2, and Retail Growth Tiers 1 and 2 enables 
the Exchange to redirect resources and funding into other programs and 
tiers intended to incentivize increased order flow.
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    \41\ Supra note 16.
    \42\ Supra note 25.
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    The Exchange believes the proposed addition of fee code DX and the 
revised applicability of fee code DQ are reasonable as the Exchange 
offers many other fee codes that are specifically designed for orders 
that add liquidity to the Exchange or remove liquidity from the 
Exchange.\43\ While the fee assessed for orders appended with fee code 
DX will be slightly higher than the fee assessed for orders appended 
with fee code DQ, the Exchange believes that promoting liquidity-adding 
MDOs containing a QDP instruction represents an equitable allocation of 
fees and rebates and is not unfairly discriminatory because the fees 
will apply to all Members who add or remove liquidity utilizing an MDO 
with a QDP instruction, equally. Furthermore, the Exchange believes 
that assessing a lower fee under fee code DQ will promote a reasonable 
means to encourage liquidity adding volume to the Exchange for MDOs 
utilizing a QDP instruction. While Members are assessed a small fee to 
utilize MDOs with a QDP instruction, the Exchange believes that 
promoting liquidity adding activity would help deepen the Exchange's 
liquidity pool, support the quality of price discovery, and improve 
market quality, for all investors.
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    \43\ See e.g., EDGX Equities Fee Schedule, Fee Codes 3 and 6.
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    The Exchange believes that the proposed changes to its Add/Remove 
Volume Tiers and Non-Displayed Add Volume Tiers are reasonable as they 
do not represent a significant departure from the criteria currently 
offered in the Fee Schedule. The Exchange also believes that the 
proposal represents an equitable allocation of fees and rebates and is 
not unfairly discriminatory because all Members will be eligible for 
the proposed new tiers and have the opportunity to meet the tiers' 
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 
the new proposed tiers. While the Exchange has no way of predicting 
with certainty how the proposed changes will impact Member activity, 
based on the prior months volume, the Exchange anticipates that at 
least one Member will be able to satisfy proposed Add Volume Tier 1, at 
least two Members will be able to satisfy proposed Add Volume Tier 2, 
at least two Members will be able to satisfy proposed Add Volume Tier 
3, at least one Member will be able to satisfy proposed Add Volume Tier 
4, at least 1 Member will be able to satisfy proposed Add Volume Tier 
5, at least two Members will be able to satisfy proposed Non-Displayed 
Add Volume Tier 1, at least two Members will be able to satisfy 
proposed Non-Displayed Add Volume Tier 2, and at least one Member will 
be able to satisfy proposed Non-Displayed Add Volume Tier 3. The 
Exchange also notes that proposed changes will not adversely impact any 
Member's ability to qualify for 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. 
Furthermore, the proposed rule change to eliminate Growth Tiers 1-3, 
Non-Displayed Step-Up Volume Tiers 1 and 2, and Retail Growth Tiers 1 
and 2 enables the Exchange to redirect resources and funding into other 
programs and tiers intended to incentivize increased order flow.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Rather, as discussed above, 
the Exchange believes that the proposed changes would encourage the 
submission of additional order flow to a public exchange, thereby 
promoting market depth, execution incentives and enhanced execution 
opportunities, as well as price discovery and transparency for all 
Members. As a result, the Exchange believes that the proposed changes 
further the Commission's goal in adopting Regulation NMS of fostering 
competition among orders, which promotes ``more efficient pricing of 
individual stocks for all types of orders, large and small.''
    The Exchange believes the proposed rule changes do not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
changes to the Exchange's Add/Remove Volume Tiers and Non-Displayed Add 
Volume Tiers will apply to all Members equally in that all Members are 
eligible for each of the Tiers, have a reasonable opportunity to

[[Page 34555]]

meet the Tiers' criteria and will receive the enhanced rebate on their 
qualifying orders if such criteria is met. In addition, the Exchange 
proposal to eliminate Growth Tiers 1-3, Non-Displayed Step-Up Volume 
Tiers 1 and 2, and Retail Growth Tiers 1 and 2 will not impose any 
burden on intramarket competition because it applies to all Members 
uniformly, as in, the tiers will no longer be available to any Member. 
The Exchange does not believe the proposed changes burden competition, 
but rather, enhances competition as it is intended to increase the 
competitiveness of EDGX by amending an existing pricing incentive and 
adopting 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 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.
    The Exchange believes the proposal to introduce the DX fee code 
does not impose a burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. The 
proposed fees associated with fee code DX would apply to all Members 
equally in that all Members would be subject to the same flat fee for 
the execution of an MDO with a QDP instruction that removes liquidity 
from the Exchange. Although MDOs entered with the QDP instruction would 
be subject to the pricing described in this proposed rule change, the 
Exchange does not believe that pricing would impose any significant 
burden on intramarket competition as this fee would be applied in the 
same manner to the execution of any MDO entered with a QDP instruction 
that removes liquidity from the Exchange. Both MDO and the associated 
QDP instruction are available to all Members on an equal and non-
discriminatory basis. As a result, any Member can decide to use (or not 
use) the QDP instruction based on the benefits provided by that 
instruction in potentially avoiding unfavorable executions, and the 
associated charge that the Exchange proposes to introduce. As 
discussed, any firm that chooses to use the QDP instruction with an MDO 
that removes liquidity would be charged the same flat fee for the 
execution of orders that are entered with this instruction. The 
proposal to modify fee code DQ to apply only to MDO orders using the 
QDP instruction that add liquidity to the Exchange similarly does not 
impose a burden on intramarket competition in that the applicability of 
the fee code will apply equally to all Members in that all Members 
would be subject to the same flat fee for the execution of an MDO with 
a QDP instruction that adds liquidity to the Exchange and the Exchange 
does not propose a change to the existing fee.
    Next, the Exchange believes the proposed rule changes does not 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As previously 
discussed, the Exchange operates in a highly competitive market. 
Members have numerous alternative venues that they may participate on 
and direct their order flow, including other equities exchanges, off-
exchange venues, and alternative trading systems. Additionally, the 
Exchange represents a small percentage of the overall market. Based on 
publicly available information, no single equities exchange has more 
than 16% of the market share.\44\ 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.'' \45\ 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'. . . .'' \46\ 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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    \44\ Supra note 3.
    \45\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \46\ 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 \47\ and paragraph (f) of Rule 19b-4 \48\ 
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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    \47\ 15 U.S.C. 78s(b)(3)(A).
    \48\ 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 [email protected]. Please include 
File Number SR-CboeEDGX-2023-036 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange

[[Page 34556]]

Commission, 100 F Street NE, Washington, DC 20549-1090.

All submissions should refer to File Number SR-CboeEDGX-2023-036. 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. Do not include 
personal identifiable information in submissions; you should submit 
only information that you wish to make available publicly. We may 
redact in part or withhold entirely from publication submitted material 
that is obscene or subject to copyright protection. All submissions 
should refer to File Number SR-CboeEDGX-2023-036, and should be 
submitted on or before June 20, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\49\
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    \49\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-11356 Filed 5-26-23; 8:45 am]
BILLING CODE 8011-01-P