[Federal Register Volume 87, Number 239 (Wednesday, December 14, 2022)]
[Notices]
[Pages 76530-76532]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-27053]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-96466; File No. SR-CboeEDGX-2022-052]


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

December 8, 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 December 1, 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 Options'') 
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/), 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 to eliminate two 
Market Maker Volume Tiers, effective December 1, 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 options venues to which market participants 
may direct their order flow. Based on publicly available information, 
no single options exchange has more than 18% of the market share and 
currently the Exchange represents only approximately 6% of the market 
share.\3\ Thus, in such a low-concentrated and

[[Page 76531]]

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 trade on competing venues if 
they deem pricing levels at those other venues to be more favorable.
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    \3\ See Cboe Global Markets U.S. Options Market Monthly Volume 
Summary (November 30, 2022),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 assesses a standard fee 
of $0.20 per contract for Market Maker orders that add liquidity 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. Additionally, the Fee 
Schedule offers tiered pricing which provides Members \4\ opportunities 
to qualify for higher rebates or reduced fees where certain volume 
criteria and thresholds are met. Additionally, in response to the 
competitive environment, the Exchange also offers tiered pricing, which 
provides Members with 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 Exchange Rule 1.5(n).
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    For example, pursuant to Footnote 2 of the Fees Schedule, the 
Exchange currently offers eight Market Maker Volume Tiers which provide 
reduced fees between $0.01 and $0.17 per contract for qualifying Market 
Makers orders that yield fee code PM or NM where a Member meets the 
respective tiers' volume thresholds.\5\ In particular, Market Maker 
Volume Tier 7 provides a reduced fee of $0.04 per contract for a 
Member's qualifying orders (i.e., yielding fee code PM or NM) if a 
Member: (1) has an ADV in Customer orders greater than or equal to 
0.70% of average OCV; (2) has an ADV in Customer or Market Maker orders 
greater than or equal to 0.50% of average OCV; (3) has an ADV in AIM 
Agency Orders greater than or equal to 0.30% of average OCV; and (4) 
has an ADV in complex Customer orders (yielding fee codes ZA, ZB, ZC, 
or ZD) greater than or equal to 0.10% of average OCV. Market Maker 
Volume Tier 8 provides a reduced fee of $0.03 per contract for a 
Member's qualifying orders (i.e., yielding fee code PM or NM) if a 
Member: (1) has an ADV in Customer orders greater than or equal to 
1.00% of average OCV; (2) has an ADV in Customer or Market Maker orders 
greater than or equal to 1.10% of average OCV; (3) has an ADV in AIM 
Agency Orders greater than or equal to 0.75% of average OCV; and (4) 
has an ADV in complex Customer orders (yielding fee codes ZA, ZB, ZC, 
or ZD) greater than or equal to 0.20% of average OCV. The Exchange 
notes that no Member has reached either Tier 7 or 8 in several months 
and the Exchange therefore proposes to eliminate these Tiers from the 
Fees Schedule.\6\
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    \5\ See Cboe EDGX U.S. Options Exchange Fees Schedule, Footnote 
2, Market Maker Volume Tiers.
    \6\ In connection with the proposed elimination of Tier 7, the 
Exchange also proposes to eliminate references to the listed fee of 
``$0.04'' for fee codes PM and NM in the Standard Rates table as 
such reduced fee will no longer be an option for Market-Maker orders 
that add liquidity. The Exchange notes that it is not proposing to 
eliminate the reference to ``$0.03'' notwithstanding the proposed 
elimination of Tier 8 as another Market Maker Volume Tier (i.e., 
Tier 5) currently also offers a reduced fee of $0.03.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\7\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \8\ 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. Additionally, 
the Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \9\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \7\ 15 U.S.C. 78f(b).
    \8\ 15 U.S.C. 78f(b)(5).
    \9\ Id.
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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 Exchange believes that eliminating Market Maker Volume Tiers 7 
and 8 under Footnote 2 is reasonable because the Exchange is not 
required to maintain these tiers or provide reduced fees. The Exchange 
also believes the proposed change is reasonable because no Members have 
reached these tiers in several months. Further, Members still have 
other opportunities to obtain reduced fees, such as via Market Maker 
Volume Tiers 1 through 6.\10\ The Exchange believes that eliminating 
Market Maker Volume Tiers 7 and 8 is equitable and not unfairly 
discriminatory because it applies uniformly to all Members. The 
Exchange also notes that the proposed changes will not adversely impact 
any Member's ability to otherwise qualify for reduced fees or enhanced 
rebates offered under other tiers.
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    \10\ See Cboe EDGX Options Fees Schedule, Footnote 2.
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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. In particular, 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 proposal to 
eliminate Market Maker Volume Tiers 7 and 8 applies to all Members, in 
that, such Tiers will not be available for any Member. The Exchange 
does not believe the proposed changes burden competition as all Members 
will continue to have an opportunity receive enhanced rebates or 
reduced fees offered under various tiers, including Market Maker Volume 
Tiers 1 through 6, which tiers are generally designed to increase the 
competitiveness of EDGX and 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 benefit all market participants 
on the Exchange by enhancing market quality

[[Page 76532]]

and continuing to encourage Members to send orders, thereby 
contributing towards a robust and well-balanced market ecosystem.
    The Exchange also 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 they may participate on and 
direct their order flow, including 15 other options exchanges. 
Additionally, the Exchange represents a small percentage of the overall 
market. Based on publicly available information, no single options 
exchange has more than 18% of the market share. Therefore, no exchange 
possesses significant pricing power in the execution of order flow. 
Indeed, participants can readily choose to send their orders to other 
exchanges 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.'' 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'. . . .''. 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.

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 \11\ and paragraph (f) of Rule 19b-4 \12\ 
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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    \11\ 15 U.S.C. 78s(b)(3)(A).
    \12\ 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-2022-052 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-2022-052. 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-2022-052, and 
should be submitted on or before January 4, 2023.
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    \13\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\13\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2022-27053 Filed 12-13-22; 8:45 am]
BILLING CODE 8011-01-P


