[Federal Register Volume 87, Number 199 (Monday, October 17, 2022)]
[Notices]
[Pages 62898-62901]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-22446]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96018; File No. SR-CboeEDGX-2022-045]


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

October 11, 2022.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(the

[[Page 62899]]

``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on October 5, 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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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 Equity'') to modify the criteria of 
Growth Tier 4.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
October 3, 2022 (SR-CboeEDGX-2022-042). On October 5, 2022, the 
Exchange withdrew that filing and submitted this filing.
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    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues 
that do not have similar self-regulatory responsibilities under the 
Exchange Act, to which market participants may direct their order flow. 
Based on publicly available information,\4\ no single registered 
equities exchange has more than 19% 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 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 the 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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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (September 23, 2022), available at https://www.cboe.com/us/equities/market_statistics/.
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Modification to Growth Volume Tier 4
    Under footnote 1 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers. For example, the Exchange offers four 
Growth Tiers that each provide an enhanced rebate for Members' 
qualifying orders yielding fee codes B,\5\, V,\6\ Y,\7\ 3 \8\ or 4,\9\ 
where a Member reaches certain add volume-based criteria, including 
``growing'' its volume over a certain baseline month. Currently, Growth 
Tier 4 provides an enhanced rebate of $0.0034 per share to MPIDs that 
(1) add a Step-Up ADAV \10\ from October 2021 equal to or greater than 
0.10% of the TCV \11\ or MPIDs that add a Step-Up ADAV from October 
2021 equal to or greater than 16 million shares; and (2) MPIDs that add 
an ADV \12\ equal to or greater than 0.30% of TCV or MPIDs that add an 
ADV equal to or greater than 35 million shares. The Exchange now 
proposes to amend the criteria of Growth Tier 4. Particularly, the 
Exchange proposes to provide that under prong 1 of Growth Tier 4, MPIDs 
must add a Step-Up ADAV from October 2021 equal to or greater than 
0.12% of the TCV (instead of 0.10% of the TCV) or add a Step-Up ADAV 
from October 2021 equal to or greater than 16 million shares. The 
Exchange is not proposing to change the criteria under prong 2 of 
Growth Tier 4.
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    \5\ Orders yielding Fee Code ``B'' are orders adding liquidity 
to EDGX (Tape B).
    \6\ Orders yielding Fee Code ``V'' are orders adding liquidity 
to EDGX (Tape A).
    \7\ Orders yielding Fee Code ``Y'' are orders adding liquidity 
to EDGX (Tape C).
    \8\ Orders yielding Fee Code ``3'' are orders adding liquidity 
to EXGX in the pre and post market (Tapes A or C).
    \9\ Orders yielding Fee Code ``4'' are orders adding liquidity 
to EDGX in the pre and post market (Tape B).
    \10\ ``Step-Up ADAV'' means ADAV in the relevant baseline month 
subtracted from current ADAV. ``ADAV'' means average daily volume 
calculated as the number of shares added per day. ADAV is calculated 
on a monthly basis.
    \11\ ``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.
    \12\ ``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. ADV is calculated on a 
monthly basis.
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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 
(the ``Act''),\13\ in general, and furthers the objectives of section 
6(b)(4),\14\ 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) \15\ requirements that the rules of 
an exchange be designed to prevent

[[Page 62900]]

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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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
    \15\ 15 U.S.C. 78f(b)(5).
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    The Exchange believes that its proposed change to Growth Tier 4 is 
reasonable, equitable and not unfairly discriminatory. The Exchange's 
proposal to amend Growth Tier 4 is reasonable because the tier will 
continue to be available to all MPIDs and will continue to provide 
MPIDs an opportunity to receive an enhanced rebate. 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 or liquidity provision and/or growth thresholds, 
as well as assess similar fees or rebates for similar types of orders, 
to that of the Exchange. The Exchange also believes that the existing 
rebate under Growth Tier 4 continues to be commensurate with the 
existing and proposed criteria. That is, the rebate reasonably reflects 
the difficulty in achieving the corresponding criteria as amended.
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    \16\ See BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \17\ See EDGX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
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    The Exchange believes that the change to Growth Tier 4 will benefit 
all market participants by incentivizing continuous liquidity and, 
thus, deeper more liquid markets as well as increased execution 
opportunities. Particularly, the proposal is designed to incentivize 
liquidity, which further contributes to a deeper, more liquid market 
and provide even more execution opportunities for active market 
participants at improved prices. 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.
    The Exchange also believes that the proposed amendment to Growth 
Tier 4 represents an equitable allocation of rebates and is not 
unfairly discriminatory because all MPIDs are eligible for the tier and 
would have the opportunity to meet the tier's criteria and would 
receive the proposed rebate 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 MPIDs qualifying for the proposed tiers. While 
the Exchange has no way of predicting with certainty how the proposed 
tier will impact MPID activity, the Exchange anticipates that at least 
one MPID will be able to compete for and reach the proposed criteria in 
Growth Tier 4. The Exchange also notes all MPIDs are eligible to 
satisfy the revised criteria of Growth Tier 4 and further believes the 
proposed change will provide a reasonable means to encourage future 
overall growth in Members' order flow to the Exchange by offering an 
enhanced rebate on qualifying orders. Moreover, the proposed criteria 
will not adversely impact any MPID or Member's ability to qualify for 
other reduced fee or enhanced rebate tiers. Should any MPID not meet 
the proposed criteria under Growth Tier 4, the MPID will merely not 
receive the corresponding enhanced rebate.
    As noted above, the Exchange operates in a highly competitive 
market. The Exchange in only one of 16 equity venues to which market 
participants may direct their order flow, and it represents a small 
percentage of the overall market. It is also only one of several maker-
taker exchanges. Competing equity exchanges offer similar rates and 
tiered pricing structures to that of the Exchange, including schedules 
of rebates and fees that apply based upon members achieving certain 
volume thresholds.

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. 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 changes 
further 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 to Growth Tier 4 will apply to all Members equally in that all 
Members are eligible for the tier, have a reasonable opportunity to 
meet the tier's criteria and will receive the enhanced rebate on their 
qualifying orders if such criteria is met. The Exchange does not 
believe the proposed changes burden competition, but rather, enhances 
competition as it is intended to increase the competitiveness of EDGX 
by 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 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.

[[Page 62901]]

Based on publicly available information, no single equities exchange 
has more than 19% 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\
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    \18\ See 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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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 [email protected]. Please include 
File Number SR-CboeEDGX-2022-045 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-2022-045. 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. 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-2022-045, and 
should be submitted on or before November 7, 2022.
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    \23\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\23\
J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2022-22446 Filed 10-14-22; 8:45 am]
BILLING CODE 8011-01-P


