[Federal Register Volume 86, Number 20 (Tuesday, February 2, 2021)]
[Notices]
[Pages 7902-7905]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02119]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91002; File No. SR-CboeEDGX-2021-006]


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

January 27, 2021.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that on January 13, 2021, Cboe EDGX Exchange, Inc. (the 
``Exchange'' or ``EDGX'') filed with the Securities and Exchange 
Commission (the ``Commission'') the proposed rule change as described 
in Items I and II below, which Items have been prepared by the self-
regulatory organization. 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\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') is filing 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change to amend the fee schedule applicable to Members and non-
Members of the Exchange pursuant to EDGX Rules 15.1(a) and (c). Changes 
to the fee schedule pursuant to this proposal are effective upon 
filing. 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/),

[[Page 7903]]

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 self-regulatory organization 
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 those 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'') by eliminating certain 
routing fee codes.\4\
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    \4\ The Exchange initially filed the proposed fee changes 
January 4, 2021 (SR-CboeEDGX-2021-001). On January 13, 2021, the 
Exchange withdrew that filing 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 
Exchange Act, to which market participants may direct their order flow. 
Based on publicly available information,\5\ no single registered 
equities exchange has more than 16% 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 believes that the ever-shifting market share among 
the exchanges from month to month demonstrates that market participants 
can shift order flow or discontinue to reduce use of certain categories 
of products, in response to fee changes. Accordingly, competitive 
forces constrain the Exchange's transaction fees, and market 
participants can readily trade on competing venues if they deem pricing 
levels at those other venues to be more favorable.
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    \5\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (December 29, 2020), available at https://markets.cboe.com/us/equities/market_statistics/.
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    The Exchange assesses fees in connection with orders routed away to 
various exchanges. As a result of minimal use in the last months, the 
Exchange proposes to eliminate the following routing fee codes 
currently under the Fee Codes and Associated Fees section of the Fee 
Schedule:
     Fee code 8, which is appended to Members' orders routed to 
NYSE American that adds liquidity and assesses a charge of $0.00020 per 
contract for orders in securities priced at or above $1.00 and assesses 
no charge for orders in securities priced below $1.00;
     Fee code K, which is appended to Members' orders routed to 
PSX using the ROUC routing strategy \6\ and assesses a charge of 
$0.00290 per contract for orders in securities priced at or above $1.00 
and assesses a charge of 30% of the dollar value per contract for 
orders in securities priced below $1.00; and
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    \6\ ROUC is a routing option under which an order checks the 
System for available shares and then is sent to destinations on the 
System routing table, Nasdaq OMX BX, and NYSE. If shares remain 
unexecuted after routing, they are posted on the EDGX Book, unless 
otherwise instructed by the User. See Rule 11.11(g)(1); see also 
Cboe Routing Strategies, FIX/BOE Routing Tags and Instructions, 
available at: https://cdn.cboe.com/resources/features/Cboe_USE_RoutingStrategies.pdf.
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     Fee code MX, which is appended to Members' orders routed 
to NYSE American using the ROUC routing strategy and assesses a charge 
of $0.00020 per contract for orders in securities priced at or above 
$1.00 and assesses no charge for orders in securities priced below 
$1.00.
    The Exchange has observed a minimal amount of volume in recent 
months in orders yielding fee codes 8, K, or MX. In particular, over 
the last six months the Exchange observed that orders yielding fee code 
MX accounted for approximately only 0.01% of all routed order volume, 
orders yielding fee code 8 accounted for approximately only 0.14% of 
all routed order volume, and orders yielding fee code K accounted for 
approximately only 0.004% of all routed order volume. The Exchange 
believes that, because so few Users elect to route their orders with 
specifications to which fee codes 8, K or MX, the current demand does 
not warrant the infrastructure and ongoing Systems maintenance required 
to support these separate fee codes. Therefore, the Exchange now 
proposes to delete fee codes 8, K and MX in the Fee Schedule. The 
Exchange notes that Users will continue to be able to choose to route 
their orders with the same specifications to which fee codes 8, K and 
MX currently apply--such orders will simply be assessed the fees 
currently in place for routed orders generally.\7\ That is, if any of 
the routed orders to which fee code K or MX currently apply are 
submitted in the pre- or post-market sessions that remove liquidity,\8\ 
then fee code 7 will apply, which is appended to Members' routed orders 
in the pre- or post-market sessions and assesses a charge of $0.00300 
per contract for orders in securities priced at or above $1.00 and 
assesses a charge of 30% of the dollar value per contract for orders in 
securities priced below $1.00. Fee code X will be appended to routed 
orders not submitted during the pre- or post-market sessions to which 
fee code K or MX currently apply and to routed orders to which fee code 
8 currently applies. Fee code X currently assesses a charge of $0.00300 
per contract for orders in securities priced at or above $1.00 and 
assesses a charge of 30% of the dollar value per contract for orders in 
securities priced below $1.00. The Exchange notes that rates applicable 
to orders yielding fee codes 7 and X are the standard routing fees 
pursuant to the Standard Rates section of the Fee Schedule.
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    \7\ The Exchange notes that there are other fee codes that apply 
to certain other routing specifications, however, those routed 
orders not otherwise specified in such other routing fee code 
descriptions yield the general routing fee codes 7 or X.
    \8\ Fee code 7 is currently appended to all routed orders in the 
pre- or post-market session that remove liquidity. The proposed rule 
change updates the description associated with fee code 7 to clarify 
in the description that such orders remove liquidity. This update 
does not alter the orders to which fee code 7 currently applies but 
merely makes it clear in the Fee Schedule that fee code 7 applies to 
qualifying routed orders that remove liquidity.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is 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 issuers and other persons 
using its facilities. The Exchange also believes that the proposed rule 
change is consistent with the objectives of Section 6(b)(5) \11\ 
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

[[Page 7904]]

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, and, 
particularly, is not designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ 15 U.S.C. 78f.(b)(5).
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    In particular, the Exchange believes the proposed rule change to 
remove fee codes 8, K and MX is reasonable as the Exchange has observed 
a minimal amount of volume in orders yielding these fee codes and, 
therefore, the continuation of these fee codes does not warrant the 
infrastructure and ongoing Systems maintenance required to support 
separate fee codes for specific routed orders. As such, the Exchange 
also believes that is reasonable and equitable to assess routed orders 
which meet the specifications to which fee codes 8, K and MX are 
currently applicable the slightly higher standard routing fee currently 
in place for all other routed orders--via fee codes 7 or X, as 
applicable. The Exchange believes that the proposed rule change is 
equitable and not unfairly discriminatory because Members will continue 
to have the option to elect to route their orders in the same manner 
(i.e., routed to NYSE American that add liquidity and routed to PSX or 
NYSE American using the ROUC routing strategy) will be automatically 
and uniformly assessed the applicable standard rates in place for 
generally all other routed orders.\12\ Further, if members do not favor 
the Exchange's pricing for routed orders, they can send their routable 
orders directly to away markets instead of using routing functionality 
provided by the Exchange. Routing through the Exchange is optional, and 
the Exchange operates in a competitive environment where market 
participants can readily direct order flow to competing venues or 
providers of routing services if they deem fee levels to be excessive.
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    \12\ See supra note 7.
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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. The Exchange does not 
believe the proposed rule change will impose any burden on intramarket 
competition because all Members orders that would yield current fee 
codes 8, K or MX, will automatically and uniformly be assessed the fees 
already in place for routed orders generally,\13\ as applicable (i.e., 
fee codes 7 or X).
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    \13\ See id.
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    The Exchange does not believe that the proposed rule change will 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
again notes that orders that meet the specifications to which fee codes 
8, K or MX would currently apply, will yield the same fee codes and be 
assessed the same corresponding rates that are already in place in the 
Fee Schedule for routed orders generally, as previously filed with the 
Commission. Also, as previously discussed, the Exchange operates in a 
highly competitive market. Members have numerous alternative venues 
that they may participate on and director their order flow, including 
15 other options exchanges and off-exchange venues. Additionally, the 
Exchange represents a small percentage of the overall market. Based on 
publicly available information, no single options exchange has more 
than 16% of the market share.\14\ Therefore, no exchange possesses 
significant pricing power in the execution of option 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.'' \15\ 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'. . . .''.\16\ 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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    \14\ See supra note 5.
    \15\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \16\ 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 is effective upon filing pursuant to 
Section 19(b)(3)(A) \17\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \18\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such 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 shall institute proceedings under 
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments

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

Electronic Comments

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

[[Page 7905]]

CboeEDGX-2021-006 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-2021-006. 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-2021-006, and should be 
submitted on or before February 23, 2021.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02119 Filed 2-1-21; 8:45 am]
BILLING CODE 8011-01-P


