Document ID: SEC-2019-0114-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe EDGX Exchange, Inc.
Posted Date: 2019-02-14T05:00Z

[Federal Register Volume 84, Number 31 (Thursday, February 14, 2019)]
[Notices]
[Pages 4111-4113]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-02286]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85078; File No. SR-CboeEDGX-2019-002]

Self-Regulatory Organizations; Cboe EDGX Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change To 
Amend the Exchange's Fee Schedule Applicable to Its Equities Trading 
Platform (``EDGX Equities'') To Introduce a ``Cross-Asset Volume Tier''

February 8, 2019.
    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 January 29, 2019, Cboe EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I, II, 
and III below, which Items have been prepared by the Exchange. The 
Commission is publishing this notice to solicit comments on the 
proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe EDGX Exchange, Inc. (``EDGX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (the ``Commission'') a 
proposed rule change to amend the Exchange's fee schedule applicable to 
its equities trading platform (``EDGX Equities'') to introduce a 
``Cross-Asset Volume Tier.'' 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/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 purpose of the proposed rule change is to amend the EDGX 
Equities fee schedule to introduce a ``Cross-Asset Volume Tier'' under 
Footnote 1, effective February 1, 2019.
    Currently, with respect to the Exchange's equities trading 
platform, the Exchange determines the liquidity adding rebate that it 
will provide to Members using the Exchange's tiered pricing structure. 
The EDGX Equities fee schedule currently contains seven Add Volume 
Tiers that provide enhanced rebates, ranging from of $0.0025 to $0.0033 
per share, for orders yielding fee codes B,\3\ V,\4\ Y,\5\ 3 \6\ and 
4.\7\ The Exchange proposes to adopt an eighth tier under Footnote 1 
called the Cross-Asset Volume Tier. Particularly, the Exchange proposes 
to create a cross-asset tier which is designed to incentivize members 
to achieve certain levels of participation on both the Exchange's 
equities and options platform (``EDGX Options''). As

[[Page 4112]]

proposed, under the Cross-Asset Volume Tier, a Member would receive a 
rebate of $0.0030 per share if that Member (i) adds an ADV \8\ greater 
or equal to 0.20% of the TCV \9\ and (ii) has an ADV in Customer orders 
on EDGX Options greater or equal to 0.10% of average OCV.\10\ The 
Exchange notes that another Exchange has similar cross-asset add volume 
tiers.\11\
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    \3\ ``B'' is associated with displayed orders that add liquidity 
on EDGX for Tape B.
    \4\ ``V'' is associated with displayed orders that add liquidity 
on EDGX for Tape A.
    \5\ ``Y'' is associated with displayed orders that add liquidity 
on EDGX for Tape C.
    \6\ ``3'' is associated with displayed orders that add liquidity 
on EDGX for Tape A or C during the post-market or pre-market trading 
sessions.
    \7\ ``4'' is associated with displayed orders that add liquidity 
on EDGX for Tape B during the post-market or pre-market trading 
sessions.
    \8\ ``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.
    \9\ ``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.
    \10\ ``OCV'' means, for purposes of equities pricing, 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, using the definition of Customer as 
provided under the Exchange's fee schedule for EDGX Options.
    \11\ See Cboe BZX U.S. Equities Exchange Fee Schedule, Footnote 
1.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with Section 6 of the Act,\12\ in general, and furthers the 
requirements of Section 6(b)(4),\13\ in particular, as it is designed 
to provide for the equitable allocation of reasonable dues, fees and 
other charges among its [sic]
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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
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    In particular, the Exchange notes that volume-based discounts such 
as those currently maintained on the Exchange have been widely adopted 
by options exchanges 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 of an exchange's market 
quality; (ii) associated with higher levels of market activity, such as 
higher levels of liquidity provision and/or growth patterns; and (iii) 
introduction of higher volumes of orders into the price and volume 
discovery processes. The Exchange believes the proposal to add a new 
Cross-Asset Volume Tier under footnote 1 is reasonable because it 
provides Members an additional opportunity to receive an enhanced rate 
for orders that add liquidity and is a reasonable means to encourage 
Members to increase their liquidity on the Exchange in both equities 
and options. Deepening the Exchange's liquidity pool benefits investors 
by encouraging more price competition and providing additional 
opportunities to trade. The Exchange further believes the proposed 
threshold is commensurate with the proposed enhanced rebate and that it 
will encourage members to add increased liquidity to EDGX each month in 
both equities and options. Furthermore, the Exchange believes that the 
proposed Cross-Asset Volume Tier is not unfairly discriminatory as it 
applies uniformly to all Members.
    To the extent a Member participates on the Exchange but not on EDGX 
Options, the Exchange does believe that the proposal is still 
reasonable, equitably allocated and non-discriminatory with respect to 
such Member based on the overall benefit to the Exchange resulting from 
the success of EDGX Options. Particularly, the Exchange believes such 
success allows the Exchange to continue to provide and potentially 
expand its existing incentive programs to the benefit of all 
participants on the Exchange, whether they participate on EDGX Options 
or not. The proposed pricing program is also fair and equitable in that 
membership in EDGX Options is available to all market participants 
which would provide them with access to the benefits on EDGX Options 
provided by the proposed change, even where a member of EDGX Options is 
not necessarily eligible for the proposed increased rebate on the 
Exchange. Further, the proposed change will result in Members receiving 
either the same or an increased rebate than they would currently 
receive. The Exchange also notes that another Exchange has similar 
cross-asset volume tiers.\14\
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    \14\ See Cboe BZX U.S. Equities Exchange Fee Schedule, Footnote 
1.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Rather, the 
proposed change is designed to enhance competition by attracting 
additional liquidity and increasing the competitiveness of the 
Exchange. The proposed rebate tier would apply to all members uniformly 
based. 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. The 
proposed rule change reflects a competitive pricing structure designed 
to encourage market participants to direct their order flow to the 
Exchange.

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 \15\ and paragraph (f) of Rule 19b-4 \16\ 
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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    \15\ 15 U.S.C. 78s(b)(3)(A).
    \16\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CboeEDGX-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-CboeEDGX-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

[[Page 4113]]

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; the Commission does not edit personal identifying 
information from submissions. You should submit only information that 
you wish to make available publicly. All submissions should refer to 
File Number SR-Cboe-EDGX-2019-002 and should be submitted on or before 
March 7, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\17\
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    \17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-02286 Filed 2-13-19; 8:45 am]
 BILLING CODE 8011-01-P