[Federal Register Volume 88, Number 46 (Thursday, March 9, 2023)]
[Notices]
[Pages 14657-14662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-04787]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97042; File No. SR-CboeEDGX-2023-016]


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

March 3, 2023.
    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 March 1, 2023, 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

[[Page 14658]]

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'') as follows: (1) by 
modifying and eliminating certain Growth Tiers; (2) by modifying and 
eliminating certain Non-Displayed Add Volume Tiers; (3) by modifying 
the criteria of Retail Growth Tier 3; and (4) by introducing new fee 
code DX and modifying the description of existing fee code DQ. The 
Exchange proposes to implement these changes effective March 1, 2023.
    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 
Securities Exchange Act of 1934 (the ``Act''), to which market 
participants may direct their order flow. Based on publicly available 
information,\3\ no single registered equities exchange has more than 
15% 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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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (February 22, 2023), available at https://www.cboe.com/us/equities/market_statistics/.
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Growth Tiers
    Under footnote 1 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers. In particular, the Exchange offers 
five 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. First, the 
Exchange is proposing to discontinue Growth Tiers 1-3, as no Members 
have satisfied the criteria within the past six months and the Exchange 
no longer wishes to, nor is required to, maintain such tiers. More 
specifically, the proposed change removes these tiers as the Exchange 
would rather redirect future resources and funding into other programs 
and tiers intended to incentivize increased order flow.
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    \4\ Fee code B is appended to orders adding liquidity to EDGX in 
Tape B securities.
    \5\ Fee code V is appended to orders adding liquidity to EDGX in 
Tape A securities.
    \6\ Fee code Y is appended to orders adding liquidity to EDGX in 
Tape C securities.
    \7\ Fee code 3 is appended to orders adding liquidity to EDGX in 
the pre and post market in Tapes A or C securities.
    \8\ Fee code 4 is appended to orders adding liquidity to EDGX in 
the pre and post market in Tape B securities.
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    Second, the Exchange proposes to modify the criteria of Growth Tier 
4 and Growth Tier 5, in addition to renumbering the tiers following the 
discontinuation of Growth Tiers 1-3. Currently, Growth Tier 4 (proposed 
Growth Tier 1) is as follows:
     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) MPID adds a Step-Up ADAV \9\ from October 2021 >= 0.12% of 
the TCV \10\ or MPID adds a Step-Up ADAV from October 2021 >= 
16,000,000; and (2) MPID adds an ADV >= 0.30% of TCV or MPID adds an 
ADV >= 35,000,000.
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    \9\ ADAV means average daily added volume calculated as the 
number of shares added per day ADAV is calculated on a monthly 
basis. Step-Up ADAV means ADAV in the relevant baseline month 
subtracted from current ADAV.
    \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.
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    Now, the Exchange proposes to add a third prong of criteria. The 
proposed criteria for current Growth Tier 4 (proposed Growth Tier 1) is 
as follows:
     Proposed Growth Tier 1 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) MPID adds a Step-Up ADAV from October 2021 >= 0.12% of 
the TCV or MPID adds a Step-Up ADAV from October 2021 >= 16,000,000; 
and (2) MPID adds an ADV >= 0.30% of TCV or MPID adds an ADV >= 
35,000,000; and (3) MPID adds an ADAV >= 0.30% of TCV with displayed 
orders that yield fee codes B, V, or Y.
    The proposed modification to proposed Growth Tier 1 is designed to 
encourage MPIDs to grow their volume in displayed liquidity with orders 
yielding fee codes B, V, or Y.
    In addition, the Exchange also proposes to modify the criteria of 
current Growth Tier 5 (proposed Growth Tier 2). Currently, Growth Tier 
5 is as follows:
     Growth Tier 5 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) Member adds a Step-Up ADAV from October 2022 >= 0.15% of the 
TCV or Member adds a Step-Up ADAV from October 2022 >= 15,000,000; and 
(2) Member has a total remove ADV >= 0.45% of TCV or Member has a total 
remove ADV >= 45,000,000.
    Now, the Exchange proposes to add a third prong of criteria. The 
proposed criteria for current Growth Tier 5 (proposed Growth Tier 2) is 
as follows:
     Proposed Growth Tier 2 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) Member adds a Step-Up ADAV from October 2022 >= 0.15% 
of the TCV or Member adds a Step-Up ADAV from October 2022 >= 
15,000,000; (2) Member has a total remove ADV >= 0.45% of TCV or Member 
has a total remove ADV >= 45,000,000; and (3) Member adds a Retail 
Step-Up ADV (i.e., yielding fee codes ZA \11\ or ZO \12\) from August 
2022 >= 0.10% of TCV.
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    \11\ Fee code ZA is appended to Retail Orders that add 
liquidity.
    \12\ Fee code ZO is appended to Retail orders that adds 
liquidity during the pre- and post-market.
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    The proposed modification to proposed Growth Tier 2 is intended to 
incentivize Members to grow retail volume on the Exchange.

[[Page 14659]]

Non-Displayed Add Volume Tiers
    In addition to the Growth Tiers offered under footnote 1, the 
Exchange also offers Non-Displayed Add Volume Tiers that each provide 
an enhanced rebate for Members' qualifying orders yielding fee codes 
DM,\13\ HA,\14\ MM,\15\ and RP,\16\ where a Member reaches certain 
volume-based criteria offered in each tier. The Exchange now proposes 
to discontinue the use of Non-Displayed Step-Up Volume Tiers 1 and 2, 
as no Members have satisfied the criteria within the past six months 
and the Exchange no longer wishes to, nor is required to, maintain such 
tiers. More specifically, the proposed change removes these tiers as 
the Exchange would rather redirect future resources and funding into 
other programs and tiers intended to incentivize increased order flow.
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    \13\ Fee code DM is appended to orders that add liquidity using 
MidPoint Discretionary Order within discretionary range.
    \14\ Fee code HA is appended to non-displayed orders that add 
liquidity.
    \15\ Fee code MM is appended to non-displayed orders that add 
liquidity using Mid-Point Peg.
    \16\ Fee code RP is appended to non-displayed orders that add 
liquidity using Supplemental Peg.
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    The Exchange also proposes to amend the criteria of current Non-
Displayed Step-Up Volume Tier 3, in addition to renumbering this tier 
following the discontinuation of Non-Displayed Step-Up Volume Tiers 1 
and 2. Currently, the criteria for Non-Displayed Step-Up Volume Tier 3 
(proposed Non-Displayed Step-Up Volume Tier 1) is as follows:
     Non-Displayed Step-Up Volume Tier 3 provides a rebate of 
$0.0026 per share to qualifying orders (i.e., orders yielding fee code 
DM, HA, MM, or RP) where (1) Members adds a Step-Up ADAV from October 
2022 >= 0.15% of the TCV or Member adds a Step-Up ADAV from October 
2022 >= 15,000,000; and (2) Member has a total remove ADV >= 0.45% of 
TCV or Member has a total remove ADV >= 45,000,000.
    Now, the Exchange proposes to add a third prong of criteria. The 
proposed criteria for proposed Non-Displayed Step-Up Volume Tier 1 is 
as follows:
     Non-Displayed Step-Up Volume Tier 1 provides a rebate of 
$0.0026 per share to qualifying orders (i.e., orders yielding fee code 
DM, HA, MM, or RP) where (1) Members adds a Step-Up ADAV from October 
2022 >= 0.15% of the TCV or Member adds a Step-Up ADAV from October 
2022 >= 15,000,000; (2) Member has a total remove ADV >= 0.45% of TCV 
or Member has a total remove ADV >= 45,000,000; and (3) Member adds a 
Retail Step-Up ADV (i.e., yielding fee codes ZA or ZO) from August 2022 
>= 0.10% of TCV.
    The proposed modification to proposed Non-Displayed Step-Up Volume 
Tier 1 is intended to incentivize Members to add non-displayed retail 
volume on the Exchange.
Retail Volume Tiers
    Pursuant to footnote 2 of the Fee Schedule, the Exchange offers 
Retail Volume Tiers which provide Retail Member Organizations 
(``RMOs'') \17\ an opportunity to receive an enhanced rebate from the 
standard rebate for Retail Orders \18\ that add liquidity (i.e., 
yielding fee code ZA or ZO). Currently, the Retail Volume Tiers offer 
three Retail Growth Tiers, where a Member is eligible for an enhanced 
rebate for qualifying orders (i.e., yielding fee code ZA or ZO) meeting 
certain add volume-based criteria, including ``growing'' its volume 
over a certain baseline month. The Exchange now proposes to amend the 
criteria of Retail Growth Tier 3. Currently, the criteria for Retail 
Growth Tier 3 is as follows:
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    \17\ See EDGX Rule 11.21(a)(1). A ``Retail Member Organization'' 
or ``RMO'' is a Member (or a division thereof) that has been 
approved by the Exchange under this Rule to submit Retail Orders.
    \18\ See EDGX Rule 11.21(a)(2). A ``Retail Order'' is an agency 
or riskless principal order that meets the criteria of FINRA Rule 
5320.03 that originates from a natural person and is submitted to 
the Exchange by a Retail Member Organization, provided that no 
change is made to the terms of the order with respect to price or 
side of market and the order does not originate from a trading 
algorithm or any other computerized methodology.
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     Retail Growth Tier 3 provides a rebate of $0.0037 per 
share to qualifying orders (i.e., orders yielding fee code ZA or ZO) 
where (1) Member adds a Step-Up ADAV from October 2022 >= 0.15% of the 
TCV or Member adds a Step-Up ADAV from October 2022 >= 15,000,000; and 
(2) Member has a total remove ADV >= 0.45% of TCV or Member has a total 
remove ADV >= 45,000,000.
    Now, the Exchange proposes to add a third prong of criteria. 
Proposed Retail Growth Tier 3 is as follows:
     Retail Growth Tier 3 provides a rebate of $0.0037 per 
share to qualifying orders (i.e., orders yielding fee code ZA or ZO) 
where (1) Member adds a Step-Up ADAV from October 2022 >= 0.15% of the 
TCV or Member adds a Step-Up ADAV from October 2022 >= 15,000,000; (2) 
Member has a total remove ADV >= 0.45% of TCV or Member has a total 
remove ADV >= 45,000,000; and (3) Members adds a Retail Step-Up ADV 
(i.e., yielding fee code ZA or ZO) from August 2022 >= 0.10% of TCV.
    The proposed modification to Retail Growth Tier 3 is intended to 
incentivize RMOs to add retail volume on the Exchange.
    Further, the Growth Tiers, Non-Displayed Add Volume Tiers, and 
Retail Volume Tiers are intended to provide Members an opportunity to 
receive an enhanced rebate 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 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.
Fee Codes DQ and DX
    The Exchange currently offers fee code DQ, which is appended to 
Midpoint Discretionary Orders (``MDOs'') \19\ using the Quote Depletion 
Protection (``QDP'') \20\ order instruction. QDP is designed to provide 
enhanced protections to MDOs by tracking significant executions that 
constitute the best bid or offer on the EDGX Book \21\ 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.\22\ 
Currently, MDOs entered with the QDP instruction are appended fee code 
DQ and assessed a flat 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. The Exchange now proposes to amend fee code DQ to be appended to 
MDOs entered with a QDP instruction that add liquidity to the Exchange. 
There would be no change to the fee associated with fee code DQ. The 
Exchange now proposes to introduce fee code DX, which would be appended 
to MDOs with a QDP instruction that remove liquidity from the Exchange. 
Orders appended with fee code DX

[[Page 14660]]

would be assessed a fee of $0.00060 per share in securities at or above 
$1.00 and 0.30% of dollar value for securities priced below $1.00.
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    \19\ See Exchange Rule 11.8(g).
    \20\ See Exchange Rule 11.8(g)(10).
    \21\ See Exchange Rule 1.5(d).
    \22\ See Securities Exchange Act Release No. 89007 (June 4, 
2020), 85 FR 35454 (June 10, 2020) (SR-CboeEDGX-2020-010) (``Notice 
of Filing of Amendment No. 1 and Order Granting Accelerated Approval 
of a Proposed Rule Change, as Modified by Amendment No. 1, to Amend 
the Rule Relating to MidPoint Discretionary Orders to Allow Optional 
Offset or Quote Depletion Protection Instructions'').
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\23\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \24\ 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) \25\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \26\ 
as it is designed to provide for the equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities.
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    \23\ 15 U.S.C. 78f(b).
    \24\ 15 U.S.C. 78f(b)(5).
    \25\ Id.
    \26\ 15 U.S.C. 78f(b)(4).
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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 
its proposal to modify proposed Growth Tiers 1 and 2, proposed Non-
Displayed Step-Up Volume Tier 1, and Retail Growth Tier 3 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. Additionally, the Exchange notes that relative volume-based 
incentives and discounts have been widely adopted by exchanges,\27\ 
including the Exchange,\28\ 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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    \27\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \28\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
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    In particular, the Exchange believes the proposed modifications to 
the criteria of proposed Growth Tiers 1 and 2, proposed Non-Displayed 
Step-Up Volume Tier 1, and Retail Growth Tier 3 are reasonable because 
they will be available to all Members and provide all Members with an 
additional opportunity to receive an enhanced rebate. The Exchange 
further believes the proposed modifications to proposed Growth Tiers 1 
and 2, proposed Non-Displayed Step-Up Volume Tier 1, and Retail Growth 
Tier 3 will provide a reasonable means to encourage liquidity adding 
displayed orders, liquidity adding non-displayed orders, and retail 
orders, respectively, 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. 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.
    The Exchange believes that the proposed changes to proposed Growth 
Tiers 1 and 2, proposed Non-Displayed Step-Up Volume Tier 1, and Retail 
Growth Tier 3 are reasonable as they do not represent a significant 
departure from the criteria currently offered in the Fee Schedule. 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 the proposed new tiers and 
have the opportunity to meet the tiers' criteria and receive the 
corresponding enhanced 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 Members qualifying the new proposed tiers. 
While the Exchange has no way of predicting with certainty how the 
proposed changes will impact Member activity, based on the prior months 
volume, the Exchange anticipates that at least one Member will be able 
to satisfy the criteria proposed under proposed Growth Tiers 1 and 2, 
proposed Non-Displayed Step-Up Volume Tier 1, and Retail Growth Tier 3. 
The Exchange also notes that proposed changes will not adversely impact 
any Member's ability to qualify for 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.
    The Exchange believes the proposed addition of fee code DX and the 
revised applicability of fee code DQ are reasonable as the Exchange 
offers many other fee codes that are specifically designed for orders 
that add liquidity to the Exchange or remove liquidity from the 
Exchange.\29\ While the fee assessed for orders appended with fee code 
DX will be slightly higher than the fee assessed for orders appended 
with fee code DQ, the Exchange believes that promoting liquidity-adding 
MDOs containing a QDP instruction represents an equitable allocation of 
fees and rebates and is not unfairly discriminatory because the fees 
will apply to all Members who add or remove liquidity utilizing an MDO 
with a QDP instruction, equally. Furthermore, the Exchange believes 
that assessing a lower fee under fee code DQ will promote a reasonable 
means to encourage liquidity adding volume to the Exchange for MDOs 
utilizing a QDP instruction. While Members are assessed a small fee to 
utilize MDOs with a QDP instruction, the Exchange believes that 
promoting liquidity adding activity would help deepen the Exchange's 
liquidity pool, support the quality of price discovery, and improve 
market quality, for all investors.
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    \29\ See e.g., EDGX Equities Fee Schedule, Fee Codes 3 and 6.
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    Finally, the Exchange believes that the proposed rule change to 
eliminate Growth Tiers 1-3 and Non-Displayed Step-Up Volume Tiers 1 and 
2 is reasonable because the Exchange is not required to maintain these 
tiers or provide Members an opportunity to receive enhanced rebates. 
The Exchange believes the proposal to eliminate these tiers is also 
equitable and not unfairly discriminatory because it applies to all 
Members (i.e., the tiers will not be available for any Member). The 
Exchange notes that no Members have satisfied the criteria of Growth 
Tiers 1-3 and Non-Displayed Step-Up Volume Tiers 1-2 in any of the past 
six months.

[[Page 14661]]

The Exchange also notes that the proposed rule change to remove these 
tiers merely results in Members not receiving an enhanced rebate, 
which, as noted above, the Exchange is not required to offer or 
maintain. Furthermore, the proposed rule change to eliminate Growth 
Tiers 1-3 and Non-Displayed Step-Up Volume Tiers 1-2 enables the 
Exchange to redirect resources and funding into other programs and 
tiers intended to incentivize increased order flow.

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 changes 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 changes do 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 proposed Growth Tiers 1 and 2, proposed Non-Displayed Step-
Up Volume Tier 1, and Retail Growth Tier 3 will 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 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 amending an existing pricing incentive and 
adopting pricing incentives 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. Finally, the 
Exchange does not believe the proposed rule change to eliminate Growth 
Tiers 1-3 and Non-Displayed Step-Up Volume Tiers 1-2 will impose any 
burden on intramarket competition because it applies to all Members 
uniformly, as in, the tiers will not longer be available to any Member.
    The Exchange does not believe the proposal to introduce the DX fee 
code does not impose a burden on intramarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. The 
proposed fees associated with fee code DX would apply to all Members 
equally in that all Members would be subject to the same flat fee for 
the execution of an MDO with a QDP instruction that removes liquidity 
from the Exchange. Although MDOs entered with the QDP instruction would 
be subject to the pricing described in this proposed rule change, the 
Exchange does not believe that pricing would impose any significant 
burden on intramarket competition as this fee would be applied in the 
same manner to the execution of any MDO entered with a QDP instruction 
that removes liquidity from the Exchange. Both MDO and the associated 
QDP instruction are available to all Members on an equal and non-
discriminatory basis. As a result, any Member can decide to use (or not 
use) the QDP instruction based on the benefits provided by that 
instruction in potentially avoiding unfavorable executions, and the 
associated charge that the Exchange proposes to introduce. As 
discussed, any firm that chooses to use the QDP instruction with an MDO 
that removes liquidity would be charged the same flat fee for the 
execution of orders that are entered with this instruction. The 
proposal to modify fee code DQ to apply only to MDO orders using the 
QDP instruction that add liquidity to the Exchange similarly does not 
impose a burden on intramarket competition in that the applicability of 
the fee code will apply equally to all Members in that all Members 
would be subject to the same flat fee for the execution of an MDO with 
a QDP instruction that adds liquidity to the Exchange and the Exchange 
does not propose a change to the existing fee.
    Next, the Exchange believes the proposed rule changes 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. Based on 
publicly available information, no single equities exchange has more 
than 15% of the market share.\30\ 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.'' \31\ 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'. . . .''.\32\ 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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    \30\ Supra note 8 [sic].
    \31\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \32\ 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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[[Page 14662]]

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 \33\ and paragraph (f) of Rule 19b-4 \34\ 
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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    \33\ 15 U.S.C. 78s(b)(3)(A).
    \34\ 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-2023-016 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-2023-016. 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-2023-016, and 
should be submitted on or before March 30, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\35\
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    \35\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-04787 Filed 3-8-23; 8:45 am]
BILLING CODE 8011-01-P


