[Federal Register Volume 86, Number 69 (Tuesday, April 13, 2021)]
[Notices]
[Pages 19313-19316]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07493]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91494; File No. SR-CboeEDGX-2021-018]


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

April 7, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on April 1, 2021, Cboe EDGX Exchange, Inc. (the ``Exchange'' or 
``EDGX'') filed with the

[[Page 19314]]

Securities and Exchange Commission (the ``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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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. 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'') to include an additional 
Remove Volume Tier. The Exchange proposes to implement the proposed 
change to its fee schedule on April 1, 2021.
    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,\3\ 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 in particular operates a ``Maker-Taker'' model 
whereby it pays credits 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. 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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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (March 29, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
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    Pursuant to footnote 1 of the Fee Schedule, the Exchange offers a 
Remove Volume Tier that provides a reduced fee to Members meeting 
certain volume thresholds. Now, the Exchange is proposing to rename the 
existing Remove Volume Tier to Remove Volume Tier 1, and add an 
additional Remove Volume Tier 2. The proposed Remove Volume Tier 2 
offers a reduced fee of $0.0026 for orders in securities at or above 
$1.00 and 0.28% of total dollar value for orders in securities below 
$1.00 yielding fee code ``N'',\4\ ``W'',\5\ and ``BB'' \6\ where a 
Member has (1) a Step-Up Add TCV \7\ from January 2021 equal to or 
greater than 0.15%; (2) an ADAV \8\ greater than or equal to 0.08% of 
the TCV \9\ for Non-Displayed orders that yield fee codes DM,\10\ 
HA,\11\ HI,\12\ MM,\13\ or RP; \14\ and (3) removes an ADV \15\ greater 
than or equal to 0.75% of the TCV. The proposed Remove Volume Tier 2 is 
designed to incentivize Members to increase their orders that add 
liquidity on the Exchange for displayed and non-displayed orders, as 
well as remove displayed volume on the Exchange in order to receive a 
reduced fee on their qualifying, liquidity removing orders.
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    \4\ Orders yielding Fee Code ``N'' are orders removing liquidity 
from EDGX (Tape C).
    \5\ Orders yielding Fee Code ``W'' are orders removing liquidity 
from EDGX (Tape A).
    \6\ Orders yielding Fee Code ``BB'' are orders removing 
liquidity from EDGX (Tape B).
    \7\ Step-Up Add TCV means ADAV as a percentage of TCV in the 
relevant baseline month subtracted from current ADAV as a percentage 
of TCV.
    \8\ ADAV means average daily added volume calculated as the 
number of shares added per day.
    \9\ 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.
    \10\ Orders yielding Fee Code ``DM'' are orders adding liquidity 
using MidPoint Discretionary order within discretionary range.
    \11\ Orders yielding Fee Code ``HA'' are Non-Displayed orders 
adding liquidity.
    \12\ Orders yielding Fee Code ``HI'' are Non-Displayed orders 
that receive price improvement and add liquidity.
    \13\ Orders yielding Fee Code ``MM'' are Non-Displayed orders 
adding liquidity using MidPoint Peg.
    \14\ Orders yielding Fee Code ``RP'' are Non-Displayed orders 
adding liquidity using Supplemental Peg.
    \15\ 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.
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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,\16\ in general, and 
furthers the objectives of Section 6(b)(4),\17\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members, issuers and other persons 
using its facilities. 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 proposed rule changes 
reflect 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. The Exchange notes that relative volume-based incentives and 
discounts have been widely adopted by exchanges, including the 
Exchange, 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,

[[Page 19315]]

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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    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed addition to the Remove Volume 
Tiers is reasonable because it provides an additional opportunity for 
Members to receive a discounted rate for liquidity removing orders. The 
Exchange notes the proposed tier is available to all Members and is 
competitively achievable for all Members that submit the requisite 
order flow, in that, all firms are eligible for the proposed tier and 
those that submit the requisite order flow could compete to meet the 
proposed tier. Each Member will uniformly receive the respective 
proposed reduced fee if the corresponding tier criteria is met.
    The Exchange believes the Remove Volume Tier is a reasonable means 
to incentivize Members to continue to provide liquidity adding, 
displayed volume to the Exchange by offering them a different, 
additional opportunity than that of the Add Volume Tiers--to receive a 
reduced fee on their liquidity removing orders by meeting the proposed 
criteria in submitting additional add volume order flow.
    Overall, the Exchange believes that adding new tier criteria each 
based on a Member's liquidity adding and removing orders, will benefit 
all market participants by incentivizing continuous liquidity and thus, 
deeper more liquid markets as well as increased execution 
opportunities. Particularly, the proposed tier is designed to 
incentivize Members to increase their orders that add displayed and 
non-displayed volume on the Exchange in order to receive a reduced fee 
on their qualifying, liquidity removing orders. This overall increase 
in activity deepens the Exchange's liquidity pool, offers additional 
cost savings, supports the quality of price discovery, promotes market 
transparency and improves market quality, for all investors.
    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 the 
proposed tiers. While the Exchange has no way of predicting with 
certainty how the proposed tiers will impact Member activity, the 
Exchange anticipates that for the proposed Remove Volume Tier 2 at 
least one Member will be able to compete for and achieve the proposed 
criteria. The Exchange notes, however, that the proposed tier is open 
to any Member that satisfies the tier's criteria. The Exchange also 
notes that the proposed tier will not adversely impact any Member's 
pricing or their ability to qualify for other tiers. Rather, should a 
Member not meet the proposed criteria for the proposed tier, the Member 
will merely not receive the corresponding reduced fee.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. Rather, as discussed above, the 
Exchange believes that the proposed change 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 change 
furthers 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.''
    The Exchange believes the proposed rule change does not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
change applies to all Members equally in that all Members are eligible 
for the proposed Remove Volume Tier 2 and have a reasonable opportunity 
to meet the tier's criteria and will all receive the proposed reduced 
fee if such criteria is met. Additionally, the proposed tier is 
designed to attract additional order flow to the Exchange. The Exchange 
believes that the additional tier criteria would incentivize market 
participants to direct liquidity adding and removing order flow to the 
Exchange, bringing with it improved price transparency. Greater overall 
order flow and pricing transparency benefits all market participants on 
the Exchange by providing more trading opportunities, enhancing market 
quality, and continuing to encourage Members to send orders, thereby 
contributing towards a robust and well-balanced market ecosystem, which 
benefits all market participants.
    Next, the Exchange believes the proposed rule change 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 16% of the market share.\18\ 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.'' \19\ 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'. . . .''.\20\ 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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    \18\ Supra note 3.
    \19\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \20\ 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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[[Page 19316]]

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 \21\ and paragraph (f) of Rule 19b-4 \22\ 
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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    \21\ 15 U.S.C. 78s(b)(3)(A).
    \22\ 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 rule-comments@sec.gov. Please include 
File Number SR-CboeEDGX-2021-018 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-2021-018. 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-2021-018 and should be 
submitted on or before May 4, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
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    \23\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-07493 Filed 4-12-21; 8:45 am]
BILLING CODE 8011-01-P


