Document ID: SEC-2018-0599-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe EDGX Exchange, Inc.
Posted Date: 2018-04-16T04:00Z

[Federal Register Volume 83, Number 73 (Monday, April 16, 2018)]
[Notices]
[Pages 16417-16419]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-07809]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83027; File No. SR-CboeEDGX-2018-009]

Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change Related 
to Transaction Fees for Use on Cboe EDGX Exchange, Inc.'s Equity 
Platform

April 10, 2018.
    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 March 29, 2018, Cboe EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') 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 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the fee schedule applicable 
to Members \5\ and non-Members of the Exchange pursuant to EDGX Rules 
15.1(a) and (c).
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    \5\ The term ``Member'' is defined as ``any registered broker or 
dealer that has been admitted to membership in the Exchange.'' See 
Exchange Rule 1.5(n).
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    The text of the proposed rule change is available at the Exchange's 
website at www.markets.cboe.com, at the principal office of the 
Exchange, 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

[[Page 16418]]

places specified in Item IV below. The Exchange has prepared summaries, 
set forth in Sections A, B, and C below, of the most significant parts 
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'') to modify the enhanced 
rebate provided pursuant to the Investor Depth Tier under footnote 1. 
The Exchange currently offers nine Add Volume Tiers under footnote 4 
[sic], which provide enhanced rebates ranging from of $0.0025 to 
$0.0033 per share for qualifying orders which yield fee codes B,\6\ 
V,\7\ Y,\8\ 3 \9\ and 4.\10\ The Exchange proposes to modify the 
criteria necessary to achieve the Investor Depth Tier as described 
below. Currently, under the Investor Depth Tier a Member may be 
provided an enhanced rebate of $0.0033 per share where that Member: (i) 
Adds an ADV \11\ greater than or equal to 0.12% of the TCV; \12\ (ii) 
has an ``added liquidity'' as a percentage of ``added plus removed 
liquidity'' greater than or equal to 85%; and (iii) adds an ADV greater 
than or equal to 400,000 shares as non-displayed orders that yield fee 
code HA,\13\ HI,\14\ and/or MM.\15\ The Exchange now proposes to 
decrease the enhanced rebate provided by the Investor Depth Tier from 
$0.0033 per share to $0.0031 per share. The Exchange does not propose 
to amend the Investor Depth Tier's required criteria or to make any 
other changes to the other tiers under footnote 1.
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    \6\ Fee code B is appended to displayed orders which add 
liquidity to Tape B and is provided a rebate of $0.0020 per share. 
See the Exchange's fee schedule available at http://markets.cboe.com/us/equities/membership/fee_schedule/edgx/.
    \7\ Fee code V is appended to displayed orders which add 
liquidity to Tape A and is provided a rebate of $0.0020 per share. 
Id.
    \8\ Fee code Y is appended to displayed orders which add 
liquidity to Tape C and is provided a rebate of $0.0020 per share. 
Id.
    \9\ Fee code 3 is appended to displayed orders which add 
liquidity to Tape A or C during the post-market or pre-market 
sessions and is provided a rebate of $0.0020 per share. Id.
    \10\ Fee code 4 is appended to displayed orders which add 
liquidity to Tape B during the post-market or pre-market sessions 
and is provided a rebate of $0.0020 per share. Id.
    \11\ ``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. Id.
    \12\ ``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. See the Exchange's fee schedule available at http://markets.cboe.com/us/equities/membership/fee_schedule/edgx/.
    \13\ Fee code HA is appended to non-displayed orders which add 
liquidity on the Exchange and are provided an enhanced rebate of 
$0.0015 for securities priced at or above $1.00, and $0.0003 [sic] 
for securities priced below $1.00. Id.
    \14\ Fee code HI is appended to non-displayed orders which 
receive price improvement and add liquidity on the Exchange and are 
neither charged a fee nor provided a rebate. Id.
    \15\ Fee code MM is appended to non-displayed orders which add 
liquidity on the Exchange using Mid-Point Peg and are provided an 
enhanced rebate of $0.0015 for securities priced at or above $1.00, 
and $0.0003 [sic] for securities priced below $1.00. Id.
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    In light of the proposed reduction of the Investor Tier's enhanced 
rebate, the Exchange also proposes to no longer make the rebate provide 
by the tier available to orders that yield fee code ZA. Fee code ZA is 
appended to Retail Orders that add liquidity and are provided a rebate 
of $0.0032 per share.\16\ Due to the Investor Tier's rebate now 
proposed to be lower than the rebate provided to orders that yield fee 
code ZA, it is no longer necessary to make available the Investor 
Tier's rebate to fee code ZA.
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    \16\ Id.
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    The Exchange proposes to implement the above change to its fee 
schedule on April 2, 2018.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with the objectives of Section 6 of the Act,\17\ in general, and 
furthers the objectives of Section 6(b)(4),\18\ 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 also 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. The proposed 
rule changes reflect a competitive pricing structure designed to 
incentivize market participants to direct their order flow to the 
Exchange.
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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposed modifications to the tiered 
pricing structure are reasonable, fair and equitable, and non-
discriminatory. The Exchange believes the reduced rebate for the 
Investor Depth Tier represents is reasonable and equitable because it 
is intended to reflect the difficulty in achieving the tier's required 
criteria. The Exchange notes that in June 2017, it eased the first 
prong of the tier's required by requiring the Member add an ADV greater 
than or equal to 0.12% of the TCV, rather than 0.15% as previously 
required.\19\ At that time, the Exchange did not make a corresponding 
change to the tier's rebate and now proposes to reduce the rebate to 
reflect the difficulty in achieving the tier's required criteria. The 
Exchange operates in a highly competitive market in which market 
participants may readily send order flow to many competing venues if 
they deem fees at the Exchange to be excessive or incentives provided 
to be insufficient. The proposed structure remains intended to attract 
order flow to the Exchange by offering market participants a 
competitive pricing structure. The Exchange believes it is reasonable 
to offer and incrementally modify incentives intended to help to 
contribute to the growth of the Exchange.
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    \19\ See Securities Exchange Act Release No. 80977 (June 20, 
2017), 82 FR 28924 (June 26, 2017) (SR-BatsEDGX-2017-30).
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    Volume-based pricing such as that proposed herein have been widely 
adopted by exchanges, including the Exchange, and are equitable 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; (ii) associated higher levels of market 
activity, such as higher levels of liquidity provisions and/or growth 
patterns; and (iii) introduction of higher volumes of orders into the 
price and volume discovery processes.

(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 not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
that the proposed change to the Exchange's tiered pricing structure 
burdens competition because it is designed to amend the rebate to 
reasonably reflect the tier's required criteria. The Exchange 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 structures to be unreasonable or excessive. The Exchange does 
not believe the proposed amendments would burden intramarket 
competition

[[Page 16419]]

as they would be available to all Members uniformly.

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

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any unsolicited written comments from Members or other interested 
parties.

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 \20\ and paragraph (f) of Rule 19b-4 
thereunder.\21\ 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.
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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 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-2018-009 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-2018-009. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (http://www.sec.gov/rules/sro.shtml). 
Copies of the submission, all subsequent amendments, all written 
statements with respect to the proposed rule change that are filed with 
the Commission, and all written communications relating to the proposed 
rule change between the Commission and any person, other than those 
that may be withheld from the public in accordance with the provisions 
of 5 U.S.C. 552, will be available for website viewing and printing in 
the Commission's Public Reference Room, 100 F Street NE, Washington, DC 
20549, on official business days between the hours of 10:00 a.m. and 
3:00 p.m. Copies of the filing also will be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should submit only 
information that you wish to make available publicly. All submissions 
should refer to File Number SR-CboeEDGX-2018-009 and should be 
submitted on or before May 7, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-07809 Filed 4-13-18; 8:45 am]
 BILLING CODE 8011-01-P