
[Federal Register Volume 88, Number 179 (Monday, September 18, 2023)]
[Notices]
[Pages 63999-64002]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-20085]


-----------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-98365; File No. SR-CboeEDGA-2023-014]


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

September 12, 2023.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on August 31, 2023, Cboe EDGA Exchange, Inc. (the 
``Exchange'' or ``EDGA'') 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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 15 U.S.C. 78a.
    \3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

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

    Cboe EDGA Exchange, Inc. (the ``Exchange'' or ``EDGA'') 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/equities/regulation/rule_filings/edga/), 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 the 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for

[[Page 64000]]

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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule applicable to its 
equities trading platform (``EDGA Equities'') by modifying the rates 
associated with certain fee codes. The Exchange proposes to implement 
these changes effective September 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,\4\ no single registered equities exchange has more than 
14% 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 ``Taker-Maker'' model whereby it pays credits to 
members that remove liquidity and assesses fees to those that add 
liquidity. The Exchange's Fee Schedule sets forth the standard rebates 
and rates applied per share for orders that remove and provide 
liquidity, respectively. Currently, for orders in securities priced at 
or above $1.00, the Exchange provides a standard rebate of $0.00180 
[sic] per share for orders that remove liquidity and assesses a fee of 
$0.0030 per share for orders that add liquidity.\5\ For orders in 
securities priced below $1.00, the Exchange does not assess any fees or 
provide any rebates for orders that add or remove liquidity.\6\ 
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.
---------------------------------------------------------------------------

    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (August 24, 2023), available at https://www.cboe.com/us/equities/market_statistics/.
    \5\ See EDGA Equities Fee Schedule, Standard Rates.
    \6\ Id.
---------------------------------------------------------------------------

    The Exchange currently offers various fee codes for orders routed 
away from the Exchange. The Exchange is proposing to modify the routing 
fees associated with fee codes I,\7\ P,\8\ BY,\9\ RR,\10\ AX,\11\ 
AY,\12\ RY,\13\ and RZ \14\ to match the base add or remove rate for 
the associated market center to which the order is routed. The fees 
associated with fee codes I, RR, and AX will be revised to $0.0030 per 
share in securities priced above $1.00.\15\ The fee associated with fee 
code RY will be revised to $0.0020 per share in securities priced above 
$1.00.\16\ The rebates associated with fee codes P and RZ will be 
revised to $0.00160 per share in securities priced above $1.00.\17\ The 
rebates associated with fee codes BY and AY will be revised to $0.00020 
per share in securities priced above $1.00.\18\ There are no changes to 
the fees or rebates associated with securities priced below $1.00.
---------------------------------------------------------------------------

    \7\ Fee code I is appended to orders routed to EDGX.
    \8\ Fee code P is appended to orders routed to EDGX, including 
pre and post market, that add liquidity.
    \9\ Fee code BY is appended to orders routed to BYX using 
Destination Specific (``DIRC''), ROUC, ROBB or ROCO routing 
strategy.
    \10\ Fee code RR is appended to orders routed to EDGX using DIRC 
routing strategy.
    \11\ Fee code AX is appended to orders routed to EDGX using ALLB 
routing strategy.
    \12\ Fee code AY is appended to orders routed to BYX using ALLB 
routing strategy.
    \13\ Fee code RY is appended to orders routed to BYX that add 
liquidity.
    \14\ Fee code RZ is appended to orders routed to BZX that add 
liquidity.
    \15\ See EDGX Equities Fee Schedule, Standard Rates.
    \16\ See BYX Equities Fee Schedule, Standard Rates.
    \17\ See EDGX Equities Fee Schedule, Standard Rates; BZX 
Equities Fee Schedule, Standard Rates.
    \18\ See BYX Equities Fee Schedule, Standard Rates.
---------------------------------------------------------------------------

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.\19\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \20\ 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) \21\ 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) \22\ 
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.
---------------------------------------------------------------------------

    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ Id.
    \22\ 15 U.S.C. 78f(b)(4)
---------------------------------------------------------------------------

    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 its 
proposed changes to the routing fee codes are reasonable as these 
changes do not represent a significant departure from the Exchange's 
general pricing structure. Specifically, the proposed changes to fee 
codes I, P, BY, RR, AX, AY, RY, and RZ are intended to match the base 
add or remove rates on the Exchange's affiliates.\23\ 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 to receive the revised fees or rebates associated with fee 
codes I, P, BY, RR, AX, AY, RY, and RZ.
---------------------------------------------------------------------------

    \23\ Supra notes 15-18.
---------------------------------------------------------------------------

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

[[Page 64001]]

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. The proposed fees and 
rebates associated with fee codes I, P, BY, RR, AX, AY, RY, and RZ will 
apply to all Members equally in that all Members would be subject to 
the same base fee or rebate when routing an order away from the 
Exchange to the venues identified by the relevant fee code. All fee 
codes 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 
Exchange's routing functionality as part of their decision to submit 
order flow to the Exchange.
    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 14% of the market share.\24\ 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.'' \25\ 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' . . .''.\26\ 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.
---------------------------------------------------------------------------

    \24\ Supra note 4.
    \25\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \26\ 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)).
---------------------------------------------------------------------------

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 \27\ and paragraph (f) of Rule 19b-4 \28\ 
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.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(3)(A).
    \28\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeEDGA-2023-014 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-CboeEDGA-2023-014. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-CboeEDGA-2023-014 and should 
be submitted on or before October 10, 2023.


[[Page 64002]]


    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-20085 Filed 9-15-23; 8:45 am]
BILLING CODE 8011-01-P


