[Federal Register Volume 86, Number 20 (Tuesday, February 2, 2021)]
[Notices]
[Pages 7909-7913]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02118]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91000; File No. SR-CboeEDGA-2021-003]


Self-Regulatory Organizations; Cboe EDGA 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 EDGA Exchange, Inc. (the 
``Exchange'' or ``EDGA'') filed with the Securities and Exchange

[[Page 7910]]

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 EDGA Exchange, Inc. (the ``Exchange'' or ``EDGA'') 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 EDGA 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/equities/regulation/rule_filings/edga/), 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 by (1) eliminating 
certain routing fee codes and (2) amending an Add/Remove Volume 
Tier.\4\
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    \4\ The Exchange initially filed the proposed fee changes 
January 4, 2021 (SR-CboeEDGA-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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Proposal To Remove Certain Routing Fee Codes
    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 \6\ routing strategy 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\ The ROUC routing strategy is a routing strategy 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. 
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 ROBB, ROCO \7\ or 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.
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    \7\ The ROBB and ROCO routing strategies are routing strategies 
which check the System for available shares and then are sent to 
destinations on the System routing table. See Rule 11.11(g)(3); 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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    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 0.80% of all routed order volume, 
orders yielding fee code K accounted for approximately only 0.01% of 
all routed order volume, and there was only one contract executed from 
an order yielding fee code 8. 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.\8\ 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,\9\ 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

[[Page 7911]]

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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    \8\ 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.
    \9\ 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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Proposal To Amend Add/Remove Volume Tier
    In response to the competitive environment described above, the 
Exchange 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 incremental 
incentives for Members to strive for higher or different tier levels by 
offering increasingly higher discounts or enhanced benefits for 
satisfying increasingly more stringent criteria or different criteria. 
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. These competing pricing schedules, moreover, are presently 
comparable to those that the Exchange provides.
    The Exchange currently provides for such tiers pursuant to footnote 
7 of the fee schedule, which currently offers various different Add/
Remove Volume Tiers. Specifically, Tier 2 provides an opportunity for 
Members to receive reduced fee of $0.0016 per contract for qualifying 
liquidity adding orders (i.e., yielding fee codes 3,\10\ 4,\11\ B,\12\ 
V,\13\ and Y \14\), where a Member adds or removes an ADV \15\ of 
greater than or equal to 65% of TCV.\16\ The Exchange proposes to amend 
Add/Remove Volume Tier 2 to reduce the ADV percentage of TCV from 65% 
to 60%. By reducing the percentage of ADV over TCV that a Member must 
meet to receive a reduced fee under Tier 2, the proposed change eases 
the difficulty of the tier's criteria by a modest amount, which, the 
Exchange believes will incentive Members to increase their overall 
order flow, both adding and removing orders, in order to achieve the 
criteria under Tier 2 and receive the current reduced fee, which is 
remaining unchanged. The Exchange believes this may further incentivize 
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. The Exchange believes that this, in turn, benefits 
all Members by contributing towards a robust and well-balanced market 
ecosystem. The Exchange notes the proposed tier continues to be 
available to all Members and is competitively achievable for all 
Members that submit add and/or remove order flow, in that, all firms 
that submit the requisite order flow may compete to meet the tier.
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    \10\ Appended to orders that add liquidity to EDGA, pre and post 
market (Tapes A or C) and assesses a standard fee of $0.00300.
    \11\ Appended to orders that add liquidity to EDGA, pre and post 
market (Tape B) and assesses a standard fee of $0.00300.
    \12\ Appended to orders that add liquidity to EDGA (Tape B) and 
assesses a standard fee of $0.00300.
    \13\ Appended to orders that add liquidity to EDGA (Tape A) and 
assesses a standard fee of $0.00300.
    \14\ Appended to orders that add liquidity to EDGA (Tape C) and 
assesses a standard fee of $0.00300.
    \15\ ADV means 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.
    \16\ 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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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\17\ in general, and 
furthers the objectives of Section 6(b)(4),\18\ 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) \19\ 
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, and, particularly, is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4).
    \19\ 15 U.S.C. 78f.(b)(5).
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    The Exchange again notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. The proposed rule change 
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.
    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, routed to PSX using 
the ROUC routing strategy, routed to NYSE American using the ROBB, ROCO 
or ROUC routing strategy) will be automatically and uniformly assessed 
the applicable standard rates in place for generally all other routed 
orders.\20\ 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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    \20\ See supra note 8.
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    The Exchange believes the proposed rule change to amend the 
criteria in Add/Remove Volume Tier 2 is reasonable, equitable and not 
unfairly discriminatory. The Exchange believes

[[Page 7912]]

that easing the difficulty in reaching the criteria by a modest amount 
is reasonably designed to provide further incentive for Members to 
submit both adding and removing order flow to the Exchange in order to 
receive the reduced fee currently offered under Tier 2. The Exchange 
notes that the amount of the reduced fee offered is not changing. The 
Exchange believes the slight decrease in criteria difficulty under Tier 
2 may further incentivize 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. The Exchange 
believes that this, in turn, benefits all Members by contributing 
towards a robust and well-balanced market ecosystem. The Exchange 
believes that the proposed rule change is equitable and not unfairly 
discriminatory because all Members will continue to be eligible for the 
Add/Remove Volume Tier 2 and will continue to have the opportunity to 
meet the tier's criteria and receive the current reduced fee 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 
for Add/Remove Volume Tier 2, as amended. While the Exchange has no way 
of predicting with certainty how the proposed tier will impact Member 
activity, the Exchange does not anticipate that the proposed criteria 
would impact any of the Members that are currently able to compete for 
and reach Tier 2 and would merely provide the opportunity for 
additional Members to be able to compete for and reach the proposed 
tier. The Exchange also notes that proposed Add/Remove Volume Tier 2 
will not adversely impact any Member's pricing or their ability to 
qualify for other reduced fee or enhanced rebate tiers. Should a Member 
not meet the proposed criteria under the proposed tier, the Member will 
merely not receive that reduced fee. As stated, the reduced fee offered 
under Tier 2 remains unchanged and it will continue to uniformly apply 
to all Members that meet the required criteria, as amended, under Tier 
2.

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 to remove fee codes 8, K or MX 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,\21\ as applicable (i.e., fee codes 7 or X). Further, the 
Exchange does not believe that the proposed rule change to amend Add/
Remove Volume Tier 2 will impose any burden on intramarket competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act because the proposed change applies to all Members equally in 
that all Members will continue to be eligible for the proposed Add/
Remove Volume Tier 2, have a reasonable opportunity to meet the tier's 
criteria, as amended, and will all receive the current reduced fee if 
such criteria is met. As describe above, the proposed Tier 2 criteria 
is designed to attract additional order flow to the Exchange, 
incentivizing market participants to direct liquidity and executing 
order flow to the Exchange, bringing with it improved price 
transparency and more trading opportunities to the benefit of all 
market participants on the Exchange.
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    \21\ See supra note 8.
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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. In addition to this, the Exchange also notes again that 
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. 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.\22\ 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.'' \23\ 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'. . . .''.\24\ 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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    \22\ See supra note 5.
    \23\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \24\ 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) \25\ of the Act and subparagraph (f)(2) of Rule 
19b-4 \26\ thereunder, because it establishes a due,

[[Page 7913]]

fee, or other charge imposed by the Exchange.
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    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 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) \27\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
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    \27\ 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-CboeEDGA-2021-003 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-2021-003. 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-CboeEDGA-2021-003, and should be 
submitted on or before February 23, 2021.
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    \28\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02118 Filed 2-1-21; 8:45 am]
BILLING CODE 8011-01-P


