Document ID: SEC-2018-0785-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe EDGX Exchange, Inc.
Posted Date: 2018-05-21T04:00Z

[Federal Register Volume 83, Number 98 (Monday, May 21, 2018)]
[Notices]
[Pages 23515-23517]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-10707]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83240; File No. SR-CboeEDGX-2018-014]

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

May 15, 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 May 1, 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 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 (i) eliminate Mega 
Tier 2, (ii) eliminate the Step-Up Tier, (iii) modify Tape B Tier 1 and 
eliminate Tape B Tier 2 and (iv) increase the fee for orders that yield 
fee code D, effective May 1, 2018.
    The Exchange first proposes to eliminate Mega Tier 2. Mega Tier 2 
currently provides Members a rebate of $0.0032 per share where a Member 
(i) adds or routes a combined ADV \6\ greater than or equal to 
4,000,000 shares prior to 9:30 a.m. or after 4:00 p.m. and (ii) adds an 
ADV greater than or equal to 0.65% of the TCV,\7\ including during both 
market hours and pre and post-trading hours. The Exchange no longer 
wishes to maintain this tier level. As such, the Exchange proposes to 
eliminate Mega Tier 2 and rename Mega Tier 3 accordingly.
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    \6\ 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. See Exchange's fee schedule.
    \7\ 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 Exchange's fee schedule.
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    The Exchange next proposes to eliminate the Step-Up Tier, which 
provides a $0.0032 per share rebate where a Member (i) adds an ADV 
greater than or equal to 0.40% of the TCV and (ii) has a Step-Up Add 
TCV from January 2017 greater than or equal to 0.10%. The Exchange no 
longer wishes to maintain this tier level and therefore proposes to 
delete it.
    The Exchange also proposes to modify Tape B Tier 1. Currently, for 
orders that yield fee codes B and 4, the Exchange provides a rebate of 
$0.0020 per share for orders that add liquidity for securities at or 
above $1.00, and a rebate of $0.00003 per share for orders that add 
liquidity for securities below $1.00. Pursuant to Tape B Volume Tier 1, 
a Member will receive an enhanced rebate of $0.0027 where a Member adds 
an ADV greater than or equal to 0.02% of the TCV in Tape B Securities. 
The Exchange proposes to increase the ADV requirement to greater than 
or equal to 0.03% of the TCV in Tape B securities. The Exchange 
believes the proposed change to the Tape B Volume Tier 1 criteria will 
encourage the entry of additional orders to the Exchange. The Exchange 
also no longer desires to maintain Tape B Volume Tier 2 and therefore 
proposes to delete it.
    Lastly, the Exchange proposes to increase the fee for orders 
yielding fee code D, which results from an order routed to the New York 
Stock Exchange (``NYSE'') or routed using the RDOT routing strategy. 
Particularly, NYSE recently implemented certain pricing changes related 
to Tapes B and C securities, including adopting a per tape fee of 
$0.00280 per share to remove liquidity from the Exchange for member

[[Page 23516]]

organizations with an Adding ADV of at least 50,000 shares for that 
respective Tape.\8\ Based on the changes in pricing at NYSE, the 
Exchange is proposing to increase its fee for orders executed at NYSE 
that yield fee code D from $0.00275 to $0.00280.
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    \8\ See NYSE Trader Update, NYSE--Fees for Trading Tapes B and C 
securities, dated April 2, 2018, available at https://www.nyse.com/publicdocs/nyse/markets/nyse/NYSE_Fee_Change_BandC_April2018.pdf.
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2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with the objectives of Section 6 of the Act,\9\ in general, and 
furthers the objectives of Section 6(b)(4),\10\ 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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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposal to eliminate the Mega Tier 
2, Step-Up Tier and Tape B Tier 2 is reasonable, fair, and equitable 
because the current tiers are not providing the desired result of 
incentivizing Members to increase their participation in EDGX Equities. 
Therefore, eliminating these tiers will have a negligible effect on 
order flow and market behavior. The Exchange believes the proposed 
changes are not unfairly discriminatory because they will apply equally 
to all Members.
    The Exchange next notes that volume-based discounts such as those 
currently maintained on the Exchange have been widely adopted by 
exchanges and are equitable and non-discriminatory because they are 
open to all Members on an equal basis and provide additional benefits 
or discounts that are reasonably related to the value of an exchange's 
market quality associated with higher levels of market activity, such 
as higher levels of liquidity provision and/or growth patterns, and 
introduction of higher volumes of orders into the price and volume 
discovery processes. While the proposed modification to the existing 
Tape B Volume Tier 1 makes such tier slightly more difficult to attain, 
it is intended to incentivize Members to send additional volume to the 
Exchange in an effort to qualify or continue to qualify for the 
enhanced rebate made available by the tier. As such, the Exchange also 
believes that the proposed changes are reasonable. The Exchange notes 
that increased volume on the Exchange provides greater trading 
opportunities for all market participants.
    The Exchange lastly believes the proposed increase to orders 
yielding fee code D is reasonable because it reflects a pass-through of 
the pricing increase by NYSE noted above. The Exchange further believes 
the proposed fee change is equitable and non-discriminatory because it 
applies uniformly to all Members.

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

    The Exchange believes the proposed amendments to its fee schedule 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
does not believe that the proposed changes represent a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. Members may opt to disfavor the 
Exchange's pricing if they believe that alternatives offer them better 
value. Accordingly, the Exchange does not believe that the proposed 
change will impair the ability of Members or competing venues to 
maintain their competitive standing in the financial markets.

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 \11\ and paragraph (f) of Rule 19b-4 
thereunder.\12\ 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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    \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 [email protected]. Please include 
File Number SR-CboeEDGX-2018-014 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-2018-014. 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-2018-014 and should be 
submitted on or before June 11, 2018.
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    \13\ 17 CFR 200.30-3(a)(12).

[[Page 23517]]

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    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-10707 Filed 5-18-18; 8:45 am]
 BILLING CODE 8011-01-P