[Federal Register Volume 87, Number 92 (Thursday, May 12, 2022)]
[Notices]
[Pages 29205-29208]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-10144]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94864; File No. SR-CboeEDGX-2022-026]


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

May 6, 2022.
    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 May 2, 2022, 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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[[Page 29206]]

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe EDGX Exchange, Inc. (the ``Exchange'' or ``EDGX'') 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'') by amending the fee 
associated with fee code DQ. The Exchange proposes to implement these 
changes effective May 2, 2022.
    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.
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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (April 22, 2022), available at https://markets.cboe.com/us/equities/market_statistics/.
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    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 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.
    Specifically, the proposed rule change amends the fee assessed to 
orders that yield fee code DQ under the Fee Codes and Associated Fees 
table of the Fee Schedule. Fee code DQ is appended to Midpoint 
Discretionary Orders (``MDOs'') \4\ using the Quote Depletion 
Protection (``QDP'') order instruction.\5\ QDP is designed to provide 
enhanced protections to MDOs by tracking significant executions that 
constitute the best bid or offer on the EDGX Book and enabling Users to 
avoid potentially unfavorable executions by preventing MDOs entered 
with the optional QDP instruction from exercising discretion to trade 
at more aggressive prices when QDP has been triggered.\6\ Currently, 
MDOs entered with the QDP instruction are appended the fee code DQ and 
are assessed a fee of $0.00020 per share in securities at or above 
$1.00 and 0.30% of dollar value for securities priced below $1.00. The 
proposal would increase the fee assessed under fee code DQ to $0.00040 
per share in securities at or above $1.00. The Exchange seeks to align 
the fee assessed to orders appended with fee code DQ with the current 
fee assessed by the Exchange's affiliate exchange, Cboe EDGA Exchange, 
Inc. (``EDGA''), which currently assesses a fee of $0.00040 per share 
in securities at or above $1.00 and 0.30% of dollar value for 
securities priced below $1.00.\7\ The Exchange does not propose to 
change the fee assessed for orders yielding fee code DQ priced below 
$1.00.
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    \4\ See Exchange Rule 11.8(g).
    \5\ See Exchange Rule 11.8(g)(10).
    \6\ See Securities Exchange Act Release No. 89007 (June 4, 
2020), 85 FR 35454 (June 10, 2020) (SR-CboeEDGX-2020-010).
    \7\ See Cboe EDGA Exchange Fee Schedule, Fee Code and Associated 
Fees, Fee Code DQ.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the objectives of Section 6 of the Securities and Exchange Act of 1933 
[sic] (the ``Act''),\8\ in general, and furthers the objectives of 
Section 6(b)(4),\9\ 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) \10\ 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. 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.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
    \10\ 15 U.S.C. 78f(b)(5).
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    In particular, the Exchange believes that the proposed amendment to 
increase the fee associated with fee code DQ is reasonable, equitable 
and not unfairly discriminatory. The Exchange believes the proposed 
increase is reasonable because the proposed change represents a modest 
fee increase for an optional order instruction. Members may continue to 
submit MDOs without the QDP order instruction if they do not wish to 
incur the slightly increased fee. Users may also opt to disfavor the 
Exchange's pricing if they believe that alternatives offer them better 
value. The Exchange further believes that the proposed change is 
reasonable because

[[Page 29207]]

the proposed fee remains consistent with pricing offered by the other 
exchanges and does not represent a significant departure from the 
Exchange's general pricing structure. Specifically, the proposed fee 
applicable to fee code DQ is equal to that of the Exchange's affiliate, 
EDGA, which currently assesses a fee of $0.00040 for MDOs submitted to 
EDGA with a QDP order instruction. In addition, the proposed fee is 
equal to the fee currently offered by the Nasdaq Stock Market LLC 
(``Nasdaq''), for its Midpoint Extended Life Order (``M-ELO'') \11\ in 
securities priced at or above $1.00.\12\ The Exchange believes that the 
proposed fee is reasonable as it is competitive with the fee assessed 
by EDGA for its MDOs appended with the QDP order instruction and the 
fee Nasdaq charges for M-ELO executions, which offer similar protective 
features to MDOs entered with the QDP order instruction on the 
Exchange. The Exchange believes the proposed rule change is equitable 
and not unfairly discriminatory because both the MDO order type and the 
associated QDP order instruction are available to all Users on an equal 
and non-discriminatory basis, and any User that chooses to use the QDP 
instruction would be uniformly subject to the same proposed fee. The 
Exchange notes that the QDP instruction is optional and market 
participants who do not wish to incur the increased flat fee can 
continue to enter MDOs without the QDP instruction.
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    \11\ Nasdaq's Midpoint Extended Life Orders are non-displayed 
orders pegged to the midpoint of the NBBO that do not execute until 
the passage of at least 10 milliseconds after the order has been 
accepted by the System. See Nasdaq Rules, Equity 4, Section 
4702(b)(14).
    \12\ See Nasdaq Rules, Equity 7, Pricing Schedule, Section 
118(a)(1), (2), (3). Nasdaq assesses a fee of $0.0004 per share when 
executed at a price at or above $1.00. Nasdaq does not charge a fee 
for M-ELO executions in securities priced below $1.00. See Nasdaq 
Rules, Equity 7, Pricing Schedule, Section 118(b).
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    The Exchange 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 fee assessed on orders that yield fee code DQ will apply 
to all such orders equally in that all MDO orders utilizing the QDP 
order instruction will be assessed the proposed slightly higher fee. 
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 the proposed change does 
not represent a significant departure from pricing currently offered by 
the Exchange or pricing offered by other equities exchanges. Members 
may opt to disfavor the Exchange's pricing if they believe that 
alternatives offer them better value. Accordingly, the Exchange does 
not believe that the proposed change will impair the ability of Members 
or competing venues to maintain their competitive standing in the 
financial markets. 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.\13\ 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.'' \14\ 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' . . .''.\15\
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    \13\ Supra note 3.
    \14\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \15\ 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 \16\ and paragraph (f) of Rule 19b-4 \17\ 
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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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 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-2022-026 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-2022-026. This 
file number should be included on the subject line if email is used. To 
help the

[[Page 29208]]

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. 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-2022-026, and 
should be submitted on or before June 2, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-10144 Filed 5-11-22; 8:45 am]
BILLING CODE 8011-01-P


