[Federal Register Volume 86, Number 235 (Friday, December 10, 2021)]
[Notices]
[Pages 70551-70554]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-26711]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93718; File No. SR-CboeEDGX-2021-050]


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

December 6, 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 December 1, 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'' or ``EDGX 
Equities'') proposes to amend its Fee Schedule. The text of the 
proposed rule change is provided in Exhibit 5.
    The text of the proposed rule change is also available on the 
Exchange's website (http://markets.cboe.com/us/options/regulation/rule_filings/edgx/) [sic], 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 (1) add a new Growth 
Tier 4, and (2) modify the Remove Volume Tier 1, effective December 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 rebates to members that add liquidity and assesses fees 
to those that remove liquidity. The Exchange's Fee Schedule sets forth 
the standard rebates and rates applied per share for orders that 
provide and remove liquidity, respectively. Currently, for orders in 
securities priced at or above $1.00, the Exchange

[[Page 70552]]

provides a standard rebate of $0.00160 per share for orders that add 
liquidity and assesses a fee of $0.0030 per share for orders that 
remove liquidity. For orders in securities priced below $1.00, the 
Exchange provides a standard rebate of $0.00009 per share for orders 
that add liquidity and assesses a fee of 0.30% of total dollar value 
for orders that remove liquidity. 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 (November 29, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
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    Under footnote 1 of the Fee Schedule the Exchange currently offers 
various Add/Remove Volume Tiers. In particular, the Exchange offers 
three Growth Tiers that each provide an enhanced rebate for Members' 
qualifying orders yielding fee codes B,\4\ V,\5\ Y,\6\ 3 \7\ and 4,\8\ 
where a Member reaches certain add volume-based criteria, including 
``growing'' its volume over a certain baseline month. Currently, the 
Growth Tiers are as follows:
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    \4\ Orders yielding Fee Code ``B'' are orders adding liquidity 
to EDGX (Tape B).
    \5\ Orders yielding Fee Code ``V'' are orders adding liquidity 
to EDGX (Tape A).
    \6\ Orders yielding Fee Code ``Y'' are orders adding liquidity 
to EDGX (Tape C).
    \7\ Orders yielding Fee Code ``3'' are orders adding liquidity 
to EDGX in the pre and post market (Tapes A or C).
    \8\ Orders yielding Fee Code ``4'' are orders adding liquidity 
to EDGX in the pre and post market (Tape B).
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     Growth Tier 1 provides a rebate of $0.0026 per share to 
qualifying orders (i.e., orders yielding fee codes B, V, Y, 3, or 4) 
where (1) the Member adds an ADV \9\ equal to or greater than 0.20% of 
the TCV; \10\ and (2) the Member has a Step-Up Add TCV \11\ from August 
2021 equal to or greater than 0.10% of [sic] the Member adds a Step-Up 
ADAV \12\ from August 2021 equal to or greater than 8 million shares.
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    \9\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day and ``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. ADAV and ADV is calculated on a monthly basis.
    \10\ ``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.
    \11\ ``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.
    \12\ ``Step-Up ADAV'' means ADAV in the relevant baseline month 
subtracted from current ADAV.
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     Growth Tier 2 provides a rebate of $0.0027 per share to 
qualifying orders (i.e., orders yielding fee codes B, V, Y, 3, or 4) 
where (1) the Member adds a Step-Up ADAV from June 2021 equal to or 
greater than 0.10% of the TCV or the Member adds a Step-Up ADAV from 
June 2021 equal to or greater than 8 million; and (2) the Member has a 
total remove ADV equal to or greater than 0.70% of TCV.
     Growth Tier 3 provides a rebate of $0.0030 per share to 
qualifying orders (i.e., orders yielding fee codes B, V, Y, 3, or 4) 
where (1) the Member has a Step-Up Add TCV from January 2021 equal to 
or greater than 0.10%; (2) the Member adds an ADV equal to or greater 
than 0.50% of the TCV; and (3) the Member removes an ADV equal to or 
greater than 0.75% of the TCV.
    Now, the Exchange proposes to add Growth Tier 4 as follows:
     Proposed Growth Tier 4 provides a rebate of $0.0034 per 
share to qualifying orders (i.e., orders yielding fee codes B, V, Y, 3, 
or 4) where (1) the Member adds a Step-Up ADAV from October 2021 equal 
to or greater than 0.10% of the TCV or the Member adds a Step-Up ADAV 
from October 2021 equal to or greater than 10 million shares; and (2) 
the Member has a total remove ADV equal to or greater than 0.60% of 
TCV.
    Under footnote 1 of the Fee Schedule the Exchange also currently 
offers two Remove Volume Tiers that each provide an enhanced rebate for 
Members' qualifying orders yielding fee codes BB,\13\ N,\14\ and W \15\ 
where a Member reaches certain remove volume-based criteria. Currently, 
the Remove Volume Tiers are as follows:
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    \13\ Orders yielding Fee Code ``BB'' are orders removing 
liquidity from EDGX (Tape B).
    \14\ Orders yielding Fee Code ``N'' are orders removing 
liquidity from EDGX (Tape C).
    \15\ Orders yielding Fee Code ``W'' are orders removing 
liquidity from EDGX (Tape A).
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     Remove Volume Tier 1 provides a reduced fee of $0.00275 
per share in securities at or above $1.00 and 0.28% of total dollar 
value in securities priced below $1.00 to qualifying orders (i.e., 
orders yielding fee codes BB, NN, or W) where (1) the Member adds a 
Step-Up ADAV from June 2021 equal to or greater than 0.10% of the TCV 
or the Member adds a Step-Up ADAV from June 2021 equal to or greater 
than 8 million shares; and (2) the Member has a total remove ADV equal 
to or greater than 0.70% of the TCV.
     Remove Volume Tier 2 provides a reduced fee of $0.00275 
per share in securities at or above $1.00 and 0.28% of total dollar 
value in securities priced below $1.00 to qualifying orders (i.e., 
orders yielding fee codes BB, NN, or W) where (1) the Member has an 
ADAV equal to or greater than 0.25% of TCV with displayed orders that 
yield fee codes B, V or Y; or (2) the Member adds Retail Order ADV 
(i.e., yielding fee code ZA) equal to or greater than 0.45% of the TCV.
    Now, the Exchange proposes to modify Remove Volume Tier 1 as 
follows:
     Proposed Remove Volume Tier 1 provides a reduced fee of 
$0.00275 per share in securities at or above $1.00 and 0.28% of total 
dollar value in securities priced below $1.00 to qualifying orders 
(i.e., orders yielding fee codes BB, NN, or W) where (1) the Member 
adds a Step-Up ADAV from June 2021 equal to or greater than 0.10% of 
the TCV or the Member adds a Step-Up ADAV from June 2021 equal to or 
greater than 8 million shares; and (2) the Member has a total remove 
ADV equal to or greater than 0.60% (instead of 0.70%) of the TCV.
    The proposed amendment to the Remove Volume Tier 1 would lessen the 
difficulty of the existing criteria while keeping the reduced fee the 
same.
    Overall, the proposed new Growth Tier and the amendments to the 
Remove Volume Tier are designed to provide Members with an opportunity 
to receive an enhanced rebate or reduced fee by increasing their order 
flow to the Exchange, which further contributes to a deeper, more 
liquid market and provides even more execution opportunities for active 
market participants. Incentivizing an increase in liquidity adding or 
removing volume, through enhanced rebate or reduced fee opportunities, 
encourages liquidity adding Members on the Exchange to contribute to a 
deeper, more liquid market, and liquidity executing Members on the 
Exchange to increase transactions and take execution opportunities 
provided by such increased liquidity, together providing for overall 
enhanced price discovery and price improvement opportunities on the 
Exchange. As such, increased overall order flow benefits all Members by 
contributing towards a robust and well-balanced market ecosystem.
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

[[Page 70553]]

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) \18\ 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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    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(4).
    \18\ 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 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. Additionally, the Exchange notes that relative volume-based 
incentives and discounts have been widely adopted by exchanges,\19\ 
including the Exchange,\20\ and are reasonable, equitable and non-
discriminatory because they are open to all Members on an equal basis 
and provide additional benefits or discounts that are reasonably 
related to (i) the value to an exchange's market quality and (ii) 
associated higher levels of market activity, such as higher levels of 
liquidity provision and/or growth patterns. Competing equity exchanges 
offer similar tiered pricing structures, including schedules of rebates 
and fees that apply based upon members achieving certain volume and/or 
growth thresholds, as well as assess similar fees or rebates for 
similar types of orders, to that of the Exchange.
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    \19\ See BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \20\ See EDGX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
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    In particular, the Exchange believes the proposed Growth Tier 4 and 
the proposed change to the Remove Volume Tier 1 are reasonable because 
the Tiers will be available to all Members and provide all Members with 
an additional opportunity to receive an enhanced rebate or reduced fee. 
The Exchange further believes the proposed Growth Tier 4 will provide a 
reasonable means to encourage overall growth in Members' order flow to 
the Exchange and to incentivize Members to continue to provide 
liquidity adding volume to the Exchange by offering them an additional 
opportunity to receive an enhanced rebate on qualifying orders. 
Similarly, the Exchange believes the Remove Volume Tier 1, even as 
amended, will provide a reasonable means to encourage overall growth in 
Members' order flow to the Exchange and to incentivize Members to 
continue to add and remove liquidity on the Exchange by offering them 
an additional opportunity to receive a reduced fee on qualifying 
orders. An overall increase in activity would deepen the Exchange's 
liquidity pool, offers additional cost savings, support the quality of 
price discovery, promote market transparency and improve market 
quality, for all investors.
    Further, the Exchange believes that the proposed changes are 
reasonable as it does not represent a significant departure from the 
criteria currently offered in the Fee Schedule. For example, the 
Exchange notes similar criteria is offered under the existing Growth 
Tiers and the change to the Remove Volume Tier 1 slightly lessens the 
difficulty of achieving the Tier. Additionally, the Exchange believes 
that the proposed enhanced rebate under Growth Tier 4 and reduced fee 
under the Remove Volume Tier 1, which is not being changed, continues 
to be commensurate with the new criteria.
    The Exchange also believes that the proposal represents an 
equitable allocation of fees and rebates and is not unfairly 
discriminatory because all Members will be eligible for Growth Tier 4 
and will continue to be eligible for the Remove Volume Tier 1 and have 
the opportunity to meet each Tier's criteria and receive the 
corresponding enhanced rebate or 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 Growth 
Tier 4 or the Remove Volume Tier 1, as amended. While the Exchange has 
no way of predicting with certainty how the proposed changes will 
impact Member activity, the Exchange anticipates that at least one 
Member will be able to satisfy the criteria proposed under each 
proposed tier. The Exchange also notes that proposed changes will not 
adversely impact any Member's ability to qualify for reduced fees or 
enhanced rebates offered under other tiers. Should a Member not meet 
the proposed new criteria, the Member will merely not receive that 
corresponding enhanced rebate.

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 
changes to the Remove Volume Tier 1 and the proposed Growth Tier 4 
apply to all Members equally in that all Members are eligible for each 
of the Tiers, have a reasonable opportunity to meet the Tiers' criteria 
and will receive the enhanced rebate or reduced fee on their qualifying 
orders if such criteria is met. The Exchange does not believe the 
proposed changes burdens competition, but rather, enhances competition 
as it is intended to increase the competitiveness of EDGX by adding a 
new pricing incentive and amending an existing pricing incentive in 
order to attract order flow and incentivize participants to increase 
their participation on the Exchange, providing for additional execution 
opportunities for market participants and improved price transparency. 
Greater overall order flow, trading opportunities, and pricing 
transparency benefits all market participants on the Exchange by 
enhancing market quality and continuing to encourage Members to send 
orders, thereby contributing towards a robust and well-balanced market 
ecosystem.
    Next, the Exchange believes the proposed rule change does not 
impose any burden on intermarket competition that is not necessary or 
appropriate in

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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.\21\ 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.'' \22\ 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'. . . .''.\23\ 
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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    \21\ Supra note 3.
    \22\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \23\ 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 \24\ and paragraph (f) of Rule 19b-4 \25\ 
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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    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 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 [email protected]. Please 
include File Number SR-CboeEDGX-2021-050 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-2021-050. 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-2021-050 and should be 
submitted on or before January 3, 2022.
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    \26\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-26711 Filed 12-9-21; 8:45 am]
BILLING CODE 8011-01-P


