[Federal Register Volume 86, Number 74 (Tuesday, April 20, 2021)]
[Notices]
[Pages 20569-20574]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08033]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91559; File No. SR-CboeEDGX-2021-020]


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

April 14, 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 7, 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, 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 Options'') is 
filing with the Securities and Exchange Commission (``Commission'') a 
proposed rule change to amend its Fees 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 Fees Schedule for its options 
platform (``EDGX Options'') by updating certain Customer-related fee 
codes, amending certain Customer-related volume tiers, and amending the 
Fees Schedule to reflect the adoption of the Penny Program on a 
permanent basis.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
April 1, 2021 (SR-CboeEDGX-2021-017). On April 7, 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 options venues to which market participants 
may direct their order flow. Based on publicly available information, 
no single options exchange has more than 15% of the market share and 
currently the Exchange represents only approximately 4% of the market 
share.\4\ Thus, in such a low-concentrated and highly competitive 
market, no single options exchange, including the Exchange, possesses 
significant pricing power in the execution of option 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

[[Page 20570]]

trade on competing venues if they deem pricing levels at those other 
venues to be more favorable.
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    \4\ See Cboe Global Markets U.S. Options Market Monthly Volume 
Summary (March 24, 2021), available at https://markets.cboe.com/us/options/market_statistics/.
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    The Exchange's Fees Schedule sets forth standard rebates and rates 
applied per contract. For example, the Exchange provides standard 
rebates ranging from $0.01 up to $0.21 per contract for Customer orders 
in both Penny and Non-Penny Securities. The Fee Codes and Associated 
Fees section of the Fees Schedule also provides for certain fee codes 
associated with certain order types and market participants that 
provide for various other fees or rebates. Fee code ZA, for example, is 
appended to Customer complex orders which execute against a contra non-
Customer order in Penny Securities and currently offers a rebate of 
$0.45 per contract. Similarly, fee code ZB is appended to Customer 
complex orders which execute against a contra non-Customer order in 
non-Penny Securities and currently offers a rebate of $0.80 per 
contract. Fee code BC is appended to Customer Agency orders executed in 
the Automated Improvement Mechanism (``AIM'' or ``AIM Auction'') and 
currently offers a rebate of $0.11 per contract. Additionally, the Fee 
Schedule offers tiered pricing which provides Members \5\ opportunities 
to qualify for higher rebates or reduced fees where certain volume 
criteria and thresholds are met. Footnote 1 of the Fee Schedule 
currently offers three Complex Customer Penny Tiers which provide 
enhanced rebates between $0.47 and $0.49 per contract for qualifying 
Customer orders that yield fee code ZA where a Member meets certain 
liquidity thresholds, and three Complex Customer Non-Penny Tiers which 
provide enhanced rebates between $0.85 and $0.95 per contract for 
qualifying Customer orders that yield fee code ZB for Members that meet 
certain liquidity thresholds. Footnote 9 of the Fee Schedule currently 
also offers an AIM Volume Tier which provides an enhanced rebate of 
$0.14 for qualifying Customer orders that yield fee code BC where a 
Member meets the tier's volume threshold.
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    \5\ See Exchange Rule 1.5(n).
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    The Exchange proposes to amend the rebate amounts provided to 
orders yielding fee codes ZA, ZB, and BC, the Customer Complex Penny 
and Non-Penny Tiers, and the AIM Volume Tier. As described above, 
qualifying Customer orders yielding fee codes ZA, ZB, and BC are 
currently provided a rebate in the amount of $0.45, $0.80, and $0.11 
per contract, respectively. The proposed rule change proposes to 
incrementally decrease each of these amounts to a rebate of $0.39 per 
contract for orders yielding fee code ZA, $0.75 per contract for orders 
yielding fee code ZB, and $0.06 for orders yielding fee code BC. The 
proposed rule change also reflects the change in these amounts in the 
Fee Codes and Associated Fees section of the Fee Schedule, as well as 
in Footnote 6 (AIM and SAM Pricing) and Footnote 8 (Complex Order 
Types) of the Fee Schedule. The Exchange notes that these rates for 
Customer orders are in line with, yet also competitive with, rates 
assessed by other options exchanges, which offer lower rates for 
Customer orders but more volume incentive opportunities for enhanced 
pricing (which the Exchange also proposes to incorporate for Customer 
orders herein this proposal).\6\
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    \6\ See e.g., MIAX Emerald Options Exchange Fee Schedule, 
Section 1(a)(i). Section 1(a)(i) provides a range of base rebates 
for customer Penny and Non-Penny transactions depending on meeting 
various volume tiers (Section 1(a)(ii)). For example, base rebates 
for Customer complex transactions in Penny classes range from $0.25 
to $0.50 and for Customer complex transaction in non-Penny classes 
range from $0.40 to $0.87; see also MIAX Options Fee Schedule, 
Section 1(a)(v) which offers a base rate of $0.00 for Customer 
transactions in MIAX's auction mechanism (``PRIME''), and Section 
1(a)(iii), which then offers a rebate of $0.10 or $0.11 for Customer 
transactions in PRIME if a member meets certain volume thresholds.
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    The proposed rule change amends the Customer Complex Penny Tiers. 
Currently, Tier 1 offers an enhanced rebate of $0.47 per contract for a 
Member's qualifying orders (i.e., yielding fee code ZA) if a Member has 
an ADV \7\ in Customer orders greater than or equal to 0.40% of average 
OCV.\8\ Tier 2 currently offers an enhanced rebate of $0.48 per 
contract for qualifying orders if a Member has an ADV in Customer 
orders greater than or equal to 0.55% of average OCV. Tier 3 currently 
offers an enhanced rebate of $0.49 per contract for qualifying orders 
if a Member has an ADV in Customer orders greater than or equal to 
0.75% of average OCV. The proposed rule change amends the Customer 
Complex Penny Tiers by modestly reducing the enhanced rebate amount 
offered per each tier, modestly reducing the percentage of average OCV 
that a Member's ADV in Customer orders must reach in Tier 1 and Tier 2, 
adding an alternative prong of criteria in each tier, and adopting two 
new tiers, Tier 4 and Tier 5. The proposed rule change reduces the 
enhanced rebate offered by Tier 1 from $0.47 to $0.40, by Tier 2 from 
$0.48 to $0.45, and by Tier 3 from $0.49 to $0.47. The proposed rule 
change reduces the percentage of average OCV that a Member's ADV in 
Customer orders must meet in Tier 1 from 0.40% to 0.25% and in Tier 2 
from 0.55% to 0.50%. The proposed rule change adds an alternative prong 
of criteria regarding a Member's ADV in complex non-crossing orders 
(that is, orders not executed in a two sided auction mechanism such as 
AIM or the Solicitation Auction Mechanism (``SAM'') or in a crossing 
mechanism such as a Qualified Contingent Cross (``QCC'')) as a 
percentage of average OCV in each tier that a Member may choose to meet 
in lieu of the existing criteria (Customer order ADV as a percentage of 
average OCV) to receive the corresponding enhanced rebate. 
Specifically, a Member may reach the proposed alternative criteria in 
Tier 1 if the Member has an ADV in complex non-crossing orders that is 
greater than or equal to 0.10% of average OCV, the proposed alternative 
criteria in Tier 2 if the Member has an ADV in complex non-crossing 
orders that is greater than or equal to 0.25% of average OCV, and the 
proposed alternative criteria in Tier 3 if the Member has an ADV in 
complex non-crossing orders that is greater than or equal to 0.45% of 
average OCV. Finally, the proposed rule change adopts Tier 4, which 
provides an enhanced rebate of $0.49 per contract for qualifying orders 
if a Member has an ADV in complex non-crossing orders greater than or 
equal to 0.60% of average OCV or if a Member has an ADV in Customer 
orders greater than or equal to 1.00% of average OCV, and adopts Tier 
5, which provides an enhanced rebate of $0.50 per contract for 
qualifying orders if a Member has an ADV in complex non-crossing orders 
greater than or equal to 1.00% of average OCV or Member has an ADV in 
Customer orders greater than or equal to 2.00% of average OCV.
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    \7\ ``ADV'' means average daily volume calculated as the number 
of contracts added or removed, combined, per day.
    \8\ ``OCC Customer Volume or ``OCV'' means the total equity and 
ETF options volume that clears in the Customer range at the Options 
Clearing Corporation (``OCC'') for the month for which the fees 
apply, excluding volume on any day that the Exchange experiences an 
Exchange System Disruption and on any day with a scheduled early 
market close.
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    The proposed rule change amends the Customer Complex Non-Penny 
Tiers. Currently, Tier 1 offers an enhanced rebate of $0.85 per 
contract for a Member's qualifying orders (i.e., yielding fee code ZB) 
if a Member has an ADV in Customer orders greater than or equal to 
0.40% of average OCV. Tier 2 currently offers an enhanced rebate of 
$0.87 per contract for qualifying orders if a Member has an ADV in 
Customer orders greater than or equal to 0.55% of average OCV. Tier 3 
currently offers an enhanced rebate of $0.95 per contract

[[Page 20571]]

for qualifying orders if a Member has an ADV in Customer orders that is 
greater than or equal to 0.75% of average OCV. In particular, the 
proposed rule change amends the Customer Complex Non-Penny Tiers by 
modestly reducing the enhanced rebate amount offered in Tier 1 and Tier 
2, modestly increasing the percentage of average OCV that a Member's 
ADV in Customer orders must reach in each tier, adding an alternative 
prong of criteria in each tier, and adopting new Tier 4. The proposed 
rule change reduces the enhanced rebate offered by Tier 1 from $0.85 to 
$0.80 and by Tier 2 from $0.87 to $0.85. The proposed rule change 
increases the percentage of average OCV that a Member's ADV in Customer 
orders must meet in Tier 1 from 0.40% to 0.50%, in Tier 2 from 0.55% to 
0.75%, and in Tier 3 from 0.75% to 1.00%. The proposed rule change adds 
an alternative prong of criteria regarding a Member's ADV in complex 
non-crossing orders as a percentage of average OCV in each tier that a 
Member may choose to meet in lieu of the existing criteria (Customer 
order ADV as a percentage of average OCV) to receive a corresponding 
enhanced rebate. Specifically, a Member may reach the proposed 
alternative criteria in Tier 1 if the Member has an ADV in complex non-
crossing orders that is greater than or equal to 0.25% of average OCV, 
the proposed alternative criteria in Tier 2 if the Member has an ADV in 
complex non-crossing orders that is greater than or equal to 0.45% of 
average OCV, and the proposed alternative criteria in Tier 3 if the 
Member has an ADV in complex non-crossing orders that is greater than 
or equal to 0.60% of average OCV. Finally, the proposed rule change 
adopts Tier 4, which provides an enhanced rebate of $1.00 per contract 
for qualifying orders if a Member has an ADV in complex non-crossing 
orders greater than or equal to 1.00% of average OCV or if a Member has 
an ADV in Customer orders greater than or equal to 2.00% of average 
OCV.
    The proposed rule change to the existing Customer Complex Penny/
Non-Penny Tiers eases the overall difficulty in reaching the tiers' 
criteria by adding an alternative criteria option that Members may 
choose to meet in lieu of the existing criteria and amends the enhanced 
rebates to correspond with the ease in criteria. While the proposed 
change incrementally increases the ADV as a percentage of average OCV 
in the existing Customer Complex Non-Penny Tiers' criteria, the 
Exchange notes that the overall difficulty of meeting the criteria in 
these existing tiers is eased by the opportunity to meet alternative 
criteria. Also, as a result of the increase in the percentage of 
Customer order ADV in the existing Customer Complex Non-Penny Tiers, 
the proposed corresponding enhanced rebates are not as reduced as the 
proposed enhanced rebates that correspond to the less difficult 
criteria (due to the addition of the alternative criteria plus the 
decrease in ADV as a percentage of average OCV) proposed in the 
existing Customer Complex Penny Tiers. The proposed overall ease in 
criteria and new tiers offered under the Customer Complex Penny/Non-
Penny Tiers provide Members an additional opportunity to receive a 
rebate on their qualifying Customer complex orders (i.e., yielding fee 
code ZA and ZB), which, in turn, provides Members with increased 
incentives to increase their Customer order flow and their overall 
complex non-crossing order flow in order to achieve the proposed eased 
and/or additional criteria and receive enhanced rebates on their 
qualifying Customer complex orders.
    The proposed rule change also amends the AIM Volume Tier. 
Currently, Tier 1 offers an enhanced rebate of $0.14 per contract for a 
Member's qualifying orders (i.e. yielding fee code BC) if a Member has 
an ADV in Customer Orders greater than or equal to 0.35% of average 
OCV. The proposed rule change adopts a new Tier 1 (and, as a result, 
updates current Tier 1 to Tier 2),\9\ which offers an enhanced rebate 
of $0.11 per contract for qualifying orders if a Member has an ADV in 
Customer Orders greater than or equal to 0.30% of average OCV. The 
proposed rule change also incrementally increases the percentage of a 
Member's Customer Order ADV into average OCV from 0.35% to 0.50% in 
Tier 2 (current Tier 1). The corresponding enhanced rebate remains the 
same Like the proposed additional Customer Complex Penny/Non-Penny 
Tiers, the proposed new AIM Volume Tier provide Members with an 
additional opportunity to achieve tier criteria and receive an enhanced 
rebate, thus providing further incentive to submit Customer order flow 
to the Exchange.
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    \9\ As a result of the proposed additional tier, the proposed 
rule change also updates the heading of Footnote 9 from singular to 
plural ``Tiers.''
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    The Exchange believes that the proposed changes to the Customer 
Complex Penny/Non-Penny Tiers and AIM Volume Tiers are designed overall 
to incentivize more Customer order flow and to direct an increase of 
order flow to the EDGX Options Order Book. The Exchange believes that 
an increase in Customer order flow and overall order flow to the 
Exchange's Book creates more trading opportunities, which, in turn 
attracts Market-Makers. A resulting increase in Market-Maker activity 
may facilitate tighter spreads, which may lead to an additional 
increase of order flow from other market participants, further 
contributing to a deeper, more liquid market to the benefit of all 
market participants by creating a more robust and well-balanced market 
ecosystem.
    Finally, the proposed rule change updates the term ``Penny Pilot'' 
throughout the Fee Schedule to reflect the 2020 adoption of the pilot 
program on a permanent basis.\10\ More specifically, on April 1, 2020 
the Commission approved an amendment the Plan for the Purpose of 
Developing and Implementing Procedures Designed to Facilitate the 
Listing and Trading of Standardized Options (the ``OLPP'') to make 
permanent the Penny Pilot Program, and the Exchange accordingly 
conformed its Rules to the OLPP Program by deleting Interpretation and 
Policy .01 to Rule 21.5 (the ``Penny Pilot Rule''), replacing it with 
Rule 21.5(e) (Requirements for Penny Interval Program). As a result, 
the proposed rule change now updates the Fee Schedule to reflect the 
permanent Penny Program, as follows:
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    \10\ See Securities Exchange Act Release No. 89080 (June 17, 
2020), 85 FR 37722 (June 23, 2020) (SR-CboeEDGX-2020-028).
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     Removes the term ``Pilot'' from the descriptions of fee 
codes PB, PC, PF, PM, PN, PO, PP, PT, RN, and RQ in the Fees Codes and 
Associated Fees section; \11\
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    \11\ The Exchange notes that this update harmonizes these fee 
code descriptions with existing fee code descriptions that currently 
refer to just ``Penny''.
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     replaces ``Pilot'' with ``Program'' where applicable in 
the Standard Rates table, Footnote 4, Footnote 6, Footnote 8, and 
Marketing Fees table; and
     amends the term ``Penny Pilot Securities'' to reflect the 
definition of ``Penny Program Securities'' in the Definition section 
and updates the definition to reflect Rule 21.5(e), which now governs 
the Penny Program.
    The Exchange believes that the proposed rule change will provide 
additional clarity in the Fee Schedule by updating references to the 
current permanent Penny Program and the corresponding Rule that now 
governs the program. The Exchange notes that the proposed rule change 
does not alter the securities eligible for the Penny Program nor any of 
the rates currently assessed for Penny Program Securities.

[[Page 20572]]

2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\12\ in general, and 
furthers the objectives of Section 6(b)(4),\13\ 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) \14\ 
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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    \12\ 15 U.S.C. 78f.
    \13\ 15 U.S.C. 78f(b)(4).
    \14\ 15 U.S.C. 78f.(b)(5).
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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 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.
    The Exchange believes the proposed reduction in rebate amounts for 
orders yielding fee codes ZA, ZB, and BC is reasonable, equitable, and 
not unfairly discriminatory. The Exchange believes that amending the 
rebates for Customer orders yielding fee code ZA, ZB, or BC is 
reasonable because, as stated above, in order to operate in the highly 
competitive equities markets, the Exchange and its competing exchanges 
seek to offer similar pricing structures, including assessing 
comparable rates and offering multiple enhanced pricing opportunities 
for various types of orders. Thus, the Exchange believes the proposed 
rate changes (along with the proposed offering of additional tiered 
pricing opportunities) are reasonable as they are generally aligned 
with and competitive with the amounts assessed for similar Customer 
orders on other options exchanges.\15\ The Exchange also believes that 
amending the rebate amounts associated with fee codes ZA, ZB, and BC 
represents an equitable allocation of fees and is not unfairly 
discriminatory because they will continue to automatically and 
uniformly apply to all Members' respective qualifying Customer orders.
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    \15\ See supra note 6.
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    The Exchange believes the proposed changes to the Customer Complex 
Penny/Non-Penny Tiers and AIM Volume Tier are reasonable overall 
because they amend the tiers in a manner that incentivizes increased 
Customer order flow and/or overall order flow to the EDGX Book by 
providing Members with additional opportunities to meet criteria, both 
via reduction in difficulty and additional tiers, in order to receive 
enhanced rebates a Member's qualifying orders. The Exchange notes that 
relative volume-based incentives and discounts have been widely adopted 
by exchanges,\16\ including the Exchange,\17\ 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. Additionally, as noted 
above, the Exchange operates in a highly competitive market. The 
Exchange is only one of several options venues to which market 
participants may direct their order flow, and it represents a small 
percentage of the overall market. Competing options exchanges offer 
similar tiered pricing structures to that of the Exchange, including 
schedules of rebates and fees that apply based upon members achieving 
certain volume and/or growth thresholds and offer comparable pricing to 
members for achieving such tiers.\18\
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    \16\ See e.g., Cboe BZX U.S. Options Exchange Fee Schedule, 
Footnote 1, Customer Penny Add Volume Tiers; and Footnote 12, 
Customer Non-Penny Add Volume Tiers, both of which provide for 
various tiers with different, incrementally more difficult criteria, 
many of which are based on average volumes as a percentage of 
average OCV and offer enhanced rebates ranging from $0.35 to $1.06 
per contract.
    \17\ See i.e., Cboe EDGX U.S. Options Exchange Fee Schedule, 
Footnote 1, Customer Volume Tiers.
    \18\ See supra note 16.
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    Specifically, the Exchange believes that the proposed changes to 
the Customer Complex Penny/Non-Penny Tiers and the AIM Volume Tier are 
reasonable, equitable, and not unfairly discriminatory. The Exchange 
believes that the additional, alternative criteria and modification of 
existing criteria in the Customer Complex Penny/Non-Penny Tiers are 
reasonable because they amend existing opportunities to receive 
enhanced rebates by easing the level of difficulty in each set of the 
three existing tiers and maintain the current structure of step-up in 
difficulty in achieving each ascending tier. The proposed new Customer 
Complex Penny/Non-Penny Tiers are reasonable because they provide 
Members with additional, also incrementally more challenging, 
opportunities to receive enhanced rebates. Likewise, the proposed new 
AIM Volume Tier 1 provides Members with an additional opportunity to 
achieve easier tier criteria (than that of current Tier 1) and receive 
an enhanced rebate, while slightly increasing the difficulty in 
reaching the criteria in the existing AIM Volume Tier (current Tier 1) 
to also reflect an incremental step-up in difficulty in the AIM Volume 
Tiers. The Exchange believes that the proposed additional opportunities 
in the Customer Penny/Non-Penny Tiers and AIM Volume Tiers for Members 
to receive enhanced rebates on their qualifying orders via new tiers 
and an overall ease in tier difficulty (while still maintaining the 
current structure of step-up in difficulty through ascending tiers) are 
reasonably designed to provide further incentive to Members to increase 
Customer order flow to the Exchange overall order flow directly to the 
Exchange's Book. As described above, Customer order flow and overall 
order flow to the Exchange's Book creates more trading opportunities, 
which, in turn attracts Market-Makers. A resulting increase in Market-
Maker activity may facilitate tighter spreads, which may lead to an 
additional increase of order flow from other market participants. 
Increased overall order flow benefits all investors by deepening the 
Exchange's liquidity pool, potentially providing even greater execution 
incentives and opportunities, offering additional flexibility for all 
investors to enjoy cost savings, supporting the quality of price 
discovery, promoting market transparency, and improving investor 
protection.
    The Exchange further believes that the proposed changes to the 
enhanced rebate amounts and new enhanced rebates in the Customer 
Complex Penny/Non-Penny Tiers and AIM Volume Tiers are reasonable as 
they represent the proposed proportional decreases in difficulty per 
adjacent tiers. The Exchange believes that providing reduced enhanced 
rebates per tier is

[[Page 20573]]

reasonable as they are commensurate with the proposed criteria, in 
that, they are line with the easing the level of difficulty or the 
proposed new relative levels of difficulty in the Customer Complex 
Penny/Non-Penny Tiers and AIM Volume Tiers. Also, as noted above, while 
the proposed criteria changes to the existing Customer Complex Non-
Penny Tiers decrease the overall difficulty in meeting the tiers' 
criteria, the difficulty in reaching the modified criteria in these 
tiers is incrementally greater than the difficulty in reaching the 
modified criteria in the proposed Customer Complex Penny Tiers. 
Therefore, Exchange believes it is reasonable to offer, as proposed, a 
slightly less reduced enhanced rebate per corresponding Customer 
Complex Non-Penny Tier. Also, the proposed reduced enhanced rebates 
and/or proposed additional enhanced rebates in the Customer Complex 
Penny/Non-Penny Tiers and AIM Volume Tiers, as applicable, do not 
represent a significant departure from the enhanced rebates currently 
offered under the tiers as the proposed rate changes merely 
incrementally shift the range of enhanced rebates offered to most 
appropriately align with the corresponding shift in criteria difficulty 
per each tier (existing and new).
    The Exchange believes that the proposed changes to the Customer 
Complex Penny/Non-Penny Tiers and AIM Volume Tier represent an 
equitable allocation of rebates and are not unfairly discriminatory. 
All Members will continue to be eligible for the existing Customer 
Complex Penny/Non-Penny Tiers and AIM Volume Tier, as amended, and will 
be eligible for the proposed tiers by submitting the requisite order 
flow. The proposed changes to the tiers' criteria are designed as an 
incentive to any and all Members interested in meeting modified and new 
tier criteria to submit additional Customer orders and/or overall order 
flow directly to the Exchange's Book. Each Member will have the same 
opportunity to submit the requisite order flow and the corresponding 
enhanced rebates (existing and as amended) will apply uniformly to all 
Members that meet the modified or new tier criteria. 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 at least one to three Members will be able to compete for and 
potentially achieve the amended criteria in each of the existing 
Customer Complex Penny Tiers and Customer Complex Non-Penny Tiers. The 
Exchange also anticipates at least one or two Members will be able to 
compete for and potentially achieve the two new Customer Complex Penny 
Tiers and new Customer Non-Penny Tier. The Exchange anticipates that 
approximately two to three Members will be able to compete for and 
potentially achieve each of the AIM Volume Tiers, as proposed. The 
Exchange also notes that the proposed tiers will not adversely impact 
any Member's pricing or their ability to qualify for other rebate 
tiers. Rather, should a Member not meet the proposed criteria for a 
tier, the Member will merely not receive the corresponding enhanced 
rebate.
    Finally, the Exchange believes the proposed update to the Penny 
Program language and Rule reference in the Fee Schedule is reasonable, 
equitable and not unfairly discriminatory because it is intended to 
provide additional clarity in the Fee Schedule by updating references 
to the current permanent Penny Program and the corresponding Rule that 
now governs the program and does not alter the securities eligible for 
the Penny Program nor any of the rates currently assessed for Penny 
Program Securities.

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 intramarket or intermarket 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 
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.'' \19\
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    \19\ Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    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 to the rebate amounts associated with fee codes ZA, ZB, and BC 
will continue to apply uniformly and automatically to all Members' 
respective qualifying orders. The proposed tier changes apply to all 
Members equally in that all Members are eligible to achieve the tiers' 
proposed criteria, have a reasonable opportunity to meet the tiers' 
proposed criteria and will all receive the corresponding enhanced 
rebates (existing and as amended) if such criteria is met. Overall, the 
proposed change is designed to attract additional Customer order flow 
to the Exchange and overall order flow directly to the Exchange's Book. 
The Exchange believes that the modified and new tier criteria will 
incentivize market participants to strive to increase such order flow 
to the Exchange to receive the corresponding enhanced rebates and, as a 
result, increase trading opportunities, attract further Market-Maker 
activity, further incentivize the provision of liquidity and continued 
order flow to the Book, and improve price transparency on the Exchange. 
Greater overall order flow and pricing transparency benefits all market 
participants on the Exchange by generally providing a cycle of more 
trading opportunities, enhancing market quality, and continuing to 
encourage Members to submit order flow and continue to contribute 
towards a robust and well-balanced market ecosystem to the benefit of 
all market participants. The Exchange additionally notes that the 
proposed rule change to reflect the current Penny Program is 
noncompetitive, nonsubstantive and merely clarifying in nature.
    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 15 other options exchanges and 
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 options exchange has more 
than 15% of the market share.\20\ Therefore, no exchange possesses 
significant pricing power in the execution of order flow. Indeed, 
participants can readily choose to send

[[Page 20574]]

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.'' \21\ 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'. . . .''.\22\ 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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    \20\ See supra note 3.
    \21\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \22\ 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 \23\ and paragraph (f) of Rule 19b-4 \24\ 
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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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 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-2021-020 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-2021-020. 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-
020 and should be submitted on or before May 11, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\25\
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    \25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-08033 Filed 4-19-21; 8:45 am]
BILLING CODE 8011-01-P


