Document ID: SEC-2018-1785-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe EDGA Exchange, Inc.
Posted Date: 2018-11-21T05:00Z

[Federal Register Volume 83, Number 225 (Wednesday, November 21, 2018)]
[Notices]
[Pages 58795-58798]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-25340]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-84599; File No. SR-CboeEDGA-2018-017]

Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change 
Relating To Amend the Exchange's Fee Schedule Applicable to its 
Equities Trading Platform

November 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 November 1, 2018, EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') filed with the Securities and Exchange Commission (the 
``Commission'') the proposed rule change as described in Items I and II 
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 Exchange's fee schedule applicable to 
its equities trading platform.
    The text of the proposed rule change is also available on the 
Exchange's website (http://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), 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

[[Page 58796]]

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its fee schedule, effective November 
1, 2018, to (i) amend transaction fee rates, (ii) amend the definition 
for fee code MT, (iii) adopt new Add and Remove Volume Tiers, (iv) 
amend the threshold under the RMPT/RMPL Tier, and (v) adopt a new 
Routing Tier.
Transaction Fee Changes
Orders That Add Liquidity
    In securities priced at or above $1.00, the Exchange currently 
charges a fee of $0.00080 per share for Displayed and Non-Displayed 
orders that add liquidity. All Displayed and Non-Displayed orders in 
securities priced below $1.00 that add liquidity are free. The Exchange 
first proposes to increase this transaction fee and assess a standard 
rate of $0.0030 per share for Displayed and Non-Displayed orders that 
add liquidity for securities at or above $1.00 that are appended with 
fee codes B, V, Y, 3, 4, RP, HA, DA, and DM. The Exchange notes that it 
is not proposing to increase the fee for Non-Displayed orders that add 
liquidity using Mid-Point Peg, which orders yield fee code MM. All 
Displayed and Non-Displayed orders in securities priced below $1.00 
that add liquidity would continue to be free.
Orders That Remove Liquidity
    In securities priced at or above $1.00, the Exchange currently 
provides a rebate of $0.00040 per share for Displayed orders that 
remove liquidity (i.e., yields fee codes N, W, 6 and BB) and provides 
free executions for Non-Displayed orders that remove liquidity (i.e., 
yields fee codes DR, DT, HR, and MT). All Displayed and Non-Displayed 
orders in securities priced below $1.00 that remove liquidity are 
currently free, with the exception of orders that yield fee codes HR 
and MT, which result in a fee of 0.05% of dollar value.
    With respect to Displayed orders priced at or above $1.00 that 
remove liquidity, the Exchange proposes to increase the per share 
rebate from $0.00040 to $0.0024 (i.e., yields fee codes N, W, 6, or 
BB). All Displayed orders in securities priced below $1.00 would 
continue to be free.
    With respect to Non-Displayed orders priced at or above $1.00 that 
remove liquidity, the Exchange proposes to offer a $0.0024 per share 
rebate for Non-Displayed orders that remove liquidity using MidPoint 
Discretionary order not within discretionary range (i.e., yields fee 
code DR).
    With respect to the Non-Displayed orders priced below $1.00 that 
remove liquidity (i.e., yields fee code HR) and removes liquidity using 
MidPoint Peg (i.e., yields fee code MT \3\), the Exchange proposes to 
eliminate the current fee of 0.05% of dollar value and make these 
executions free, which will result in all Non-Displayed orders in 
securities priced below $1.00 being treated the same (i.e., no fees or 
rebates assessed).
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    \3\ The Exchange is proposing to amend the definition of orders 
that yield fee code MT, as further described in this rule filing.
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Fee Code MT
    The Exchange also proposes to modify the definition of fee code MT. 
Currently, fee code MT is appended to all Non-Displayed orders that 
remove liquidity using Mid Point Peg order type.\4\ The Exchange 
proposes to modify the types of orders that yield fee code MT, such 
that fee code MT will be appended to all orders that remove Mid-Point 
Peg Order liquidity (``Mid-Point Peg liquidity'') from EDGA, (i.e., any 
order for which a Mid-Point Peg order that adds liquidity (fee code MM) 
is the contra). The Exchange notes that the proposed amended definition 
for the MT fee code is the same as the definition (i.e., configuration) 
for the same fee code (MT) on its affiliate exchange, Cboe BYX 
Exchange, Inc.\5\
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    \4\ See Cboe EDGA Rule 11.8(d). Mid-Point Peg Orders are non-
displayed Market Orders or Limit Orders with an instruction to 
execute at the midpoint of the NBBO, or, alternatively, pegged to 
the less aggressive of the midpoint of the NBBO or one minimum price 
variation inside the same side of the NBBO as the order.
    \5\ See Cboe BYX Equities Exchange Fee Schedule, Fee Codes and 
Associated Fees, fee code MT.
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Add/Remove Volume Tiers
    The Exchange next proposes to adopt an Add Volume Tier, Tier 1 and 
Remove Volume Tier, Tier 1 (under new footnote 7). Particularly, 
proposed Add Volume Tier 1 would provide a reduced fee of $0.0026 per 
share for members that add an ADAV of greater than or equal to 0.10% of 
the TCV \6\ for orders that add liquidity yielding fee codes 3, 4, B, v 
and Y. The Exchange proposes to also add language in its Definitions 
section defining ``ADAV''. Specifically, ADAV shall mean average daily 
added volume calculated as the number of shares added per day.\7\ The 
Exchange notes that the proposed definition of ADAV is similar to 
definitions at other Exchanges, such as its affiliate Exchange, Cboe 
BYX Exchange, Inc. (``BYX''). Additionally, BYX has a similar Add 
Volume Tiers that require members to reach ADAV thresholds of the 
TCV.\8\ The Exchange believes the proposed change will encourage 
members to increase their liquidity on the Exchange.
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    \6\ 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.
    \7\ Like ADV (which means average daily volume calculated as the 
number of shares added to, removed from, or routed by, the Exchange 
(or any subset thereof), ADAV will be calculated on a monthly basis. 
Additionally, as with ADV, the Exchange will exclude from its 
calculation of ADAV shares added, removed, or routed on any day that 
the Exchange's system experiences a disruption that lasts for more 
than 60 minutes during Regular Trading Hours, on any day with a 
scheduled early market close, and on the last Friday in June. A 
member will be able to aggregate ADAV (and ADV) with other Members 
that control, are controlled by, or are under common control with 
such Member).
    \8\ See Cboe BYX Exchange, Inc. Equities Exchange Fee Schedule, 
Footnote 1.
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    The Exchange proposes to adopt Remove Volume Tier 1, which would 
provide an enhanced rebate of $0.0026 per share for members that (1) 
has an ADAV of greater than or equal to 0.20% of the TCV and (2) has a 
remove ADV \9\ greater than or equal to 0.40% of the TCV for orders 
that remove liquidity yielding fee codes N, W, 6 and BB. The Exchange 
believes the proposed tier will encourage members to increase their 
liquidity on the Exchange. The Exchange also notes that other exchanges 
have similar volume tiers with similar requirements.\10\
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    \9\ 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.
    \10\ See Nasdaq BX, Inc. (``BX'') Rule 7018, Nasdaq BX Equities 
System Order Execution and Routing, which provides a credit for 
orders that meet thresholds relating to accessing liquidity and 
adding liquidity. See also Cboe BYX U.S. Equities Exchange Fee 
Schedule, Volume Tier 8 under Footnote 1.
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    The Exchange believes the proposed volume requirements under both 
Add and Remove Volume Tiers 1 are commensurate with the level of the 
incentives provided.
Amend RMPT/RMPL Tier
    The Exchange currently offers a tier under footnote 1, the RMPT/
RMPL Tier under which a Member receives a discounted fee of $0.0008 per 
share for orders yielding fee code PX where that Member meets certain 
required criteria.

[[Page 58797]]

Fee code PX is appended to orders that are routed using the RMPL 
routing strategy to a destination not covered by fee code PL, or are 
routed using the RMPT routing strategy, and are assessed a fee of 
$0.00120 per share on securities priced over $1.00, and a fee of 30% of 
the total dollar value on securities priced below $1.00. Under Tier 1, 
a Member is charged a discounted fee of $0.0008 per share for orders 
yielding fee code PX where they add or remove an ADV greater than or 
equal to 4,000,000 shares using the RMPT or RMPL \11\ routing 
strategies (i.e., yielding fee codes PA, PL, PT and PX). The Exchange 
proposes amend the ADV requirement of Tier 1 from greater or equal to 
4,000,000 shares to 2,000,000 shares.
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    \11\ See Cboe EDGA Rule 11.11(g)(13).
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Adopt ROUT Tier
    The Exchange proposes to also adopt a new routing tier for orders 
routed using the ROUT strategy \12\ (``ROUT Tier''), under Footnote 1 
of the Fees Schedule. Particularly, the Exchange proposes to offer a 
discounted fee of $0.0026 per share for orders yielding fee code RT 
where that Member meets certain required criteria. Fee code RT is 
appended to orders that are routed using the ROUT routing strategy, and 
are assessed a fee of $0.00280 per share on securities priced over 
$1.00, and a fee of 30% of the total dollar value on securities priced 
below $1.00. The Exchange proposes to provide that under ROUT Tier 1, a 
Member will be charged a discounted fee of $0.0026 per share for orders 
yielding fee code RT where the Member routes an ADV than or equal to 
3,000,000 shares using routing strategy ROUT (i.e., yielding fee codes 
RT and RX).\13\ In connection the proposed changes, the Exchange 
proposes to also change the title of Footnote 1 from ``RMPT/RMPL 
Tiers'' to ``Routing Tiers'' to address both the RMPT/RMPL Tier and the 
new proposed ROUT Tier.
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    \12\ See Cboe EDGA Rule 11.11(g)(3).
    \13\ Pursuant to the Fees Schedule, variable rates provided by 
tiers apply only to executions in securities priced at or above 
$1.00.
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2. Statutory Basis
    The Exchange also believes the proposed rule change is consistent 
with Section 6(b)(4) of the Act, 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.
    The Exchange believes its proposal to increase rates for Non-
Displayed and Displayed orders that add liquidity (other than orders 
that yield fee code MM) is reasonable because the Exchange must balance 
the cost of rebates for orders that remove liquidity (and as described 
above, the Exchange is increasing the rebates provided for orders that 
remove liquidity). Additionally, the Exchange notes that the proposed 
fee is similar to, and in line with, transaction fees assessed on other 
Exchanges.\14\ Additionally the Exchange notes the proposed fee 
increase applies uniformly to members.
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    \14\ See e.g., NYSE Arca Equities, Fees and Charges, NYSE Arca 
Marketplace: Trade Related Fees and Credits.
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    The Exchange believes the proposed increased rebate for Displayed 
orders that remove liquidity is reasonable, equitable and not unfairly 
discriminatory because it provides a higher rebate to members and is 
designed to further incentivize members to bring additional liquidity 
to the Exchange, thereby promoting price discovery and enhancing order 
execution opportunities for members. The Exchange believes the proposed 
changes are equitable and not unfairly discriminatory because they 
apply equally to all members. Furthermore, the Exchange's inverted fee 
structure would continue to incentivize liquidity takers since orders 
that remove liquidity would remain eligible for better pricing--
including increased rebates for displayed orders and free executions 
for non-displayed orders--than orders that add liquidity and are 
charged a fee.
    The Exchange believes the proposal to adopt a rebate for orders 
that remove liquidity using MidPoint Discretionary Orders not within 
discretionary range (i.e., orders yielding fee code DR) is reasonable 
because it provides a rebate to members for these executions they were 
not otherwise receiving. Additionally, the Exchange notes the proposed 
rebate is the same as the rebate offered for Displayed orders that 
remove liquidity. The Exchange notes the proposed rule change applies 
uniformly to all members.
    The Exchange believes the proposal to provide free executions for 
orders priced below $1.00 and yielding fee codes HR and MT is 
reasonable, because members will no longer be assessed any fees for 
these particular transactions. The Exchange also notes the proposed 
change results in all Non-Displayed orders in securities priced below 
$1.00 being treated the same (i.e., no fees or rebates assessed). The 
proposed change also applies equally to all members.
    The Exchange believes the proposed change to the definition for fee 
code MT is reasonable because orders that currently yield fee code MT 
(i.e., Non-Displayed Mid-Point Peg orders that remove liquidity) will 
continue to receive free executions, as going forward they will be 
appended with either fee code HR (i.e., Non-displayed orders that 
remove liquidity), if contra to any order that adds liquidity other 
than Mid-Point Peg orders, or MT (i.e., an order that removes Mid-Point 
order liquidity), if contra to a Mid-Point Peg order that adds 
liquidity. Additionally, the proposed rule change is reasonable because 
all Displayed and Non-Displayed orders that remove a Non-Displayed Mid-
Point Peg Order will also receive a free execution. The proposed rule 
change is equitable and not unfairly discriminatory because it applies 
to all members. Additionally, as noted above, the proposed definition 
of fee code MT is the same as the definition used on another 
exchange.\15\
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    \15\ See Cboe BYX Equities Exchange Fee Schedule, Fee Codes and 
Associated Fees, fee code MT.
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    The Exchange believes the proposal to adopt an Add and Remove 
Volume Tier, along with a ROUT Tier, is reasonable because it provides 
members an opportunity to receive a reduced fee or enhanced rebate, 
depending on the Tier. The Exchange additionally notes that volume-
based discounts 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 (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 proposed required criteria of the Volume Tiers are 
intended to incentivize Members to send additional orders to the 
Exchange in an effort to qualify for the reduce fee and enhanced rebate 
made available by the respective tiers. The Exchange also notes that 
increased volume on the Exchange provides greater trading opportunities 
for all market participants. As noted previously, the Exchange also 
believes the proposed required criteria under the Add and Remove Volume 
Tiers 1 and ROUT Tier are commensurate with the level of the incentives 
provided.
    The Exchange believe that the amendment to the RMPL/RMPT Tier is 
reasonable and equitable because the amount of the discounted fee is 
not changing and because the amendment to the required criteria is 
designed to make it easier for market participants to

[[Page 58798]]

satisfy the tier and thus receive a discounted rate. The Exchange also 
believes notwithstanding the proposed change, RMPL/RMPT Tier 1 still 
attracts additional midpoint liquidity to the Exchange, resulting in 
increased price improvement opportunities for orders seeking an 
execution at the midpoint of the NBBO on the Exchange or elsewhere. The 
Exchange notes that routing through the Exchange is voluntary. The 
Exchange also believes that the proposed routing tier change is non-
discriminatory because it applies uniformly to all members.

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. 
Particularly, the proposed rates and rebates would apply uniformly to 
all members, and 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 changes will impair the 
ability of members or competing venues to maintain their competitive 
standing in the financial markets. Further, excessive fees would serve 
to impair an exchange's ability to compete for order flow and members 
rather than burdening competition. Moreover, the proposed fee changes 
are designed to incentivize liquidity, which the Exchange believes will 
benefit all market participants by encouraging a transparent and 
competitive market. 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 \16\ and paragraph (f) of Rule 19b-4 
thereunder.\17\ 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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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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-CboeEDGA-2018-017 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-2018-017. 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 this filing will also 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-2018-017 and should be 
submitted on or before December 12, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-25340 Filed 11-20-18; 8:45 am]
BILLING CODE 8011-01-P