Document ID: SEC-2019-0156-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe EDGA Exchange, Inc.
Posted Date: 2019-02-20T05:00Z

[Federal Register Volume 84, Number 34 (Wednesday, February 20, 2019)]
[Notices]
[Pages 5176-5178]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02736]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85116; File No. SR-CboeEDGA-2019-002]

Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend the EDGA Fee Schedule as It Relates to Pricing for the Use of 
Certain Routing Strategies

February 13, 2019.
    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 February 1, 2019, Cboe EDGA Exchange, Inc. (``Exchange'' or 
``EDGA'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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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 EDGA Exchange, Inc. (``EDGA'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (the ``Commission'') a 
proposed rule change to amend the EDGA fee schedule as it relates to 
pricing for the use of certain routing strategies. The text of the 
proposed rule change is attached as Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/edga/), 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 purpose of the proposed rule change is to amend the EDGA fee 
schedule to change the pricing applicable to orders routed using the 
ROUC routing strategy in connection with planned changes to the System 
routing table.\3\ ROUC is a routing strategy offered by the Exchange 
that is used to target certain low cost protected market centers by 
routing to those venues after accessing available liquidity on the EDGA 
Book and certain non-exchange destinations, and prior to routing to 
other trading centers included in the System routing table and posting 
to the Cboe EDGX Exchange, Inc. (``EDGX'') order book, if possible. The 
Exchange periodically changes the low cost venues targeted by the ROUC 
routing strategy to ensure that the venues prioritized for routing can 
be accessed at a low cost. Currently, three exchanges are included in 
the System routing table as low cost protected market centers: Cboe BYX 
Exchange, Inc. (``BYX''), Nasdaq BX, Inc. (``BX''), and New York Stock 
Exchange LLC (``NYSE''). Pursuant to Rule 11.11(g), the Exchange has 
determined to modify System routing table such that NYSE would no 
longer be listed as a low cost protected market center where orders are 
first routed after seeking available liquidity on the EDGA Book and 
certain non-exchange destinations. In addition, the Exchange has 
decided to add NYSE American LLC (``NYSE American'') and NYSE National, 
Inc. (``NYSE National'') as low cost protected market centers. These 
changes to the System routing table are scheduled to be introduced on 
February 1, 2019.
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    \3\ The term ``System routing table'' refers to the proprietary 
process for determining the specific trading venues to which the 
System routes orders and the order in which it routes them. See Rule 
11.13(b)(3) [sic]. The Exchange reserves the right to route orders 
simultaneously or sequentially, maintain a different System routing 
table for different routing options and to modify the System routing 
table at any time without notice. Id.
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    Currently, orders routed using the ROUC routing strategy are 
provided a rebate of $0.00150 per share when routed to BYX,\4\ charged 
a fee of $0.00290 per share when routed to Nasdaq PSX (``PSX''),\5\ or 
charged a fee of $0.00200 per share when routed to a non-exchange 
destination.\6\ Orders routed to other markets may be subject to 
different non-ROUC specific pricing. The Exchange proposes to add two 
new fee codes, MX and NX, that relate to orders routed to NYSE American 
and NYSE National, respectively, using the ROUC routing strategy. In 
securities at or above $1.00, orders routed using the ROUC routing 
strategy would be charged a fee of $0.00020 per share if executed on 
NYSE American, and provided a rebate of $0.00200 per share if executed 
on NYSE National. As proposed, the Exchange would not charge a fee or 
provide a rebate for orders routed in securities priced below $1.00. 
The proposed fees and rebates chosen for routing to these venues 
generally reflect the current transaction fees and rebates available 
for accessing liquidity on those markets.\7\
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    \4\ See EDGA Equities Schedule of Fees, fee code ``BY.'' This 
rebate applies to securities priced at or above $1.00. For 
securities priced below $1.00, a fee equal to 0.10% of the dollar 
value is applied instead. Id.
    \5\ See EDGA Equities Schedule of Fees, fee code ``K.'' This fee 
applies to securities priced at or above $1.00. For securities 
priced below $1.00, a fee equal to 0.30% of the dollar value is 
applied instead. Id.
    \6\ See EDGA Equities Schedule of Fees, fee code ``Q.'' This fee 
applies to securities priced at or above $1.00. For securities 
priced below $1.00, a fee equal to 0.30% of the dollar value is 
applied instead. Id.
    \7\ NYSE American currently charges a fee for removing liquidity 
that is $0.00020 per share in securities priced at or above $1.00, 
and 0.25% of the total dollar value of the transaction in securities 
priced below $1.00. See NYSE American Equities Price List, I. 
Transaction Fees.
    NYSE National currently provides a rebate of $0.00200 per share 
in securities priced at or above $1.00 for members that achieve 
their taking tier. See NYSE National Schedule of Fees and Rebates, 
I. Transaction Fees, B. Tiered Rates. Orders that remove liquidity 
in securities below $1.00 are executed without charge or rebate. See 
NYSE National, Schedule of Fees and Rebates, I. Transaction Fees, A. 
General Rates.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act,\8\ in general, and furthers the requirements 
of Section 6(b)(4),\9\ in particular, 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. The Exchange 
believes the proposed routing fee changes are appropriate as they 
reflect changes to the System routing table used to determine the order 
in which venues are accessed using the ROUC

[[Page 5177]]

routing strategy. ROUC specifically targets certain equities exchanges 
that provide cheap executions or rebates to liquidity removing orders, 
and routes to those venues after trading with the EDGA Book and certain 
non-exchange destinations, and prior to accessing liquidity that may be 
available on other venues on the System routing table. The Exchange 
believes that the proposed changes reflect the intent of members when 
they submit routable order flow to the Exchange using the ROUC routing 
strategy.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that it is reasonable and equitable to 
provide special pricing for orders routed to NYSE American and NYSE 
National using the ROUC routing strategy. As mentioned previously, the 
Exchange is adding these two exchanges to its list of low cost 
protected market centers, and wishes to provide the benefit of the 
rebate or lower fee provided by those markets to EDGA members using the 
ROUC routing strategy. The Exchange believes that these changes may 
increase interest in the Exchange's ROUC routing strategy, in 
particular, by passing on better pricing to EDGA members that choose to 
enter such orders on the Exchange, thereby encouraging additional order 
flow to be entered to the EDGA Book.
    The rebates provided to orders routed to NYSE National using the 
ROUC routing strategy would be limited to order price at or above $1.00 
in light of the fact that NYSE National does not provide rebates to 
liquidity removing orders in securities priced below $1.00. For 
securities priced below $1.00, the Exchange would charge no fee and 
provide no rebate, which is equivalent to pricing on NYSE National.\10\ 
Without limiting the proposed rebate for NYSE National to securities 
priced at or above $1.00, the Exchange would pay a significant rebate 
that would not be recouped via a rebate earned from the execution 
venue. The Exchange believes that is reasonable and equitable to limit 
routing rebates to circumstances where the Exchange would actually earn 
a rebate from the away venue in order to properly recoup the costs of 
accessing liquidity on such markets. Similarly, the Exchange would 
charge no fee and provide no rebate for orders routed to NYSE American 
using the ROUC routing strategy in securities priced below $1.00. 
Although such orders are charged a fee by NYSE American equal to 0.25% 
of the total dollar value of the transaction, the Exchange has 
determined to provide free executions as an additional inducement for 
members to send their routable order flow to EDGA.
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    \10\ See supra note 8 [sic].
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    Finally, the Exchange believes that the proposed changes are 
equitable and not unfairly discriminatory as the proposed fees and 
rebates would apply equally to all members that use the Exchange to 
route orders using the associated routing strategy. The proposed fees 
are designed to reflect the fees charged and rebates offered by certain 
away trading centers that are accessed by Exchange routing strategies, 
and are being made in conjunction with changes to the System routing 
table designed to provide members with low cost executions for their 
routable order flow. Furthermore, if members do not favor the proposed 
pricing, they can send their routable orders directly to away markets 
instead of using routing functionality provided by the Exchange. 
Routing through the Exchange is voluntary, and the Exchange operates in 
a competitive environment where market participants can readily direct 
order flow to competing venues or providers of routing services if they 
deem fee levels to be excessive.

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

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. The 
proposed routing fee changes are designed to reflect changes being made 
to the System routing table used to determine where to send certain 
routable orders, and generally provide better pricing to members for 
orders routed to low cost protected market centers using the Exchange's 
routing strategies. The Exchange operates in a highly competitive 
market in which market participants can readily direct their order flow 
to competing venues. In such an environment, the Exchange must 
continually review, and consider adjusting, its fees and rebates to 
remain competitive with other exchanges. For the reasons described 
above, the Exchange believes that the proposed fee changes reflect this 
competitive environment.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

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 \11\ and paragraph (f) of Rule 19b-4 \12\ 
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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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-CboeEDGA-2019-002 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-CboeEDGA-2019-002. 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

[[Page 5178]]

printing in the Commission's Public Reference Room, 100 F Street NE, 
Washington, DC 20549, on official business days between the hours of 
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available 
for inspection and copying at the principal office of the Exchange. All 
comments received will be posted without change. Persons submitting 
comments are cautioned that we do not redact or edit personal 
identifying information from comment submissions. You should submit 
only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CboeEDGA-2019-002 and should 
be submitted on or before March 13, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
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    \13\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02736 Filed 2-19-19; 8:45 am]
 BILLING CODE 8011-01-P