Document ID: SEC-2023-1476-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe EDGX Exchange, Inc.
Posted Date: 2023-12-20T05:00Z

[Federal Register Volume 88, Number 243 (Wednesday, December 20, 2023)]
[Notices]
[Pages 88159-88163]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-27919]

[[Page 88159]]

-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99177; File No. SR-CboeEDGX-2023-075]

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

December 14, 2023.
    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 December 1, 2023, 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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.\3\ 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 17 options venues to which market participants may direct their 
order flow. Based on publicly available information, no single options 
exchange has more than 16% of the market share.\4\ 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.
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed fee changes on 
December 1, 2023 (SR-CboeEDGX-2023-073). On December 1, 2023, the 
Exchange withdrew that filing and submitted SR-CboeEDGX-2023-075.
    \4\ See Cboe Global Markets U.S. Options Market Monthly Volume 
Summary (November 29, 2023), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------

    The Exchange's Fee 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. The Fee Codes and Associated 
Fees section of the Fees Schedule also provides for certain fee codes 
associated with certain order types and market participants that 
provide for various other fees or rebates. For example, the Exchange 
assesses a fee of $0.24 per contract for Market Maker orders that 
remove liquidity in Non-Penny Securities, yielding fee code NT; 
provides a rebate of $0.01 per contract for Customer-to-Non-Customer 
(i.e., ``Customer (contra Non-Customer)'') orders (that both add and 
remove liquidity) and Customer-to-Customer (i.e., ``Customer (contra 
Customer)'') orders that remove liquidity, in Non-Penny Securities, 
yielding fee code NC; and provides a rebate of $0.01 per contract for 
Customer (contra Non-Customer) orders and Customer (contra Customer) 
orders that remove liquidity, in Penny Securities, yielding fee code 
PC. Customer (contra Customer) orders that add liquidity receive no 
rebate.
Fee Codes
    The Exchange proposes to amend its Fee Schedule to adopt new fee 
code CA, which will apply to Customer (contra Non-Customer) orders that 
add liquidity; the proposed fee code provides a rebate of $0.01 per 
contract.\5\ This is the same rebate these orders currently receive 
pursuant to fee codes NC and PC.
---------------------------------------------------------------------------

    \5\ The Exchange proposes to amend Footnote 5 (Orders Submitted 
with a Designated Give Up) to include orders yielding fee code CA.
---------------------------------------------------------------------------

    The Exchange also proposes to amend the definition of current fee 
code NC to provide that such fee code (and corresponding standard 
rebate of $0.01 per contract) applies to all Simple Customer (i.e., 
Customer (contra Non-Customer) and Customer (contra Customer)) orders 
that remove liquidity in Non-Penny Securities. Similarly, the Exchange 
proposes to amend the definition of current fee code PC to provide that 
such fee code (and corresponding standard rebate of $0.01 per contract) 
applies to all Simple Customer (i.e., Customer (contra Non-Customer) 
and Customer (contra Customer)) orders that remove liquidity in Penny 
Securities. These rebates currently apply to these orders today; the 
proposed amendments to these definitions merely reflect the removal of 
Customer (contra Non-Customer) orders that add liquidity from fee codes 
NC and PC (and moving such orders to proposed fee code CA). The 
Exchange also proposes to increase the standard fee for Market Maker 
orders that remove liquidity in Non-Penny Securities (i.e., yield fee 
code NT) from $0.24 to $0.70.
Customer Volume Tiers
    The Exchange proposes to amend Footnote 1 (Customer Volume Tiers), 
applicable to orders yielding fee codes PC and NC. Pursuant to Footnote 
1 of the Fee Schedule, the Exchange currently offers four Customer 
Volume Tiers that provide rebates between $0.10 and $0.21 per contract 
for qualifying customer orders yielding fee codes PC and NC where a 
Member meets required criteria. The Exchange proposes to amend this 
Customer Volume Tier program to add orders yielding fee code CA to the 
list of qualifying customer

[[Page 88160]]

orders that may be eligible for the Customer Volume Tier program.
    The Exchange also proposes to amend the required criteria for Tiers 
3 and 4. Currently, to qualify for Tier 3, a Member must have (1) an 
ADV \6\ in Customer orders greater than or equal to 1.00% of average 
OCV; \7\ and (2) an ADV in Customer Non-Crossing orders of greater than 
or equal to 0.40% of average OCV. To qualify for Tier 4, a Member must 
have (1) an ADV in Customer orders greater than or equal to 0.75% of 
average OCV; (2) an ADV in Customer or Market Maker orders greater than 
or equal to 1.50% of average OCV; (3) an ADV in Customer Non-Crossing 
orders greater than or equal to 0.50% of average OCV; and (4) an ADAV 
\8\ in Customer Non-Crossing orders greater than or equal to 0.40% of 
average OCV.
---------------------------------------------------------------------------

    \6\ ``ADV'' means average daily volume calculated as the number 
of contracts added or removed, combined, per day.
    \7\ ``OCV'' means the total equity and ETF options volume that 
clears in the Customer range at the Options Clearing Corporation 
(``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.
    \8\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added, per day.
---------------------------------------------------------------------------

    The Exchange proposes to amend Tier 3 required criteria to state 
that a Member must have (1) an ADV in Customer orders greater than or 
equal to 1.00% of average OCV; (2) an ADV in Customer Non-Crossing 
orders of greater than or equal to 0.75% of average OCV; and (3) an 
ADAV in Simple Customer Non-Crossing orders (i.e., yielding fee code 
CA) greater than or equal to 0.45% of average OCV. The Exchange 
proposes to amend Tier 4 required criteria to state that a Member must 
have (1) an ADV in Customer orders greater than or equal to 1.50% of 
average OCV; and (2) an ADAV in Simple Customer Non-Crossing orders 
(i.e., yielding fee code CA) greater than or equal to 0.65% of average 
OCV.
    Additionally, the Exchange proposes to change the rebate for Tier 
4. Specifically, the Exchange proposes to amend the Tier 4 rebate from 
$0.21 per contract to $0.18 per contract.\9\ The rebates for Tiers 1, 
2, and 4 remain unchanged.
---------------------------------------------------------------------------

    \9\ The Exchange proposes to amend this tier rebate as described 
in the table in Footnote 1 and amend the amounts of the rebates in 
the Standard Rates table.
---------------------------------------------------------------------------

    Finally, the Exchange proposes to add new Customer Volume Tier 5 to 
provide a rebate of $0.22 per contract if a Member has (1) an ADV in 
Customer orders of greater than or equal to 2.00% of average OCV; (2) 
an ADAV in Simple Customer Non-Crossing orders (i.e., yielding fee code 
CA) greater than or equal to 1.25% of average OCV; and (3) a QCC agency 
Volume of greater than or equal to 2,000,000 contracts per month, with 
both sides of each transaction being Non-Customer, Non-
Professional.\10\
---------------------------------------------------------------------------

    \10\ The Exchange proposes to add this tier rebate as described 
in the table in Footnote 1 and add to the rebates in the Standard 
Rates table.
---------------------------------------------------------------------------

    The Exchange believes that the proposed changes to the Customer 
Volume Tier program are designed overall to incentivize more Customer 
order flow and to direct an increase of order flow to the EDGX Options 
Order Book. The Exchange believes that an increase in Customer order 
flow and overall order flow to the Exchange's Book creates 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.
Supplemental AIM Tiers
    The Exchange proposes to amend the Supplemental AIM \11\ Tiers set 
forth in Footnote 9 (Automated Improvement Mechanism (``AIM'') Penny 
Tiers). The Exchange currently offers two tiers related to Customer 
volume under Footnote 9 applicable to orders yielding fee code ``BC'', 
which fee code is appended to Customer Agency orders executed in AIM. 
The AIM Tiers currently provide enhanced rebates of $0.09 and $0.10 per 
contract for qualifying orders that yield fee code BC where a Member 
meets the respective tier's volume threshold.
---------------------------------------------------------------------------

    \11\ The term ``AIM'' refers to Automated Improvement Mechanism.
---------------------------------------------------------------------------

    The Exchange also offers two Supplemental AIM Tiers under Footnote 
9 which provide additional rebates (i.e., in addition to the standard 
rebate or enhanced rebates Members may receive for Customer Agency 
orders executed in AIM). The tiers are applicable to fee code BC and 
applied on an order-by-order basis.
    Supplemental AIM Tier 1 provides an additional rebate of $0.02 per 
contract where (i) a Member has an ADV in Customer Orders greater than 
or equal to 0.50% of average OCV and (ii) the order has an Interaction 
Rate greater than or equal to 51% and less than 80%. Supplemental AIM 
Tier 2 provides an additional rebate of $0.05 per contract where (i) a 
Member has an ADV in Customer Orders greater than or equal to 0.50% of 
average OCV and (ii) the order has an Interaction Rate greater than or 
equal to 0% and less than 51%. The ``Interaction Rate'' of an order 
refers to the percentage of the Agency Order that traded against the 
Initiating Order.\12\
---------------------------------------------------------------------------

    \12\ An Options Member may electronically submit for execution 
in AIM an order it represents as agent (``Agency Order'') against 
principal interest or a solicited order(s) (except for an order for 
the account of any Options Market Maker registered in the applicable 
series on the Exchange) (an ``Initiating Order''). See EDGX Options 
Rule 21.19.
---------------------------------------------------------------------------

    The Exchange proposes to amend Supplemental AIM Tier 1 criteria to 
require that (1) Member has an ADV in Customer Orders greater than or 
equal to 0.50% of average OCV; and (2) the order has an Interaction 
Rate greater than or equal to 51% and less than 70%. The Exchange also 
proposes to amend Supplemental AIM Tier 2 criteria to require that (1) 
Member has an ADV in Customer Orders greater than or equal to 0.50% of 
average OCV; and (2) the order has an Interaction Rate greater than or 
equal to 30% and less than 51%. The Exchange also proposes to reduce 
the current rebate for Supplemental AIM Tier 2 from $0.05 per contract 
to $0.03 per contract.
    Finally, the Exchange proposes to add new Supplemental AIM Tier 3, 
which would provide an additional rebate of $0.05 per contract where 
(i) Member has an ADV in Customer Orders greater than or equal to 0.50% 
of average OCV; and (ii) the order has an Interaction Rate greater than 
or equal to 0% and less than 30%.
    The proposed changes to the Supplemental AIM Tiers are designed to 
incentivize order flow providers to continue to route AIM orders to the 
Exchange, notwithstanding the potential for such orders to be broken 
up.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\13\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \14\ 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

[[Page 88161]]

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) \15\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers. The Exchange also believes the proposed rule change is 
consistent with Section 6(b)(4) of the Act,\16\ which requires that 
Exchange rules provide for the equitable allocation of reasonable dues, 
fees, and other charges among its Members and other persons using its 
facilities.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ Id.
    \16\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    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 
market participants. 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. The proposed fee 
changes reflect a competitive pricing structure designed to incentivize 
market participants to direct their order flow, which the Exchange 
believes would enhance market quality to the benefit of all Members.
Fee Codes
    The Exchange believes its proposed adoption of new fee code CA, 
which applies to Customer (contra Non-Customer) orders that add 
liquidity and which provides a rebate of $0.01 per contract, and its 
proposal to amend the definition of current fee code NC and PC is 
consistent with Section 6(b)(4) of the Act in that the proposed changes 
are reasonable, equitable and not unfairly discriminatory. Previously, 
Customer (contra Non-Customer) orders that add liquidity were assigned 
fee code PC or NC, depending on whether the order was in Penny 
Securities or Non-Penny Securities, respectively, and received a rebate 
of $0.01 per contract. Under the proposed changes, Customers executing 
an order in Penny and Non-Penny Securities with a Non-Customer on the 
liquidity adding side of orders executed in Penny and Non-Penny 
Securities will still be eligible for a rebate of $0.01 per contract, 
merely using a different fee code. Thus, the Exchange believes that the 
proposed change will continue to incentivize Customer order flow in 
Penny and Non-Penny Securities, which may lead to an increase in 
liquidity on the Exchange. An overall increase in liquidity benefits 
all market participants by providing more trading opportunities, which 
attracts Market Makers. An increase in Market Maker activity in turn 
facilitates tighter spreads, which may cause an additional 
corresponding increase in order flow from other market participants. 
The Exchange believes the proposed changes are equitable and not 
unfairly discriminatory because they will apply equally to all 
liquidity adding sides of Customer-to-Non-Customer transactions in 
Penny and Non-Penny Securities, i.e. all Customers will continue to 
receive a $0.01 rebate for these transactions. Further, the changes to 
fee codes NC and PC are reasonable, as the Exchange will, under the 
proposed rule changes, still offer a rebate of $0.01 for Simple 
Customer orders (including both Customer (contra Non-Customer) and 
Customer (contra-Customer), as is currently the case) that remove 
liquidity in Non-Penny and Penny Securities, respectively.\17\
---------------------------------------------------------------------------

    \17\ Customer (contra Customer) trades that add liquidity in 
Penny and Non-Penny Securities will continue to not be subject to 
fees. See EDGX Options Fee Schedule, Fee Codes and Associated Fees, 
Fee Codes TP and TN.
---------------------------------------------------------------------------

    The Exchange also believes the proposed change to increase the 
standard fee for Market Maker orders that remove liquidity in Non-Penny 
Securities (i.e., yield fee code NT) from $0.24 to $0.70 is reasonable, 
equitable, and not unfairly discriminatory. The Exchange believes the 
proposed rate change is reasonable because, as stated above, in order 
to operate in the highly competitive options markets, the Exchange and 
its competing exchanges seek to offer similar pricing structures, 
including assessing comparable rates for various types of orders. Thus, 
the Exchange believes the proposed rates are reasonable as they are 
generally aligned with and competitive with the amounts assessed for 
similar Market Maker orders on other options exchanges.\18\ The 
Exchange also believes that amending the standard fee amount associated 
with fee code NT represents an equitable allocation of fees and is not 
unfairly discriminatory because the fee will continue to automatically 
and uniformly apply to all Members' respective qualifying Market Maker 
orders.
---------------------------------------------------------------------------

    \18\ See e.g., MEMX Options Exchange Fee Schedule, Transactions 
Fees, which assesses a charge of $1.10 for Market Maker orders that 
remove liquidity in Non-Penny Securities.
---------------------------------------------------------------------------

Customer Volume Tiers
    The Exchange believes the proposed changes to the Customer Volume 
Tier program are reasonable because they continue to provide 
opportunities for Members to receive higher rebates by providing for 
incrementally increasing volume-based criteria they can reach for. The 
Exchange believes the tiers, as modified, continue to serve as a 
reasonable means to encourage Members to increase their liquidity on 
the Exchange, particularly in connection with additional Customer Order 
flow to the Exchange in order to benefit from the proposed enhanced 
rebates. The Exchange also notes that any overall increased liquidity 
that may result from the proposed tier incentives benefits all 
investors by offering additional flexibility for all investors to enjoy 
cost savings, supporting the quality of price discovery, promoting 
market transparency and improving investor protection.
    The Exchange believes that the proposed changes to the Customer 
Volume Tier program represent an equitable allocation of fees and is 
not unfairly discriminatory because Members will be eligible for these 
tiers and the corresponding enhanced rebates will apply uniformly to 
all Members that reach the proposed tier criteria. The Exchange 
believes that a number of market participants have a reasonable 
opportunity to satisfy the tiers' criteria as modified. While the 
Exchange has no way of knowing whether this proposed rule change would 
definitively result in any particular Member qualifying for the tiers 
as amended, the Exchange anticipates at least one Member meeting, or 
being reasonably able to meet, the revised Tier 1 criteria; 
approximately three Members being reasonably able to meet the revised 
Tier 2 criteria; approximately one Member being reasonably able to meet 
the revised Tier 3 criteria; approximately two Members being reasonably 
able to meet the revised Tier 4 criteria; and currently no Members 
meeting the revised Tier 5 criteria. However, the proposed tiers, as 
amended, are open to any Member that satisfies the tier's criteria. The 
Exchange also notes that the proposed changes 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, the 
Member will

[[Page 88162]]

merely not receive the corresponding enhanced rebates.
Supplemental AIM Tiers
    The Exchange believes its proposed changes related to the 
Supplemental AIM Tiers are reasonable, equitable and not unfairly 
discriminatory. The Exchange believes the proposed changes to 
Supplemental AIM Tiers 1 and 2 for orders yielding fee code BC are 
reasonable because the tiers continue to provide an enhanced rebate 
opportunity (albeit at a lower amount in the case of Supplemental AIM 
Tier 2), which the Exchange believes is still commensurate with the 
amended criteria. The Exchange also believes the proposed rule change 
to adopt new Supplemental AIM Tier 3 is reasonable because it provides 
an additional opportunity for Members to receive enhanced rebates for 
meeting certain thresholds, based on the Interaction Rate of the AIM 
order. The Exchange also believes the proposed enhanced rebate is 
commensurate with the proposed criteria. The proposed rule change is 
equitable and unfairly discriminatory as the amended criteria for 
Supplemental AIM Tiers 1 and 2, the amended rebate amount for 
Supplemental AIM Tier 2, and new Supplemental AIM Tier 3 apply 
uniformly to all Members submitting AIM Agency Orders to the Exchange. 
While the Exchange has no way of knowing whether this proposed rule 
change would definitively result in any particular Member qualifying 
for the tiers, as amended, the Exchange anticipates at least six 
Members meeting, or being reasonably able to meet, the revised Tier 1 
criteria; at least six Members meeting, or being reasonably able to 
meet, the revised Tier 2 criteria; and at least six Members meeting, or 
being reasonably able to meet, new Tier 3 criteria. However, the 
proposed tiers are open to any Member that satisfies the tiers' 
criteria.
    Overall, the Exchange believes the proposal encourages the use of 
AIM. As noted, the Exchange believes that the proposed changes would 
incentivize Agency Order flow to AIM Auctions, notwithstanding the 
potential for such orders to be broken up. Additional auction order 
flow provides market participants with additional trading opportunities 
at improved prices.

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. Particularly, the proposed 
fee code changes apply uniformly and automatically to all Members' 
respective qualifying orders. As noted above, under the proposed 
changes, Customers executing an order in Penny and Non-Penny Securities 
with a Non-Customer on the liquidity adding side of orders executed in 
Penny and Non-Penny Securities will still be eligible for a rebate of 
$0.01 per contract, merely using a different fee code. Further, the 
Exchange will, under the proposed rule changes, still offer a rebate of 
$0.01 for Simple Customer orders (including both Customer (contra Non-
Customer) and Customer (contra-Customer), as is currently the case) 
that remove liquidity in Non-Penny and Penny Securities, respectively. 
Thus, orders assigned to current fee code NC and PC will continue to 
receive the same rebate of $0.01, under fee codes CA, NC, and PC. 
Additionally, the proposed Customer Volume Tier and Supplement AIM Tier 
changes apply 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 
corresponding enhanced rebates (existing and as amended) if such 
criteria is met. Overall, the proposed change is designed to attract 
additional Customer order flow to the Exchange and overall order flow 
directly to the Exchange's Book. The Exchange believes that the 
modified and new tier criteria will incentivize market participants to 
strive to increase such order flow to the Exchange to receive the 
corresponding enhanced rebates and, as a result, increase trading 
opportunities, attract further Market Maker activity, further 
incentivize the provision of liquidity and continued order flow to the 
Book, and improve price transparency on the Exchange. Greater overall 
order flow and pricing transparency benefits all market participants on 
the Exchange by generally providing a cycle of more trading 
opportunities, enhancing market quality, and continuing to encourage 
Members to submit order flow and continue to contribute towards a 
robust and well-balanced market ecosystem to the benefit of 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 16 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 16% of the market share.\19\ 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.'' \20\ 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'. . . .''.\21\ 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.
---------------------------------------------------------------------------

    \19\ See supra note 3.
    \20\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \21\ 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)).
---------------------------------------------------------------------------

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.

[[Page 88163]]

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 \22\ and paragraph (f) of Rule 19b-4 \23\ 
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.
---------------------------------------------------------------------------

    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeEDGX-2023-075 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-2023-075. 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 (https://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 
a.m. and 3 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-2023-075 and should 
be submitted on or before January 10, 2024.
---------------------------------------------------------------------------

    \24\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\24\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-27919 Filed 12-19-23; 8:45 am]
BILLING CODE 8011-01-P