Document ID: SEC-2017-2051-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe EDGX Exchange, Inc.
Posted Date: 2017-12-14T05:00Z

[Federal Register Volume 82, Number 239 (Thursday, December 14, 2017)]
[Notices]
[Pages 58996-58998]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-26911]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82240; File No. SR-CboeEDGX-2017-003]

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

December 8, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 30, 2017, Cboe EDGX Exchange, Inc. (``EDGX'' or 
``Exchange'') 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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[[Page 58997]]

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 to: (i) Reduce the 
rebate applicable to fee code ZA; and (ii) provide the enhanced rebate 
offered by the Investor Depth Tier under footnote 1 of the fee schedule 
to orders that yield fee code ZA where the Member satisfies the tier's 
required criteria.
    Currently, the Exchange determines the liquidity adding rebate that 
it will provide to Members using the Exchange's fee code and tiered 
pricing structure. Fee code ZA is appended to Retail Orders \6\ that 
add liquidity on the Exchange. Retail Orders which yield fee code ZA 
currently receive a rebate of $0.0034 per share in securities priced at 
or above $1.00 and a rebate of $0.00003 per share in securities priced 
below $1.00. The Exchange now proposes to reduce the rebate provided by 
fee code ZA from $0.0034 per share to $0.0032 per share for securities 
priced at or above $1.00. The Exchange does not proposes to amend the 
rebate provided by fee code ZA for securities priced below $1.00.
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    \6\ ``Retail Orders'' are defined as ``an agency or riskless 
principal order that meets the criteria of FINRA Rule 5320.03 that 
originates from a natural person and is submitted to the Exchange by 
a Retail Member Organization, provided that no change is made to the 
terms of the order with respect to price or side of market and the 
order does not originate from a trading algorithm or any other 
computerized methodology.'' See Exchange Rule 11.21(a)(2).
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    The Exchange offers additional rebates depending on the volume 
tiers for which such Member qualifies. As is the case with any rebate 
on the fee schedule, to the extent that a Member qualifies for higher 
rebates than those provided under a volume tier, the higher rebate 
shall apply. Footnote 1 offers volume tiered rebates ranging from 
$0.0025 to $0.0033 per share to orders yielding fee codes B,\7\ V, \8\ 
Y,\9\ 3 \10\ and 4.\11\ Under footnote 1's Investor Depth Tier, a 
Member will receive a rebate of $0.0033 per share where they: (i) add 
an ADV >= 0.12% of the TCV; (ii) have an ``added liquidity'' as a 
percentage of ``added plus removed liquidity'' >= 85%; and (iii) adds 
an ADV >= 400,000 shares as non-displayed orders that yield fee code 
HA,\12\ HI,\13\ and/or MM.\14\ The Exchange now proposes to also 
provide the rebate offered by the Investor Depth Tier to orders that 
yield fee code ZA where the Member satisfies the tier's required 
criteria. As such, Member's Retail Orders that yield fee code ZA would 
receive an enhanced rebate of $0.0033 per share where that Member 
satisfies the tier's required criteria.
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    \7\ Fee code B is appended to displayed orders that add 
liquidity in Tape B securities and are 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/.
    \8\ Fee code V is appended to displayed orders that add 
liquidity in Tape A securities and are provided a rebate of $0.0020 
per share. Id.
    \9\ Fee code Y is appended to displayed orders that add 
liquidity in Tape C securities and are provided a rebate of $0.0020 
per share. Id.
    \10\ Fee code 3 is appended to displayed orders that add 
liquidity in Tape A or C securities during the post-market or pre-
market sessions and are provided a rebate of $0.0020 per share. Id.
    \11\ Fee code 4 is appended to displayed orders that add 
liquidity in Tape B securities during the post-market or pre-market 
sessions and are provided a rebate of $0.0020 per share. Id.
    \12\ Fee code HA is appended to non-displayed orders that add 
liquidity and are provided a rebate of $0.0015 per share. See the 
Exchange's fee schedule available at http://markets.cboe.com/us/equities/membership/fee_schedule/edgx/.
    \13\ Fee code HI is appended to non-displayed orders that add 
liquidity and receive price improvement and are executed free of 
charge. Id.
    \14\ Fee code MM is appended to non-displayed orders that add 
liquidity using the Mid-Point Peg order type. Id.
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Implementation Date
    The Exchange proposes to implement these amendments to its fee 
schedule as of December 1, 2017.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\15\ in general, and 
furthers the objectives of Section 6(b)(4),\16\ 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. The proposed rule change reflects a competitive 
pricing structure designed to incent market participants to direct 
their order flow to the Exchange. The Exchange believes the rates 
remain competitive with those charged by other venues and, therefore, 
reasonable and equitably allocated to Members. The Exchange further 
believes that the proposed amendments are non-discriminatory because 
they apply uniformly to all Members.
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    \15\ 15 U.S.C. 78f.
    \16\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes it is equitable and reasonable to lower the 
rebate for Retail Orders that yield fee code ZA from $0.0034 to $0.0032 
per share as the level of rebate is either equal to or greater than the 
rebate offered on another exchange.\17\ The Exchange further believes 
the proposed fee change is equitable and reasonable because it 
continues to enable Retail Orders that add liquidity to receive an 
enhanced rebate by qualifying for the Investor Depth Tier under 
footnote 1. Doing so should encourage market participants to direct 
more order flow to the Exchange in attempt to qualify for the Investor 
Depth tier and receive an enhanced rebate for their Retail Orders. 
Volume-based rebates and fees such as proposed herein have been widely 
adopted by equities and 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 the value to 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

[[Page 58998]]

into the price and volume discovery processes.
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    \17\ NYSE Arca, Inc. (``NYSE Arca'') provides a standard rebate 
of $0.0030 per share for retail orders that add liquidity. See the 
NYSE Arca fee schedule available at https://www.nyse.com/publicdocs/nyse/markets/nyse-arca/NYSE_Arca_Marketplace_Fees.pdf. Cboe BZX 
Exchange, Inc. (``BZX'') provides a rebate of $0.0032 per share to 
retail orders that add liquidity. See the BZX fee schedule available 
at http://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
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(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. Similarly, the Exchange does 
not believe that the proposed change to the Exchange's tiered pricing 
structure burdens competition, but instead, enhances competition by 
modifying pricing incentives to attract order flow and incentivize 
participants to increase their participation on the Exchange. 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 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 \18\ and paragraph (f) of Rule 19b-4 
thereunder.\19\ 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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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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-2017-003 on the subject line.

Paper Comments

     Send paper comments in triplicate to Brent J. Fields, 
Secretary, Securities and Exchange Commission, 100 F Street NE, 
Washington, DC 20549-1090.

All submissions should refer to File Number SR-CboeEDGX-2017-003. 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-2017-003 and should be 
submitted on or before January 4, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2017-26911 Filed 12-13-17; 8:45 am]
 BILLING CODE 8011-01-P