Document ID: SEC-2023-0480-0001
Agency: sec
Document Type: Notice
Title: Self-Regulatory Organizations; Proposed Rule Changes: Cboe EDGX Exchange, Inc.
Posted Date: 2023-05-03T04:00Z

[Federal Register Volume 88, Number 85 (Wednesday, May 3, 2023)]
[Notices]
[Pages 27940-27946]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-09335]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97393; File No. SR-CboeEDGX-2023-030

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

April 27, 2023.
    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 April 17, 2023, Cboe EDGX Exchange, Inc. (``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 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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[[Page 27941]]

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 applicable to its 
equities trading platform (``EDGX Equities'') as follows: (1) by 
modifying and introducing certain Growth Tiers; (2) by modifying the 
criteria of Non-Displayed Step-Up Volume Tier 1; (3) by modifying and 
introducing certain Remove Volume Tiers; (4) by modifying the criteria 
of Retail Growth Tier 3; and (5) by modifying the rates associated with 
certain fee codes. The Exchange proposes to implement these changes 
effective April 3, 2023.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
April 3, 2023 (SR-CboeEDGX-2023-024). On April 17, 2023, the 
Exchange withdrew that filing and submitted SR-CboeEDGX-2023-029. On 
April 17, 2023, the Exchange withdrew SR-CboeEDGX-2023-029 and 
submitted this proposal.
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    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 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues 
that do not have similar self-regulatory responsibilities under the 
Securities Exchange Act of 1934 (the ``Act''), to which market 
participants may direct their order flow. Based on publicly available 
information,\4\ no single registered equities exchange has more than 
17% of the market share. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. The Exchange in 
particular operates a ``Maker-Taker'' model whereby it pays rebates to 
members that add liquidity and assesses fees to those that remove 
liquidity. The Exchange's Fee Schedule sets forth the standard rebates 
and rates applied per share for orders that provide and remove 
liquidity, respectively. Currently, for orders in securities priced at 
or above $1.00, the Exchange provides a standard rebate of $0.00160 per 
share for orders that add liquidity and assesses a fee of $0.0030 per 
share for orders that remove liquidity.\5\ For orders in securities 
priced below $1.00, the Exchange provides a standard rebate of $0.00009 
per share for orders that add liquidity and assesses a fee of 0.30% of 
the total dollar value for orders that remove liquidity.\6\ 
Additionally, in response to the competitive environment, the Exchange 
also offers tiered pricing which provides Members opportunities to 
qualify for higher rebates or reduced fees where certain volume 
criteria and thresholds are met. Tiered pricing provides an incremental 
incentive for Members to strive for higher tier levels, which provides 
increasingly higher benefits or discounts for satisfying increasingly 
more stringent criteria.
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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (March 24, 2023), available at https://www.cboe.com/us/equities/_statistics/.
    \5\ See EDGX Equities Fee Schedule, Standard Rates.
    \6\ Id.
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Growth Tiers
    Under footnote 1 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers. In particular, the Exchange offers two 
Growth Tiers that each provide an enhanced rebate for Members' 
qualifying orders yielding fee codes B,\7\ V,\8\ Y,\9\ 3,\10\ and 
4,\11\ where a Member reaches certain add volume-based criteria, 
including ``growing'' its volume over a certain baseline month. First, 
the Exchange is proposing to introduce new Growth Tier 1 to provide 
Members an additional manner in which they could receive an enhanced 
rebate if certain criteria is met. The proposed criteria for proposed 
Growth Tier 1 is as follows:
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    \7\ Fee code B is appended to orders adding liquidity to EDGX in 
Tape B securities.
    \8\ Fee code V is appended to orders adding liquidity to EDGX in 
Tape A securities.
    \9\ Fee code Y is appended to orders adding liquidity to EDGX in 
Tape C securities.
    \10\ Fee code 3 is appended to orders adding liquidity to EDGX 
in the pre and post market in Tapes A or C securities.
    \11\ Fee code 4 is appended to orders adding liquidity to EDGX 
in the pre and post market in Tape B securities.
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     Growth Tier 1 provides a rebate of $0.0020 per share for 
securities priced above $1.00 to qualifying orders (i.e., orders 
yielding fee B, V, Y, 3, or 4) where Member adds a Step-Up ADAV \12\ 
from January 2023 >=0.10% of the TCV \13\ or Member adds a Step-Up ADAV 
from January 2023 >=10,000,000.
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    \12\ ``Step-Up ADAV'' means ADAV in the relevant baseline month 
subtracted from current ADAV. ADAV means average daily added volume 
calculated as the number of shares added per day. ADAV is calculated 
on a monthly basis.
    \13\ ``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.
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    Proposed Growth Tier 1 will provide a lower rebate than other 
existing Growth Tiers, but this lower rebate is commensurate with the 
difficulty of meeting the less stringent criteria associated with 
proposed Growth Tier 1.
    Second, the Exchange proposes to renumber current Growth Tiers 1 
and 2 and modify the criteria of proposed Growth Tier 3 (current Growth 
Tier 2). Currently, Growth Tier 2 (proposed Growth Tier 3) reads as 
follows:
     Growth Tier 2 provides a rebate of $0.0034 per share to 
qualifying orders (i.e., orders yielding fee codes B, V, Y, 3, or 4) 
where (1) Member adds a Step-Up ADAV from October 2022 >=0.15% of the 
TCV or Member adds a Step-Up ADAV from October 2022 >=15,000,000; and 
(2) Member has a total remove ADV \14\ >=0.45% of TCV or Member has a 
total remove ADV >=45,000,000; and (3) Member adds a Retail Step-Up ADV 
\15\

[[Page 27942]]

(i.e., yielding fee codes ZA \16\ or ZO \17\) from August 2022 >=0.10% 
of TCV.
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    \14\ ``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.
    \15\ ``Step-Up ADV'' means ADV in the relevant baseline month 
subtracted from current day ADV.
    \16\ Fee code ZA is appended to Retail Orders that add 
liquidity.
    \17\ Fee code ZO is appended to Retail orders that adds 
liquidity during the pre- and post-market.
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    Now, the Exchange proposes to remove the third prong of criteria. 
The proposed criteria for current Growth Tier 2 (proposed Growth Tier 
3) is as follows:
     Proposed Growth Tier 3 provides a rebate of $0.0034 per 
share to qualifying orders (i.e., orders yielding fee codes B, V, Y, 3, 
or 4) where (1) Member adds a Step-Up ADAV from October 2022 >=0.15% of 
the TCV or Member adds a Step-Up ADAV from October 2022 >=15,000,000; 
and (2) Member has a total remove ADV >=0.45% of TCV or Member has a 
total remove ADV >=45,000,000.
    The proposed modification to proposed Growth Tier 3 removes a 
criteria designed to encourage Members to grow their volume in retail 
orders on the Exchange. By removing a criteria while keeping the 
enhanced rebate the same, the proposed criteria slightly decreases the 
difficulty required for Members to meet the applicable tier threshold. 
By introducing proposed Growth Tier 1 and decreasing the difficulty 
required under proposed Growth Tier 3, Members are still incentivized 
to grow their volume on the Exchange, thereby contributing to a deeper 
and more liquid market, which benefits all market participants and 
provides greater execution opportunities on the Exchange.
Non-Displayed Add Volume Tiers
    In addition to the Growth Tiers offered under footnote 1, the 
Exchange also offers Non-Displayed Add Volume Tiers that each provide 
an enhanced rebate for Members' qualifying orders yielding fee codes 
DM,\18\ HA,\19\ MM,\20\ and RP,\21\ where a Member reaches certain 
volume-based criteria offered in each tier. The Exchange now proposes 
to amend the criteria of current Non-Displayed Step-Up Volume Tier 1. 
Currently, the criteria for Non-Displayed Step-Up Volume Tier 1 is as 
follows:
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    \18\ Fee code DM is appended to orders that add liquidity using 
MidPoint Discretionary Order within discretionary range.
    \19\ Fee code HA is appended to non-displayed orders that add 
liquidity.
    \20\ Fee code MM is appended to non-displayed orders that add 
liquidity using Mid-Point Peg.
    \21\ Fee code RP is appended to non-displayed orders that add 
liquidity using Supplemental Peg.
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     Non-Displayed Step-Up Volume Tier 1 provides a rebate of 
$0.0026 per share to qualifying orders (i.e., orders yielding fee code 
DM, HA, MM, or RP) where (1) Members adds a Step-Up ADAV from October 
2022 >=0.15% of the TCV or Member adds a Step-Up ADAV from October 2022 
>=15,000,000; and (2) Member has a total remove ADV >=0.45% of TCV or 
Member has a total remove ADV >=45,000,000; and (3) Member adds a 
Retail Step-Up ADV (i.e., yielding fee codes ZA or ZO) from August 2022 
>=0.10% of TCV.
    Now, the Exchange proposes to remove the third prong of criteria. 
The proposed criteria for Non-Displayed Step-Up Volume Tier 1 is as 
follows:
     Non-Displayed Step-Up Volume Tier 1 provides a rebate of 
$0.0026 per share to qualifying orders (i.e., orders yielding fee code 
DM, HA, MM, or RP) where (1) Members adds a Step-Up ADAV from October 
2022 >=0.15% of the TCV or Member adds a Step-Up ADAV from October 2022 
>=15,000,000; and (2) Member has a total remove ADV >=0.45% of TCV or 
Member has a total remove ADV >=45,000,000.
    The proposed modification to Non-Displayed Step-Up Volume Tier 1 is 
intended to remove criteria designed to incentivize Members to add non-
displayed retail volume on the Exchange. By removing a criteria while 
keeping the enhanced rebate the same, the proposed criteria slightly 
decreases the difficulty required for Members to meet the applicable 
tier threshold while continuing to encourage Members to add non-
displayed liquidity to the Exchange, thereby contributing to a deeper 
and more liquid market, which benefits all market participants and 
provides greater execution opportunities on the Exchange.
Remove Volume Tiers
    In addition to the Growth Tiers and Non-Displayed Add Volume Tiers 
offered under footnote 1, the Exchange also offers two Remove Volume 
Tiers that each assess a reduced fee for Members' qualifying orders 
yielding fee codes BB,\22\ N,\23\ and W \24\ where a Member reaches 
certain add or remove volume-based criteria. The Exchange first 
proposes to amend the criteria in Remove Volume Tiers 1 and 2. 
Currently, the criteria for these tiers is as follows:
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    \22\ Fee code BB is appended to orders that remove liquidity 
from EDGX in Tape B securities.
    \23\ Fee code N is appended to orders that remove liquidity from 
EDGX in Tape C securities.
    \24\ Fee code W is appended to orders that remove liquidity from 
EDGX in Tape A securities.
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     Remove Volume Tier 1 provides a reduced fee of $0.00275 
per share for securities priced above $1.00 or 0.28% of the total 
dollar value in securities priced below $1.00 to qualifying orders 
(i.e., orders yielding fee codes BB, N, or W) where (1) Member adds a 
Step-Up ADAV from June 2021 >=0.10% of the TCV or Member adds a Step-Up 
ADAV from June 2021 >=8,000,000; and (2) Member has a total remove ADV 
>=0.60% of the TCV or Member has a total remove ADV >=45,000,000.
     Remove Volume Tier 2 assesses a reduced fee of $0.00275 
per share for securities priced above $1.00 or 0.28% of the total 
dollar value in securities priced below $1.00 to qualifying orders 
(i.e., orders yielding fee codes BB, N, or W) where (1) Member has an 
ADAV >=0.25% TCV with displayed orders that yield fee codes B, V, or Y; 
or (2) Member adds Retail Order ADV (i.e., yielding fee codes ZA or ZO) 
>=0.45% of the TCV.
    Now, the Exchange proposes to replace the existing criteria with a 
single prong of criteria for each tier and slightly increase the 
reduced fee assessed by Remove Volume Tier 1. The proposed criteria is 
as follows:
     Remove Volume Tier 1 assesses a reduced fee of $0.00285 
per share for securities priced above $1.00 or 0.28% of the total 
dollar value in securities priced below $1.00 to qualifying orders 
(i.e., orders yielding fee codes BB, N, or W) where Member has an ADAV 
>=0.25% TCV with displayed orders that yield fee codes B, V, or Y.
     Remove Volume Tier 2 assesses a reduced fee of $0.00275 
per share for securities priced above $1.00 or 0.28% of the total 
dollar value in securities priced below $1.00 to qualifying orders 
(i.e., orders yielding fee codes BB, N, or W) where Member adds Retail 
Order ADV (i.e., yielding fee codes ZA or ZO) >=0.45% of the TCV.
    The proposed change to Remove Volume Tier 1 will provide a slightly 
lower reduced fee in exchange for less difficult criteria that 
continues to encourage Members to strive to meet the criteria by 
removing liquidity on the Exchange. Similarly, the proposed change to 
Remove Volume Tier 2 will assess the current reduced fee while 
lessening the difficulty of meeting the criteria in Remove Volume Tier 
2.
    Second, the Exchange proposes to introduce Remove Volume Tier 3. 
The proposed criteria in proposed Remove Volume Tier 3 is as follows:
     Proposed Remove Volume Tier 3 assesses a reduced fee of 
$0.00275 per share in securities priced above $1.00 or 0.28% of the 
total dollar value in securities priced below $1.00 for qualifying 
orders (i.e., orders yielding fee codes BB, N, or W) where (1) Member 
adds a Step-Up ADAV from June 2021 >=0.10% of the TCV or Member adds a 
Step-Up ADAV from June 2021 >=8,000,000; and (2) Member has a total 
remove ADV >=0.60% of the TCV or Members has a total remove ADV 
>=45,000,000; and (3) Member adds

[[Page 27943]]

Retail Order ADV (i.e., yielding fee codes ZA or ZO) >=0.10% of the 
TCV.
    The addition of proposed Remove Volume Tier 3 is designed to 
provide Members an alternative opportunity to earn a reduced fee where 
Members achieve certain add or remove volume-based criteria. The 
Exchange believes assessing an identical fee as Remove Volume Tier 2 
albeit using slightly more difficult criteria will encourage Members to 
strive to meet the criteria by removing liquidity on the Exchange. The 
proposed changes to the Remove Volume Tiers are designed to incentivize 
Members to provide additional volume to the Exchange. An increase in 
remove liquidity on the Exchange signals an overall increase in 
activity from other market participants, contributes to a deeper, more 
liquid market, and provides additional execution opportunities for 
active market participants, which benefits the entire market system.
Retail Growth Tiers
    Pursuant to footnote 2 of the Fee Schedule, the Exchange offers 
Retail Volume Tiers which provide Retail Member Organizations 
(``RMOs'') \25\ an opportunity to receive an enhanced rebate from the 
standard rebate for Retail Orders \26\ that add liquidity (i.e., 
yielding fee code ZA or ZO). Currently, the Retail Volume Tiers offer 
three Retail Growth Tiers, where a Member is eligible for an enhanced 
rebate for qualifying orders (i.e., yielding fee code ZA or ZO) meeting 
certain add volume-based criteria, including ``growing'' its volume 
over a certain baseline month. The Exchange now proposes to amend the 
criteria of Retail Growth Tier 3. Currently, the criteria for Retail 
Growth Tier 3 is as follows:
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    \25\ See EDGX Rule 11.21(a)(1). A ``Retail Member Organization'' 
or ``RMO'' is a Member (or a division thereof) that has been 
approved by the Exchange under this Rule to submit Retail Orders.
    \26\ See EDGX Rule 11.21(a)(2). A ``Retail Order'' is 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.
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     Retail Growth Tier 3 provides a rebate of $0.0037 per 
share to qualifying orders (i.e., orders yielding fee code ZA or ZO) 
where (1) Member adds a Step-Up ADAV from October 2022 >=0.15% of the 
TCV or Member adds a Step-Up ADAV from October 2022 >=15,000,000; (2) 
Member has a total remove ADV >=0.45% of TCV or Member has a total 
remove ADV >=45,000,000; and (3) Members adds a Retail Step-Up ADV 
(i.e., yielding fee code ZA or ZO) from August 2022 >=0.10% of TCV.
    Now, the Exchange proposes to delete the third prong of criteria. 
The proposed criteria for Retail Growth Tier 3 is as follows:
     Retail Growth Tier 3 provides a rebate of $0.0037 per 
share to qualifying orders (i.e., orders yielding fee code ZA or ZO) 
where (1) Member adds a Step-Up ADAV from October 2022 >=0.15% of the 
TCV or Member adds a Step-Up ADAV from October 2022 >=15,000,000; and 
(2) Member has a total remove ADV >=0.45% of TCV or Member has a total 
remove ADV >=45,000,000.
    The proposed modification to Retail Growth Tier 3 removes a 
criteria designed to encourage RMOs to grow their volume in retail 
orders on the Exchange. By removing a criteria while keeping the 
enhanced rebate the same, the proposed criteria slightly decreases the 
difficulty required for Members to meet the applicable tier threshold 
while continuing to encourage RMOs to grow their volume in retail 
orders.
    Furthermore, the Growth Tiers, Non-Displayed Add Volume Tiers, 
Remove Volume Tiers, and Retail Volume Tiers are intended to provide 
Members an opportunity to receive an enhanced rebate or reduced fee by 
increasing their order flow to the Exchange, which further contributes 
to a deeper, more liquid market and provides even more execution 
opportunities for active market participants. Incentivizing an increase 
in liquidity adding or removing volume, through enhanced rebate or 
reduced fee opportunities, encourages liquidity adding Members on the 
Exchange to contribute to a deeper, more liquid market, and liquidity 
executing Members on the Exchange to increase transactions and take 
execution opportunities provided by such increased liquidity, together 
providing for overall enhanced price discovery and price improvement 
opportunities on the Exchange. As such, increased overall order flow 
benefits all Members by contributing towards a robust and well-balanced 
market ecosystem.
Fee Code Changes
    The Exchange currently offers fee code DX, which is appended to 
Midpoint Discretionary Orders (``MDOs'') \27\ using the Quote Depletion 
Protection (``QDP'') \28\ order instruction that remove liquidity from 
the Exchange. QDP is designed to provide enhanced protections to MDOs 
by tracking significant executions that constitute the best bid or 
offer on the EDGX Book \29\ and enabling Users \30\ to avoid 
potentially unfavorable executions by preventing MDOs entered with the 
optional QDP instruction from exercising discretion to trade at more 
aggressive prices when QDP has been triggered.\31\ Currently, orders 
appended with fee code DX are be assessed a fee of $0.00060 per share 
in securities at or above $1.00 and 0.30% of dollar value for 
securities priced below $1.00. The Exchange proposes to increase the 
fee to $0.0010 per share in securities at or above $1.00. There is no 
proposed change in the fee assessed to securities priced below $1.00.
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    \27\ See Exchange Rule 11.8(g).
    \28\ See Exchange Rule 11.8(g)(10).
    \29\ See Exchange Rule 1.5(d).
    \30\ See Exchange Rule 1.5(ee).
    \31\ See Securities Exchange Act Release No. 89007 (June 4, 
2020), 85 FR 35454 (June 10, 2020) (SR-CboeEDGX-2020-010) (``Notice 
of Filing of Amendment No. 1 and Order Granting Accelerated Approval 
of a Proposed Rule Change, as Modified by Amendment No. 1, to Amend 
the Rule Relating to MidPoint Discretionary Orders to Allow Optional 
Offset or Quote Depletion Protection Instructions'').
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    The Exchange also offers various fee codes for orders routed away 
from the Exchange. The Exchange is proposing to modify the routing fees 
associated with fee codes RZ,\32\ I,\33\ BY,\34\ AA,\35\ AY,\36\ 
RR,\37\ and RY \38\ to match the base add or remove rate for the 
associated market center to which the order is routed. The rebates for 
fee codes RZ, I, AA, and RR will be revised to $0.0016 per share in 
securities priced above $1.00.\39\ The rebates for fee codes BY and AY 
will be revised to $0.0002 per share in securities priced above 
$1.00.\40\ The fee for fee code RY will be revised to $0.0020 per share 
in securities priced above $1.00.\41\ There are no changes to the fees 
or rebates associated with securities priced below $1.00.
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    \32\ Fee code RZ is appended to orders routed to BZX that add 
liquidity.
    \33\ Fee code I is appended to orders routed to EDGA using the 
ROUC routing strategy.
    \34\ Fee code BY is appended to orders routed to BYX using 
Destination Specific (``DIRC'') or ROUC routing strategy.
    \35\ Fee code AA is appended to orders routed to EDGA using the 
ALLB routing strategy.
    \36\ Fee code AY is appended to orders routed to BYX using the 
ALLB routing strategy.
    \37\ Fee code RR is appended to orders routed to EDGA using the 
DIRC routing strategy.
    \38\ Fee code RY is appended to orders routed to BYX that add 
liquidity.
    \39\ See BZX Equities Fee Schedule, Standard Rates; EDGA 
Equities Fee Schedule, Standard Rates.
    \40\ See BYX Equities Fee Schedule, Standard Rates.
    \41\ Id.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of

[[Page 27944]]

section 6(b) of the Act.\42\ Specifically, the Exchange believes the 
proposed rule change is consistent with the section 6(b)(5) \43\ 
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 
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) \44\ requirement that the rules of an exchange not be designed 
to permit unfair discrimination between customers, issuers, brokers, or 
dealers as well as section 6(b)(4) \45\ 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.
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    \42\ 15 U.S.C. 78f(b).
    \43\ 15 U.S.C. 78f(b)(5).
    \44\ Id.
    \45\ 15 U.S.C. 78f(b)(4)
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    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 Exchange believes that 
its proposal to: (1) introduce a new Growth Tier and modify current 
Growth Tiers 1 and 2; (2) modify Non-Displayed Step-Up Volume Tier 1; 
(3) introduce a new Remove Volume Tier and modify current Remove Volume 
Tiers 1 and 2; and (4) modify Retail Growth Tier 3 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 
Members. Additionally, the Exchange notes that relative volume-based 
incentives and discounts have been widely adopted by exchanges,\46\ 
including the Exchange,\47\ and are reasonable, 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 to an exchange's market quality and (ii) 
associated higher levels of market activity, such as higher levels of 
liquidity provision and/or growth patterns. Competing equity exchanges 
offer similar tiered pricing structures, including schedules of rebates 
and fees that apply based upon members achieving certain volume and/or 
growth thresholds, as well as assess similar fees or rebates for 
similar types of orders, to that of the Exchange.
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    \46\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \47\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
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    In particular, the Exchange believes its proposal to: (1) introduce 
a new Growth Tier and modify current Growth Tiers 1 and 2; (2) modify 
Non-Displayed Step-Up Volume Tier 1; (3) introduce a new Remove Volume 
Tier and modify current Remove Volume Tiers 1 and 2; and (4) modify 
Retail Growth Tier 3 is reasonable because the revised tiers will be 
available to all Members and provide all Members with an additional 
opportunity to receive an enhanced rebate or a reduced fee. The 
Exchange further believes the proposed modifications to its Growth 
Tiers, Non-Displayed Step-Up Volume Tier 1, Remove Volume Tiers, and 
Retail Growth Tier 3 will provide a reasonable means to encourage 
liquidity adding displayed orders, liquidity adding non-displayed 
orders, and retail orders, respectively, in Members' order flow to the 
Exchange and to incentivize Members to continue to provide liquidity 
adding volume to the Exchange by offering them an additional 
opportunity to receive an enhanced rebate or reduced fee on qualifying 
orders. An overall increase in activity would deepen the Exchange's 
liquidity pool, offers additional cost savings, support the quality of 
price discovery, promote market transparency and improve market 
quality, for all investors.
    The Exchange believes that the proposed changes to its Growth 
Tiers, Non-Displayed Step-Up Volume Tier 1, Remove Volume Tiers, and 
Retail Growth Tier 3 are reasonable as they do not represent a 
significant departure from the criteria currently offered in the Fee 
Schedule. Further, the Exchange believes its proposed changes to the 
routing fee codes and to fee code DX are reasonable as these changes do 
not represent a significant departure from the Exchange's general 
pricing structure. The Exchange notes that the proposed changes to fee 
code DX are a modest increase over existing prices and yet the proposed 
fee is lower than other similar fees to remove volume on the 
Exchange.\48\ Indeed, the proposed changes to fee codes RZ, I, BY, AA, 
AY, RR, and RY are intended to match the base add or remove rates on 
the Exchange's affiliates.\49\ The Exchange also believes that the 
proposal represents an equitable allocation of fees and rebates and is 
not unfairly discriminatory because all Members will be eligible for 
the proposed new tiers and have the opportunity to meet the tiers' 
criteria and receive the corresponding enhanced rebate if such criteria 
is met. Without having a view of activity on other markets and off-
exchange venues, the Exchange has no way of knowing whether this 
proposed rule change would definitely result in any Members qualifying 
the new proposed tiers. While the Exchange has no way of predicting 
with certainty how the proposed changes will impact Member activity, 
based on the prior months volume, the Exchange anticipates that at 
least one Member will be able to satisfy proposed Growth Tier 1, at 
least two Members will be able to satisfy proposed Growth Tier 3, at 
least two Members will be able to satisfy proposed Non-Displayed Step-
Up Volume Tier 1, at least two Members will be able to satisfy proposed 
Remove Volume Tier 1, at least two Members will be able to satisfy 
proposed Remove Volume Tier 2, at least one Member will be able to 
satisfy proposed Remove Volume Tier 3, and at least two Members will be 
able to satisfy proposed Retail Growth Tier 3. The Exchange also notes 
that proposed changes will not adversely impact any Member's ability to 
qualify for enhanced rebates offered under other tiers. Should a Member 
not meet the proposed new criteria, the Member will merely not receive 
that corresponding enhanced rebate.
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    \48\ See, Cboe EDGX Equities Fee Schedule, Fee Codes and 
Associated Fees.
    \49\ Supra notes 38-39.
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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 that is not necessary or appropriate 
in furtherance of the purposes of the Act. Rather, as discussed above, 
the Exchange believes that the proposed changes would encourage the 
submission of additional order flow to a public exchange, thereby 
promoting market depth, execution incentives and enhanced execution 
opportunities, as well as price discovery and transparency for all 
Members. As a result, the Exchange believes that the proposed changes 
further the Commission's goal in adopting Regulation NMS of fostering 
competition among orders, which promotes ``more efficient pricing of 
individual stocks for all types of orders, large and small.''

[[Page 27945]]

    The Exchange believes the proposed rule changes do not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
changes to the Exchange's Growth Tiers, Non-Displayed Step-Up Volume 
Tier 1, Remove Volume Tiers, and Retail Growth Tier 3 will apply to all 
Members equally in that all Members are eligible for each of the Tiers, 
have a reasonable opportunity to meet the Tiers' criteria and will 
receive the enhanced rebate on their qualifying orders if such criteria 
is met. The Exchange does not believe the proposed changes burdens 
competition, but rather, enhances competition as it is intended to 
increase the competitiveness of EDGX by amending an existing pricing 
incentive and adopting pricing incentives in order to attract order 
flow and incentivize participants to increase their participation on 
the Exchange, providing for additional execution opportunities for 
market participants and improved price transparency. Greater overall 
order flow, trading opportunities, and pricing transparency benefits 
all market participants on the Exchange by enhancing market quality and 
continuing to encourage Members to send orders, thereby contributing 
towards a robust and well-balanced market ecosystem.
    The Exchange does not believe the proposal to revise the applicable 
fee or rebate associated with the Exchange's routing fee codes or fee 
code DX does not impose a burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. The 
proposed fee associated with fee code DX would apply to all Members 
equally in that all Members would be subject to the same flat fee for 
the execution of an MDO with a QDP instruction that removes liquidity 
from the Exchange. Both MDO and the associated QDP instruction are 
available to all Members on an equal and non-discriminatory basis. As a 
result, any Member can decide to use (or not use) the QDP instruction 
based on the benefits provided by that instruction in potentially 
avoiding unfavorable executions, and the associated charge that the 
Exchange proposes to amend. In addition, the fees and rebates 
associated with routing orders away from the Exchange similarly apply 
to all Members on an equal and non-discriminatory basis and Members can 
choose to use (or not use) the Exchange's routing functionality as part 
of their decision to submit order flow to the Exchange.
    Next, the Exchange believes the proposed rule changes 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 other equities exchanges, 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 equities exchange has more 
than 17% of the market share.\50\ 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.'' \51\ 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'. . . .''.\52\ 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.
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    \50\ Supra note 3.
    \51\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \52\ 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)).
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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.

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 \53\ and paragraph (f) of Rule 19b-4 \54\ 
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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    \53\ 15 U.S.C. 78s(b)(3)(A).
    \54\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeEDGX-2023-030 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-2023-030. 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

[[Page 27946]]

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. 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-2023-030, and should be submitted on or before May 24, 
2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\55\
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    \55\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-09335 Filed 5-2-23; 8:45 am]
BILLING CODE 8011-01-P