
[Federal Register Volume 88, Number 227 (Tuesday, November 28, 2023)]
[Notices]
[Pages 83176-83179]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-26189]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99012; File No. SR-CboeEDGA-2023-020]


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

November 22, 2023.
    Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on November 10, 2023, Cboe EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') filed with the Securities and Exchange Commission 
(``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 EDGA Exchange, Inc. (the ``Exchange'') 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 
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 (``EDGA Equities'') by modifying its Add/
Remove Volume Tiers. The Exchange proposes to implement these changes 
effective November 1, 2023.\3\
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    \3\ The Exchange initially filed the proposed fee change on 
November 1, 2023 (SR-CboeEDGA-2023-019). On November 10, 2023, the 
Exchange withdrew that filing and submitted this proposal.
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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 
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 
17% 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 $0.00160 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.
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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (October 27, 2023), available at https://www.cboe.com/us/equities/market_statistics/.
    \5\ See EDGA Equities Fee Schedule, Standard Rates.
    \6\ Id.
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Add/Remove Volume Tiers
    Under footnote 7 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers. In particular, the Exchange offers 
three Add Volume Tiers that each assess a reduced fee for Members' 
qualifying orders yielding fee codes 3,\7\ 4,\8\ B,\9\ V,\10\ and 
Y,\11\ where a Member reaches certain add volume-based criteria. The 
Exchange is proposing to introduce a new Add Volume Tier 4. The 
proposed criteria is as follows:
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    \7\ Fee code 3 is appended to orders that add liquidity to EDGA 
in Tape A or Tape C securities during the pre and post market.
    \8\ Fee code 4 is appended to orders that add liquidity to EDGA 
in Tape B securities during the pre and post market.
    \9\ Fee code B is appended to orders that add liquidity to EDGA 
in Tape B securities.
    \10\ Fee code V is appended to orders that add liquidity to EDGA 
in Tape A securities.
    \11\ Fee code Y is appended to orders that add liquidity to EDGA 
in Tape C securities.

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[[Page 83177]]

     Proposed Tier 4 assesses a reduced fee of $0.0014 per 
share for securities priced at or above $1.00 to qualifying orders 
(i.e., orders yielding fee codes 3, 4, B, V, or Y) where a Member adds 
or removes an ADV \12\ >=0.90% of the TCV.\13\
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    \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.
    \13\ ``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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    The Exchange believes that proposed Add Volume Tier 4 will 
incentivize Members to add volume to and remove volume from the 
Exchange, thereby contributing to a deeper and more liquid market, 
which benefits all market participants and provides greater execution 
opportunities on the Exchange. The Exchange further believes the 
proposed reduced fee associated with proposed Add Volume Tier 4 
provides a fee commensurate with the difficulty of meeting the criteria 
associated with the tier.
    In addition to the Add Volume Tiers offered under footnote 7, the 
Exchange also offers three Remove Volume Tiers that each provide an 
enhanced rebate for Members' qualifying orders yielding fee codes 
N,\14\ W,\15\ 6 \16\ and BB,\17\ where a Member reaches certain remove 
volume-based criteria. Currently Members who satisfy the criteria of 
Remove Volume Tier 2 receive an enhanced rebate of $0.0022 per share 
for securities priced at or above $1.00. The Exchange now proposed to 
revise the enhanced rebate associated with Remove Volume Tier 2. As 
proposed, Members who satisfy the criteria of Remove Volume Tier 2 will 
receive an enhanced rebate of $0.0020 per share for securities priced 
at or above $1.00. The purpose of reducing the enhanced rebate 
associated with Remove Volume Tier 2 is for business and competitive 
reasons, as the Exchange believes that reducing such rebate as proposed 
would decrease the Exchange's expenditures with respect to transaction 
pricing in a manner that is still consistent with the Exchange's 
overall pricing philosophy of encouraging added liquidity. The Exchange 
notes that despite the modest decrease in the enhanced rebate 
associated with Remove Volume Tier 2, the enhanced rebate remains 
competitive and continues to be in-line with the enhanced rebate 
provided under Remove Volume Tier 1 and Remove Volume Tier 3 (discussed 
infra).
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    \14\ Fee code N is appended to orders that remove liquidity from 
EDGA in Tape C securities.
    \15\ Fee code W is appended to orders that remove liquidity from 
EDGA in Tape A securities.
    \16\ Fee code 6 is appended to orders that remove liquidity from 
EDGA in all tapes in the pre and post market.
    \17\ Fee code BB is appended to orders that remove liquidity 
from EDGA in Tape B securities.
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    Additionally, the Exchange proposes to amend Remove Volume Tier 3. 
Currently, the criteria for Remove Volume Tier 3 is as follows:
     Remove Volume Tier 3 provides an enhanced rebate of 
$0.0024 per share for securities priced at or above $1.00 to qualifying 
orders (i.e., orders yielding fee codes N, W, 6, or BB) where (1) 
Member adds or removes a Step-Up ADV from May 2021 >=0.05% of the TCV 
or Member adds or removes a Step-Up ADV from May 2021 >=3,000,000 
shares; and (2) Member adds an ADV >=0.05% or Member adds an ADV 
>=3,000,000 shares.
    The proposed criteria for Remove Volume Tier 3 is as follows:
     Proposed Remove Volume Tier 3 provides an enhanced rebate 
of $0.0022 per share for securities priced at or above $1.00 to 
qualifying orders (i.e., orders yielding fee codes N, W, 6, or BB) 
where a Member adds or removes an ADV >=0.25% of the TCV.
    The proposed criteria is less stringent than the current criteria 
as the proposed criteria does not have a Step-Up ADV component. The 
Exchange believes that proposed Remove Volume Tier 3 will incentivize 
Members to add volume to and remove volume from the Exchange, thereby 
contributing to a deeper and more liquid market, which benefits all 
market participants and provides greater execution opportunities on the 
Exchange. While the proposed rebate under Remove Volume Tier 3 is less 
than the current rebate provided under such tier, the Exchange believes 
the proposed enhanced rebate associated with proposed Remove Volume 
Tier 3 provides a rebate commensurate with the difficulty of meeting 
the criteria associated with the tier and is in-line with the enhanced 
rebates provided under Remove Volume Tiers 1 and 2.
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.\18\ Specifically, the Exchange believes the proposed rule change 
is consistent with the section 6(b)(5) \19\ 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) \20\ 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) \21\ 
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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    \18\ 15 U.S.C. 78f(b).
    \19\ 15 U.S.C. 78f(b)(5).
    \20\ Id.
    \21\ 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 introduce Add Volume Tier 4, reduce the rebate provided 
under Remove Volume Tier 2, and modify Remove Volume 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,\22\ 
including the Exchange,\23\ 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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    \22\ See e.g., BYX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \23\ See e.g., EDGA Equities Fee Schedule, Fee Codes 3 and 6.

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[[Page 83178]]

    In particular, the Exchange believes its proposal to introduce Add 
Volume Tier 4 and modify Remove Volume Tiers 2 and 3 is reasonable 
because the tiers will be available to all Members and provide all 
Members with an additional opportunity to receive a reduced fee or an 
enhanced rebate. The Exchange further believes that despite any 
proposed reduced rebates, the proposed Add Volume Tier 4 and modified 
Remove Volume Tiers 2 and 3 will provide a reasonable means to 
encourage adding and/or removing displayed orders in Members' order 
flow to the Exchange and to incentivize Members to continue to provide 
volume to the Exchange by offering them an additional opportunity to 
receive a reduced fee or 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.
    In addition, the Exchange believes that its proposal to lower the 
enhanced rebate paid to Members that satisfy the criteria of Remove 
Volume Tier 2 is reasonable, equitable, and consistent with the Act 
because such change is designed to decrease the Exchange's expenditures 
with respect to transaction pricing in order to offset some of the 
costs associated with the Exchange's current pricing structure, which 
provides various rebates for liquidity-removing orders, and the 
Exchange's operations generally, in a manner that is consistent with 
the Exchange's overall pricing philosophy of encouraging added 
liquidity. The proposed lower enhanced rebate ($0.0020 per share) is 
reasonable and appropriate because it represents only a modest decrease 
from the current enhanced rebate ($0.0022 per share) and remains 
competitive with the reduced fees offered under Remove Volume Tier 1 
and proposed Remove Volume Tier 3. The Exchange further believes that 
the proposed decrease to the enhanced rebate associated with Remove 
Volume Tier 2 is not unfairly discriminatory because it applies to all 
Members equally, in that all Members will receive the reduced fee upon 
satisfying the criteria of Remove Volume Tier 2.
    Similarly, the Exchange believes its proposal to lower the enhanced 
rebate to Members that satisfy the criteria of Remove Volume Tier 3 is 
reasonable, equitable, and consistent with the Act because such is 
commensurate with the new proposed criteria. As noted above, the 
proposed criteria under Remove Volume Tier 3 is less stringent than the 
existing criteria as there is no Step-Up ADV component. The Exchange 
further believes that the proposed decrease to the enhanced rebate 
associated with Remove Volume Tier 3 is not unfairly discriminatory 
because it applies to all Members equally, in that all Members will 
receive the reduced fee upon satisfying the criteria of Remove Volume 
Tier 3.
    The Exchange believes the proposed Add Volume Tier 4 and the 
proposed modified Remove Volume 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 
new and revised tiers and have the opportunity to meet the tiers' 
criteria and receive the corresponding reduced fee or enhanced rebate 
if such criteria are met. Without having a view of activity on other 
markets and off-exchange venues, the Exchange has no way of knowing 
whether these proposed rule changes would definitely result in any 
Members qualifying for 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 proposed 
Add Volume Tier 4, and at least five Members will be able to satisfy 
proposed Remove Volume Tier 3. The Exchange also notes that the 
proposed changes will not adversely impact any Member's ability to 
qualify for reduced fees or 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 or reduced fee.

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 
introduction of Add Volume Tier 4 and the proposed changes to Remove 
Volume Tiers 2 and 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 reduced 
fee or enhanced rebate on their qualifying orders if such criteria are 
met. The Exchange does not believe the proposed changes burden 
competition, but rather, enhance competition. Despite any proposed 
reduced rebate, the Exchange's fee structure is intended to increase 
the competitiveness of EDGA by adopting a new pricing incentive and 
amending existing 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.
    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 17% 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

[[Page 83179]]

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.
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    \24\ Supra note 3 [sic].
    \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)).
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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 \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.
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    \27\ 15 U.S.C. 78s(b)(3)(A).
    \28\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeEDGA-2023-020 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-2023-020. 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-2023-020 and should 
be submitted on or before December 19, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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Christina Z. Milnor,
Assistant Secretary.
[FR Doc. 2023-26189 Filed 11-27-23; 8:45 am]
BILLING CODE 8011-01-P


