[Federal Register Volume 86, Number 20 (Tuesday, February 2, 2021)]
[Notices]
[Pages 7902-7905]
[FR Doc No: 2021-02119]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91002; File No. SR-CboeEDGX-2021-006]

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

January 27, 2021.
    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 January 13, 2021, 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 and II below, which Items have been prepared by the self-
regulatory organization. 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\ 15 U.S.C. 78a.
    \3\ 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'') is filing
with the Securities and Exchange Commission (``Commission'') a proposed
rule change to amend the fee schedule applicable to Members and non-
Members of the Exchange pursuant to EDGX Rules 15.1(a) and (c). Changes
to the fee schedule pursuant to this proposal are effective upon
filing. 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 self-regulatory organization
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 those 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 parts 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'') by eliminating certain
routing fee codes.\4\
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    \4\ The Exchange initially filed the proposed fee changes
January 4, 2021 (SR-CboeEDGX-2021-001). On January 13, 2021, 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
Exchange Act, to which market participants may direct their order flow.
Based on publicly available information,\5\ no single registered
equities exchange has more than 16% 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 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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    \5\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (December 29, 2020), available at https://markets.cboe.com/us/equities/market_statistics/.
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    The Exchange assesses fees in connection with orders routed away to
various exchanges. As a result of minimal use in the last months, the
Exchange proposes to eliminate the following routing fee codes
currently under the Fee Codes and Associated Fees section of the Fee
Schedule:
     Fee code 8, which is appended to Members' orders routed to
NYSE American that adds liquidity and assesses a charge of $0.00020 per
contract for orders in securities priced at or above $1.00 and assesses
no charge for orders in securities priced below $1.00;
     Fee code K, which is appended to Members' orders routed to
PSX using the ROUC routing strategy \6\ and assesses a charge of
$0.00290 per contract for orders in securities priced at or above $1.00
and assesses a charge of 30% of the dollar value per contract for
orders in securities priced below $1.00; and
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    \6\ ROUC is a routing option under which an order checks the
System for available shares and then is sent to destinations on the
System routing table, Nasdaq OMX BX, and NYSE. If shares remain
unexecuted after routing, they are posted on the EDGX Book, unless
otherwise instructed by the User. See Rule 11.11(g)(1); see also
Cboe Routing Strategies, FIX/BOE Routing Tags and Instructions,
available at: https://cdn.cboe.com/resources/features/Cboe_USE_RoutingStrategies.pdf.
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     Fee code MX, which is appended to Members' orders routed
to NYSE American using the ROUC routing strategy and assesses a charge
of $0.00020 per contract for orders in securities priced at or above
$1.00 and assesses no charge for orders in securities priced below
$1.00.
    The Exchange has observed a minimal amount of volume in recent
months in orders yielding fee codes 8, K, or MX. In particular, over
the last six months the Exchange observed that orders yielding fee code
MX accounted for approximately only 0.01% of all routed order volume,
orders yielding fee code 8 accounted for approximately only 0.14% of
all routed order volume, and orders yielding fee code K accounted for
approximately only 0.004% of all routed order volume. The Exchange
believes that, because so few Users elect to route their orders with
specifications to which fee codes 8, K or MX, the current demand does
not warrant the infrastructure and ongoing Systems maintenance required
to support these separate fee codes. Therefore, the Exchange now
proposes to delete fee codes 8, K and MX in the Fee Schedule. The
Exchange notes that Users will continue to be able to choose to route
their orders with the same specifications to which fee codes 8, K and
MX currently apply--such orders will simply be assessed the fees
currently in place for routed orders generally.\7\ That is, if any of
the routed orders to which fee code K or MX currently apply are
submitted in the pre- or post-market sessions that remove liquidity,\8\
then fee code 7 will apply, which is appended to Members' routed orders
in the pre- or post-market sessions and assesses a charge of $0.00300
per contract for orders in securities priced at or above $1.00 and
assesses a charge of 30% of the dollar value per contract for orders in
securities priced below $1.00. Fee code X will be appended to routed
orders not submitted during the pre- or post-market sessions to which
fee code K or MX currently apply and to routed orders to which fee code
8 currently applies. Fee code X currently assesses a charge of $0.00300
per contract for orders in securities priced at or above $1.00 and
assesses a charge of 30% of the dollar value per contract for orders in
securities priced below $1.00. The Exchange notes that rates applicable
to orders yielding fee codes 7 and X are the standard routing fees
pursuant to the Standard Rates section of the Fee Schedule.
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    \7\ The Exchange notes that there are other fee codes that apply
to certain other routing specifications, however, those routed
orders not otherwise specified in such other routing fee code
descriptions yield the general routing fee codes 7 or X.
    \8\ Fee code 7 is currently appended to all routed orders in the
pre- or post-market session that remove liquidity. The proposed rule
change updates the description associated with fee code 7 to clarify
in the description that such orders remove liquidity. This update
does not alter the orders to which fee code 7 currently applies but
merely makes it clear in the Fee Schedule that fee code 7 applies to
qualifying routed orders that remove liquidity.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\9\ in general, and
furthers the objectives of Section 6(b)(4),\10\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its Members and issuers and other persons
using its facilities. The Exchange also believes that the proposed rule
change is consistent with the objectives of Section 6(b)(5) \11\
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, and,
particularly, is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
    \11\ 15 U.S.C. 78f.(b)(5).
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    In particular, the Exchange believes the proposed rule change to
remove fee codes 8, K and MX is reasonable as the Exchange has observed
a minimal amount of volume in orders yielding these fee codes and,
therefore, the continuation of these fee codes does not warrant the
infrastructure and ongoing Systems maintenance required to support
separate fee codes for specific routed orders. As such, the Exchange
also believes that is reasonable and equitable to assess routed orders
which meet the specifications to which fee codes 8, K and MX are
currently applicable the slightly higher standard routing fee currently
in place for all other routed orders--via fee codes 7 or X, as
applicable. The Exchange believes that the proposed rule change is
equitable and not unfairly discriminatory because Members will continue
to have the option to elect to route their orders in the same manner
(i.e., routed to NYSE American that add liquidity and routed to PSX or
NYSE American using the ROUC routing strategy) will be automatically
and uniformly assessed the applicable standard rates in place for
generally all other routed orders.\12\ Further, if members do not favor
the Exchange's pricing for routed orders, they can send their routable
orders directly to away markets instead of using routing functionality
provided by the Exchange. Routing through the Exchange is optional, and
the Exchange operates in a competitive environment where market
participants can readily direct order flow to competing venues or
providers of routing services if they deem fee levels to be excessive.
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    \12\ See supra note 7.
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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. The Exchange does not
believe the proposed rule change will impose any burden on intramarket
competition because all Members orders that would yield current fee
codes 8, K or MX, will automatically and uniformly be assessed the fees
already in place for routed orders generally,\13\ as applicable (i.e.,
fee codes 7 or X).
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    \13\ See id.
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    The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
again notes that orders that meet the specifications to which fee codes
8, K or MX would currently apply, will yield the same fee codes and be
assessed the same corresponding rates that are already in place in the
Fee Schedule for routed orders generally, as previously filed with the
Commission. Also, as previously discussed, the Exchange operates in a
highly competitive market. Members have numerous alternative venues
that they may participate on and director their order flow, including
15 other options exchanges and off-exchange venues. Additionally, the
Exchange represents a small percentage of the overall market. Based on
publicly available information, no single options exchange has more
than 16% of the market share.\14\ Therefore, no exchange possesses
significant pricing power in the execution of option 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.'' \15\ 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'. . . .''.\16\ 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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    \14\ See supra note 5.
    \15\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
    \16\ 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 is effective upon filing pursuant to
Section 19(b)(3)(A) \17\ of the Act and subparagraph (f)(2) of Rule
19b-4 \18\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(2).
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    At any time within 60 days of the filing of such 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 shall institute proceedings under
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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    \19\ 15 U.S.C. 78s(b)(2)(B).
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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_ADDRESS>Please include
File Number SR-

CboeEDGX-2021-006 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-2021-006. 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. All comments
received will be posted without change. 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-2021-006, and should be
submitted on or before February 23, 2021.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-02119 Filed 2-1-21; 8:45 am]
BILLING CODE 8011-01-P