[Federal Register Volume 88, Number 85 (Wednesday, May 3, 2023)]
[Notices]
[Pages 27940-27946]
[FR Doc No: 2023-09335]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97393; File No. SR-CboeEDGX-2023-030

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

April 27, 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 April 17, 2023, Cboe EDGX Exchange, Inc. (``Exchange'' or ``EDGX'')
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 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/), 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 (``EDGX Equities'') as follows: (1) by
modifying and introducing certain Growth Tiers; (2) by modifying the
criteria of Non-Displayed Step-Up Volume Tier 1; (3) by modifying and
introducing certain Remove Volume Tiers; (4) by modifying the criteria
of Retail Growth Tier 3; and (5) by modifying the rates associated with
certain fee codes. The Exchange proposes to implement these changes
effective April 3, 2023.\3\
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    \3\ The Exchange initially filed the proposed fee changes on
April 3, 2023 (SR-CboeEDGX-2023-024). On April 17, 2023, the
Exchange withdrew that filing and submitted SR-CboeEDGX-2023-029. On
April 17, 2023, the Exchange withdrew SR-CboeEDGX-2023-029 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 ``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.\5\ 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.\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 (March 24, 2023), available at https://www.cboe.com/us/equities/_statistics/.
    \5\ See EDGX Equities Fee Schedule, Standard Rates.
    \6\ Id.
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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 two
Growth Tiers that each provide an enhanced rebate for Members'
qualifying orders yielding fee codes B,\7\ V,\8\ Y,\9\ 3,\10\ and
4,\11\ where a Member reaches certain add volume-based criteria,
including ``growing'' its volume over a certain baseline month. First,
the Exchange is proposing to introduce new Growth Tier 1 to provide
Members an additional manner in which they could receive an enhanced
rebate if certain criteria is met. The proposed criteria for proposed
Growth Tier 1 is as follows:
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    \7\ Fee code B is appended to orders adding liquidity to EDGX in
Tape B securities.
    \8\ Fee code V is appended to orders adding liquidity to EDGX in
Tape A securities.
    \9\ Fee code Y is appended to orders adding liquidity to EDGX in
Tape C securities.
    \10\ Fee code 3 is appended to orders adding liquidity to EDGX
in the pre and post market in Tapes A or C securities.
    \11\ 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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     Growth Tier 1 provides a rebate of $0.0020 per share for
securities priced above $1.00 to qualifying orders (i.e., orders
yielding fee B, V, Y, 3, or 4) where Member adds a Step-Up ADAV \12\
from January 2023 >=0.10% of the TCV \13\ or Member adds a Step-Up ADAV
from January 2023 >=10,000,000.
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    \12\ ``Step-Up ADAV'' means ADAV in the relevant baseline month
subtracted from current ADAV. ADAV means average daily added volume
calculated as the number of shares added per day. ADAV 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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    Proposed Growth Tier 1 will provide a lower rebate than other
existing Growth Tiers, but this lower rebate is commensurate with the
difficulty of meeting the less stringent criteria associated with
proposed Growth Tier 1.
    Second, the Exchange proposes to renumber current Growth Tiers 1
and 2 and modify the criteria of proposed Growth Tier 3 (current Growth
Tier 2). Currently, Growth Tier 2 (proposed Growth Tier 3) reads as
follows:
     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; and
(2) Member has a total remove ADV \14\ >=0.45% of TCV or Member has a
total remove ADV >=45,000,000; and (3) Member adds a Retail Step-Up ADV
\15\

(i.e., yielding fee codes ZA \16\ or ZO \17\) from August 2022 >=0.10%
of TCV.
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    \14\ ``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.
    \15\ ``Step-Up ADV'' means ADV in the relevant baseline month
subtracted from current day ADV.
    \16\ Fee code ZA is appended to Retail Orders that add
liquidity.
    \17\ Fee code ZO is appended to Retail orders that adds
liquidity during the pre- and post-market.
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    Now, the Exchange proposes to remove the third prong of criteria.
The proposed criteria for current Growth Tier 2 (proposed Growth Tier
3) is as follows:
     Proposed Growth Tier 3 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.
    The proposed modification to proposed Growth Tier 3 removes a
criteria designed to encourage Members to grow their volume in retail
orders on the Exchange. By removing a criteria while keeping the
enhanced rebate the same, the proposed criteria slightly decreases the
difficulty required for Members to meet the applicable tier threshold.
By introducing proposed Growth Tier 1 and decreasing the difficulty
required under proposed Growth Tier 3, Members are still incentivized
to grow their volume on the Exchange, thereby contributing to a deeper
and more liquid market, which benefits all market participants and
provides greater execution opportunities on the Exchange.
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,\18\ HA,\19\ MM,\20\ and RP,\21\ where a Member reaches certain
volume-based criteria offered in each tier. The Exchange now proposes
to amend the criteria of current Non-Displayed Step-Up Volume Tier 1.
Currently, the criteria for Non-Displayed Step-Up Volume Tier 1 is as
follows:
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    \18\ Fee code DM is appended to orders that add liquidity using
MidPoint Discretionary Order within discretionary range.
    \19\ Fee code HA is appended to non-displayed orders that add
liquidity.
    \20\ Fee code MM is appended to non-displayed orders that add
liquidity using Mid-Point Peg.
    \21\ Fee code RP is appended to non-displayed orders that add
liquidity using Supplemental Peg.
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     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; and (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.
    Now, the Exchange proposes to remove the third prong of criteria.
The proposed criteria for 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; and (2) Member has a total remove ADV >=0.45% of TCV or
Member has a total remove ADV >=45,000,000.
    The proposed modification to Non-Displayed Step-Up Volume Tier 1 is
intended to remove criteria designed to incentivize Members to add non-
displayed retail volume on the Exchange. By removing a criteria while
keeping the enhanced rebate the same, the proposed criteria slightly
decreases the difficulty required for Members to meet the applicable
tier threshold while continuing to encourage Members to add non-
displayed liquidity to the Exchange, thereby contributing to a deeper
and more liquid market, which benefits all market participants and
provides greater execution opportunities on the Exchange.
Remove Volume Tiers
    In addition to the Growth Tiers and Non-Displayed Add Volume Tiers
offered under footnote 1, the Exchange also offers two Remove Volume
Tiers that each assess a reduced fee for Members' qualifying orders
yielding fee codes BB,\22\ N,\23\ and W \24\ where a Member reaches
certain add or remove volume-based criteria. The Exchange first
proposes to amend the criteria in Remove Volume Tiers 1 and 2.
Currently, the criteria for these tiers is as follows:
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    \22\ Fee code BB is appended to orders that remove liquidity
from EDGX in Tape B securities.
    \23\ Fee code N is appended to orders that remove liquidity from
EDGX in Tape C securities.
    \24\ Fee code W is appended to orders that remove liquidity from
EDGX in Tape A securities.
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     Remove Volume Tier 1 provides a reduced fee of $0.00275
per share for securities priced above $1.00 or 0.28% of the total
dollar value in securities priced below $1.00 to qualifying orders
(i.e., orders yielding fee codes BB, N, or W) where (1) Member adds a
Step-Up ADAV from June 2021 >=0.10% of the TCV or Member adds a Step-Up
ADAV from June 2021 >=8,000,000; and (2) Member has a total remove ADV
>=0.60% of the TCV or Member has a total remove ADV >=45,000,000.
     Remove Volume Tier 2 assesses a reduced fee of $0.00275
per share for securities priced above $1.00 or 0.28% of the total
dollar value in securities priced below $1.00 to qualifying orders
(i.e., orders yielding fee codes BB, N, or W) where (1) Member has an
ADAV >=0.25% TCV with displayed orders that yield fee codes B, V, or Y;
or (2) Member adds Retail Order ADV (i.e., yielding fee codes ZA or ZO)
>=0.45% of the TCV.
    Now, the Exchange proposes to replace the existing criteria with a
single prong of criteria for each tier and slightly increase the
reduced fee assessed by Remove Volume Tier 1. The proposed criteria is
as follows:
     Remove Volume Tier 1 assesses a reduced fee of $0.00285
per share for securities priced above $1.00 or 0.28% of the total
dollar value in securities priced below $1.00 to qualifying orders
(i.e., orders yielding fee codes BB, N, or W) where Member has an ADAV
>=0.25% TCV with displayed orders that yield fee codes B, V, or Y.
     Remove Volume Tier 2 assesses a reduced fee of $0.00275
per share for securities priced above $1.00 or 0.28% of the total
dollar value in securities priced below $1.00 to qualifying orders
(i.e., orders yielding fee codes BB, N, or W) where Member adds Retail
Order ADV (i.e., yielding fee codes ZA or ZO) >=0.45% of the TCV.
    The proposed change to Remove Volume Tier 1 will provide a slightly
lower reduced fee in exchange for less difficult criteria that
continues to encourage Members to strive to meet the criteria by
removing liquidity on the Exchange. Similarly, the proposed change to
Remove Volume Tier 2 will assess the current reduced fee while
lessening the difficulty of meeting the criteria in Remove Volume Tier
2.
    Second, the Exchange proposes to introduce Remove Volume Tier 3.
The proposed criteria in proposed Remove Volume Tier 3 is as follows:
     Proposed Remove Volume Tier 3 assesses a reduced fee of
$0.00275 per share in securities priced above $1.00 or 0.28% of the
total dollar value in securities priced below $1.00 for qualifying
orders (i.e., orders yielding fee codes BB, N, or W) where (1) Member
adds a Step-Up ADAV from June 2021 >=0.10% of the TCV or Member adds a
Step-Up ADAV from June 2021 >=8,000,000; and (2) Member has a total
remove ADV >=0.60% of the TCV or Members has a total remove ADV
>=45,000,000; and (3) Member adds

Retail Order ADV (i.e., yielding fee codes ZA or ZO) >=0.10% of the
TCV.
    The addition of proposed Remove Volume Tier 3 is designed to
provide Members an alternative opportunity to earn a reduced fee where
Members achieve certain add or remove volume-based criteria. The
Exchange believes assessing an identical fee as Remove Volume Tier 2
albeit using slightly more difficult criteria will encourage Members to
strive to meet the criteria by removing liquidity on the Exchange. The
proposed changes to the Remove Volume Tiers are designed to incentivize
Members to provide additional volume to the Exchange. An increase in
remove liquidity on the Exchange signals an overall increase in
activity from other market participants, contributes to a deeper, more
liquid market, and provides additional execution opportunities for
active market participants, which benefits the entire market system.
Retail Growth Tiers
    Pursuant to footnote 2 of the Fee Schedule, the Exchange offers
Retail Volume Tiers which provide Retail Member Organizations
(``RMOs'') \25\ an opportunity to receive an enhanced rebate from the
standard rebate for Retail Orders \26\ 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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    \25\ 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.
    \26\ 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; (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.
    Now, the Exchange proposes to delete the third prong of criteria.
The proposed criteria for 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; and
(2) Member has a total remove ADV >=0.45% of TCV or Member has a total
remove ADV >=45,000,000.
    The proposed modification to Retail Growth Tier 3 removes a
criteria designed to encourage RMOs to grow their volume in retail
orders on the Exchange. By removing a criteria while keeping the
enhanced rebate the same, the proposed criteria slightly decreases the
difficulty required for Members to meet the applicable tier threshold
while continuing to encourage RMOs to grow their volume in retail
orders.
    Furthermore, the Growth Tiers, Non-Displayed Add Volume Tiers,
Remove Volume Tiers, and Retail Volume Tiers are intended to provide
Members an opportunity to receive an enhanced rebate or reduced fee 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 or
reduced fee 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 Code Changes
    The Exchange currently offers fee code DX, which is appended to
Midpoint Discretionary Orders (``MDOs'') \27\ using the Quote Depletion
Protection (``QDP'') \28\ order instruction that remove liquidity from
the Exchange. QDP is designed to provide enhanced protections to MDOs
by tracking significant executions that constitute the best bid or
offer on the EDGX Book \29\ and enabling Users \30\ 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.\31\ Currently, orders
appended with fee code DX are 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. The Exchange proposes to increase the
fee to $0.0010 per share in securities at or above $1.00. There is no
proposed change in the fee assessed to securities priced below $1.00.
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    \27\ See Exchange Rule 11.8(g).
    \28\ See Exchange Rule 11.8(g)(10).
    \29\ See Exchange Rule 1.5(d).
    \30\ See Exchange Rule 1.5(ee).
    \31\ 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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    The Exchange also offers various fee codes for orders routed away
from the Exchange. The Exchange is proposing to modify the routing fees
associated with fee codes RZ,\32\ I,\33\ BY,\34\ AA,\35\ AY,\36\
RR,\37\ and RY \38\ to match the base add or remove rate for the
associated market center to which the order is routed. The rebates for
fee codes RZ, I, AA, and RR will be revised to $0.0016 per share in
securities priced above $1.00.\39\ The rebates for fee codes BY and AY
will be revised to $0.0002 per share in securities priced above
$1.00.\40\ The fee for fee code RY will be revised to $0.0020 per share
in securities priced above $1.00.\41\ There are no changes to the fees
or rebates associated with securities priced below $1.00.
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    \32\ Fee code RZ is appended to orders routed to BZX that add
liquidity.
    \33\ Fee code I is appended to orders routed to EDGA using the
ROUC routing strategy.
    \34\ Fee code BY is appended to orders routed to BYX using
Destination Specific (``DIRC'') or ROUC routing strategy.
    \35\ Fee code AA is appended to orders routed to EDGA using the
ALLB routing strategy.
    \36\ Fee code AY is appended to orders routed to BYX using the
ALLB routing strategy.
    \37\ Fee code RR is appended to orders routed to EDGA using the
DIRC routing strategy.
    \38\ Fee code RY is appended to orders routed to BYX that add
liquidity.
    \39\ See BZX Equities Fee Schedule, Standard Rates; EDGA
Equities Fee Schedule, Standard Rates.
    \40\ See BYX Equities Fee Schedule, Standard Rates.
    \41\ Id.
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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.\42\ Specifically, the Exchange believes the
proposed rule change is consistent with the section 6(b)(5) \43\
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) \44\ 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) \45\ 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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    \42\ 15 U.S.C. 78f(b).
    \43\ 15 U.S.C. 78f(b)(5).
    \44\ Id.
    \45\ 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: (1) introduce a new Growth Tier and modify current
Growth Tiers 1 and 2; (2) modify Non-Displayed Step-Up Volume Tier 1;
(3) introduce a new Remove Volume Tier and modify current Remove Volume
Tiers 1 and 2; and (4) modify 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,\46\
including the Exchange,\47\ 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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    \46\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove
Volume Tiers.
    \47\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
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    In particular, the Exchange believes its proposal to: (1) introduce
a new Growth Tier and modify current Growth Tiers 1 and 2; (2) modify
Non-Displayed Step-Up Volume Tier 1; (3) introduce a new Remove Volume
Tier and modify current Remove Volume Tiers 1 and 2; and (4) modify
Retail Growth Tier 3 is reasonable because the revised tiers will be
available to all Members and provide all Members with an additional
opportunity to receive an enhanced rebate or a reduced fee. The
Exchange further believes the proposed modifications to its Growth
Tiers, Non-Displayed Step-Up Volume Tier 1, Remove Volume Tiers, 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 or reduced fee 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 its Growth
Tiers, Non-Displayed Step-Up Volume Tier 1, Remove Volume Tiers, and
Retail Growth Tier 3 are reasonable as they do not represent a
significant departure from the criteria currently offered in the Fee
Schedule. Further, the Exchange believes its proposed changes to the
routing fee codes and to fee code DX are reasonable as these changes do
not represent a significant departure from the Exchange's general
pricing structure. The Exchange notes that the proposed changes to fee
code DX are a modest increase over existing prices and yet the proposed
fee is lower than other similar fees to remove volume on the
Exchange.\48\ Indeed, the proposed changes to fee codes RZ, I, BY, AA,
AY, RR, and RY are intended to match the base add or remove rates on
the Exchange's affiliates.\49\ 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 proposed Growth Tier 1, at
least two Members will be able to satisfy proposed Growth Tier 3, at
least two Members will be able to satisfy proposed Non-Displayed Step-
Up Volume Tier 1, at least two Members will be able to satisfy proposed
Remove Volume Tier 1, at least two Members will be able to satisfy
proposed Remove Volume Tier 2, at least one Member will be able to
satisfy proposed Remove Volume Tier 3, and at least two Members will be
able to satisfy proposed 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.
---------------------------------------------------------------------------

    \48\ See, Cboe EDGX Equities Fee Schedule, Fee Codes and
Associated Fees.
    \49\ Supra notes 38-39.
---------------------------------------------------------------------------

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 the Exchange's Growth Tiers, Non-Displayed Step-Up Volume
Tier 1, Remove Volume Tiers, 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.
    The Exchange does not believe the proposal to revise the applicable
fee or rebate associated with the Exchange's routing fee codes or fee
code DX does not impose a burden on intramarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act. The
proposed fee 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. 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 amend. In addition, the fees and rebates
associated with routing orders away from the Exchange similarly apply
to all Members on an equal and non-discriminatory basis and Members can
choose 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 17% of the market share.\50\ 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.'' \51\ 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'. . . .''.\52\ 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.
---------------------------------------------------------------------------

    \50\ Supra note 3.
    \51\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
    \52\ 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 \53\ and paragraph (f) of Rule 19b-4 \54\
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.
---------------------------------------------------------------------------

    \53\ 15 U.S.C. 78s(b)(3)(A).
    \54\ 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-CboeEDGX-2023-030 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-2023-030. 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 10:00 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. 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-CboeEDGX-2023-030, and should be submitted on or before May 24,
2023.

    For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\55\
---------------------------------------------------------------------------

    \55\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-09335 Filed 5-2-23; 8:45 am]
BILLING CODE 8011-01-P


[Federal Register Volume 80, Number 123 (Friday, June 26, 2015)]
[Notices]
[Pages 36894-36896]
[FR Doc No: 2015-15723]

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DEPARTMENT OF TRANSPORTATION

Federal Motor Carrier Safety Administration

[Docket No. FMCSA-2014-0111]

Hours of Service of Drivers: Renewal of Illumination Fireworks,
LLC and ACE Pyro, LLC Exemptions From the 14-Hour Rule During
Independence Day Celebrations

AGENCY: Federal Motor Carrier Safety Administration (FMCSA), DOT.

ACTION: Notice of final disposition; grant of applications for
exemptions.

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

SUMMARY: FMCSA announces its decision to grant exemptions to
Illumination Fireworks, LLC and ACE Pyro, LLC (the applicants) from the
requirement that drivers of commercial motor vehicles (CMVs) must not
drive a CMV following the 14th hour after coming on duty. The FMCSA
renews the exemptions for drivers of approximately 50 CMVs employed by
the applicants in conjunction with staging fireworks shows celebrating
Independence Day during the period June 28-July 8, 2015, inclusive.
During this period, the CMV drivers employed by the applicants will be
allowed to exclude off-duty and sleeper-berth time of any length from
the calculation of the 14 hours. These drivers will not be allowed to
drive after accumulating a total of 14 hours of on-duty time, following
10 consecutive hours off duty, and will continue to be subject to the
11-hour driving time limit, and the 60- and 70-hour on-duty limits. The
Agency has determined that the terms and conditions of the limited 1-
year exemptions will ensure a level of safety equivalent to, or greater
than, the level of safety achieved without the exemptions.

DATES: These exemptions are effective during the period of June 28
(12:01 a.m.) through July 8, 2015 (11:59 p.m.).

FOR FURTHER INFORMATION CONTACT: Mrs. Pearlie Robinson, Driver and
Carrier Operations Division; Office of Carrier, Driver and Vehicle
Safety Standards; Telephone:<PHONE_NUMBER>, Email<EMAIL_ADDRESS>
Federal Motor Carrier Safety Administration, 1200 New Jersey Avenue SE,
Washington, DC 20590-0001.
    Docket: For access to the docket to read background documents or
comments submitted to notice requesting public comments on the
exemption application, go to www.regulations.gov at any time or visit
Room W12-140 on the ground level of the West Building, 1200 New Jersey
Avenue SE., Washington, DC, between 9 a.m. and 5 p.m., ET, Monday
through Friday, except Federal holidays. The on-line Federal document
management system is available 24 hours each day, 365 days each year.
The docket number is listed at the beginning of this notice.

SUPPLEMENTARY INFORMATION:

Background

    The hours-of-service (HOS) rule in 49 CFR 395.3(a)(2) prohibits a
property-carrying CMV driver from driving a CMV after the 14th hour
after coming on duty following 10 consecutive hours off duty. FMCSA has
authority under 49 U.S.C. 31136(e) and 31315 to grant exemptions from
certain parts of the Federal Motor Carrier Safety Regulations (FMCSRs).
FMCSA must publish a notice of each exemption request in the Federal
Register (49 CFR 381.315(a)). The Agency must provide the public an
opportunity to inspect the information relevant to the application,
including any safety analyses that have been conducted. The Agency must
also provide an opportunity for public comment on the request.
    The Agency reviews safety analyses and public comments submitted,
and determines whether granting the exemption would likely achieve a
level of safety equivalent to, or greater than, the level that would be
achieved by the current regulation (49 CFR 381.305). The decision of
the Agency must be published in the Federal Register (49 CFR
381.315(b)) with the reasons for denying or granting the application
and, if granted, the name of the person or class of persons receiving
the exemption, and the regulatory provision from which the exemption is
granted. The notice must also specify the effective period and explain
the terms and conditions of the exemption. The exemption may be renewed
(49 CFR 381.300(b)).

Request for Exemption

    The initial exemption application from Illumination Fireworks, LLC
(USDOT 2326703) and ACE Pyro, LLC (USDOT 1352892) (the applicants) for
relief from the HOS rule was submitted in 2014; a copy is in the
docket. That document fully described the nature of operations
encountered by CMV drivers employed by the applicants. On June 28,
2014, the Agency granted the applicants' exemptions from the HOS
regulation that prohibits drivers from operating property-carrying CMVs
after the 14th hour after coming on duty. The exemption expired on July
8, 2014.
    On October 14, 2014, FMCSA published notice of the applicants'
renewal request (79 FR 61687). The applicants are fireworks display
companies that employ CMV drivers who hold commercial driver's licenses
(CDLs) with hazardous materials (HM) endorsements to transport Division
1.3G and 1.4G explosives (fireworks) in conjunction with the setup of
fireworks shows for Independence Day. The applicants seek exemptions
from the 14-hour rule in 49 CFR 395.3(a)(2) so that drivers would be
allowed to exclude off-duty and sleeper-berth time of any length from
the calculation of the 14 hours. The applicants state they are seeking
HOS exemptions for the 2015 Independence Day period because compliance
with the 14-hour rule would impose economic hardship on cities,
municipalities, and themselves. Complying with the existing regulations
means most shows would require two drivers, significantly increasing
the cost of the fireworks display.
    The applicants assert that without the extra duty-period provided
by the exemption, safety would decline because fireworks drivers would
be unable to return to their home base after each show should they have
fireworks remaining after the display. They would be forced to park the
CMVs carrying Division 1.3G and 1.4G explosives in areas less secure
than the motor carriers' home base.

Method To Ensure an Equivalent or Greater Level of Safety

    As a condition for maintaining the exemptions, each motor carrier
will be required to notify FMCSA within 5 business days of any accident
(as defined in 49 CFR 390.5) involving the operation of any CMVs under
this exemption. The applicants advise they have never been in an
accident.
    In the exemption request, the applicants asserted that the
operational demands of this unique industry minimize the risks of CMV
crashes. In the last few days before the Independence Day holiday,
these drivers transport fireworks over relatively short routes from
distribution points to the site of the fireworks display, and normally
do so in the early morning when traffic is light. The applicants noted
that during the 2014 Independence Day season, the furthest Illumination
Fireworks or ACE Pyro CMVs traveled from their home bases was 150
miles, which involves a very

small amount of driving. At the site, they spend considerable time
installing, wiring, and safety-checking the fireworks displays,
followed by several hours of duty in the late afternoon and early
evening prior to the event. During this time, the drivers are able to
rest and nap, thereby reducing or eliminating the fatigue accumulated
during the day. Before beginning another duty day, these drivers must
take 10 consecutive hours off duty, the same as other CMV drivers.
    A copy of the application for the exemptions is available for
review in the docket for this notice.

Public Comments

    Two comments were received in response to the October 14 notice.
The Advocates for Highway and Auto Safety (Advocates) and Ms. Lisa
Kupsey opposed the application.
    The Advocates said that ``its arguments against the granting of the
present exemption are almost identical to those provided in prior
comments regarding similar applications for exemption filed by the APA.
Because the present application relies almost entirely upon the APA
exemption application process as a foundation for its application,
Advocates sees no need to restate the arguments in their entirety.''
    Ms. Kupsey commented
    ``Is this business that necessary that it has to allow its
employees to be `exempt'? Probably not.''
    All comments are available for review in the docket for this
notice.

FMCSA Response to Public Comments and Agency Decision

    Prior to publishing the Federal Register notice announcing the
receipt of the applicants' exemption request, FMCSA ensured that the
motor carriers involved have a current USDOT registration, Hazardous
Materials Safety Permit, minimum required levels of insurance, and were
not subject to any ``imminent hazard'' or other OOS orders. The Agency
conducted a comprehensive investigation of the safety performance
history of each applicant during the review process. As part of this
process, FMCSA reviewed its Motor Carrier Management Information System
safety records, including inspection and accident reports submitted to
FMCSA by State agencies, for each applicant motor carrier. The Agency
also requested and received a records review of each carrier from the
Pipeline and Hazardous Materials Safety Administration (PHMSA).
    FMCSA reviewed the comments and concluded that the information
provided by Ms. Kupsey did not address this notice.
    With regards to Advocates' suggestion that the applicants should
have alternative means to comply with the HOS regulations without an
exemption, FMCSA does not believe reasonable alternatives are
necessarily available in many locations. Such alternatives would
include locating additional drivers with CDLs and HM endorsements. This
is difficult for part-time, holiday-specific work. CDL holders with HM
endorsements are likely to be in high demand, given the Transportation
Security Administration requirements for such drivers. And, as
indicated in this notice and the application, potential alternatives
could drive the cost of fireworks displays beyond the financial
capabilities of many communities.
    The FMCSA has evaluated the application, the safety records of the
companies to which the exemption would apply, and the comments. The
Agency believes that the applicants will likely achieve a level of
safety that is equivalent to, or greater than, the level of safety
achieved without the exemption [49 CFR 381.305(a)], and grants the
requested exemptions covering the operations of the CMV drivers
employed by the applicants.

Terms and Conditions of the Exemptions

Period of the Exemptions

    These exemptions are effective during the period of June 28 (12:01
a.m.) through July 8, 2015 (11:59 p.m.).

Extent of the Exemptions

    The drivers employed by the applicants are provided an exemption
from the requirements of 49 CFR 395.3(a)(2). This regulation prohibits
a driver from driving a CMV after the 14th hour after coming on duty
and does not permit off-duty periods to extend the 14-hour limit.
Drivers covered by the exemptions may exclude off-duty and sleeper-
berth time of any length from the calculation of the 14-hour limit. The
exemptions are contingent on each driver driving no more than 11 hours
in the 14-hour period after coming on duty as extended by any off-duty
or sleeper-berth time in accordance with this exemption. The exemptions
are further contingent on each driver having a minimum of 10
consecutive hours off duty prior to beginning a new duty period. The
carriers and drivers must comply with all other applicable requirements
of the FMCSRs (49 CFR parts 350-399) and Hazardous Materials
Regulations (49 CFR parts 105-180).

Other Conditions

    The exemptions are contingent upon each carrier maintaining USDOT
registration, a Hazardous Materials Safety Permit, minimum levels of
public liability insurance, and not being subject to any ``imminent
hazard'' or other out-of-service (OOS) order issued by FMCSA. Each
driver covered by the exemptions must maintain a valid CDL with the
required endorsements, not be subject to any OOS order or suspension of
driving privileges, and meet all physical qualifications required by 49
CFR part 391. Drivers operating under an exemption must carry a copy of
the exemption document onboard the vehicle for review by any law
enforcement officer.

Preemption

    During the period the exemptions are in effect, no State may
enforce any law or regulation that conflicts with or is inconsistent
with the exemptions with respect to a person or entity operating under
the exemptions (49 U.S.C. 31315(d)).

FMCSA Accident Notification

    Exempt motor carriers must notify FMCSA by email to<EMAIL_ADDRESS>within 5 business days of any accidents (as defined by 49 CFR 390.5)
involving the operation of any of its CMVs while under this exemption.
The notification must include the following information:
    a. Exemption Identifier: ``ILLUM/ACE''
    b. Name and USDOT number of the motor carrier,
    c. Date of the accident,
    d. City or town, and State, in which the accident occurred, or
which is closest to the scene of the accident,
    e. Driver's name and driver's license number,
    f. Vehicle number and State license number,
    g. Number of individuals suffering physical injury,
    h. Number of fatalities,
    i. The police-reported cause of the accident,
    j. Whether the driver was cited for violation of any traffic laws,
or motor carrier safety regulations, and
    k. The total driving time and the total on-duty time of the CMV
driver at the time of the accident.

Termination

    The FMCSA does not believe the two motor carriers and approximately
50 drivers covered by the exemptions will experience any deterioration
of their

safety record. However, should this occur, FMCSA will take all steps
necessary to protect the public interest, including revocation of the
exemptions. The FMCSA will immediately revoke the exemptions for
failure to comply with its terms and conditions.

    Issued on: June 8, 2015.
T. F. Scott Darling III,
Chief Counsel.
[FR Doc. 2015-15723 Filed 6-25-15; 8:45 am]
 BILLING CODE 4910-EX-P


[Federal Register Volume 84, Number 197 (Thursday, October 10, 2019)]
[Notices]
[Pages 54707-54710]
[FR Doc No: 2019-22137]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-87223; File No. SR-NYSEArca-2019-55]

Self-Regulatory Organizations; NYSE Arca, Inc.; Order Approving a
Proposed Rule Change To Amend NYSE Arca Rule 8.700-E and To List and
Trade Shares of the Dynamic Short Short-Term Volatility Futures ETF

October 4, 2019.

I. Introduction

    On August 7, 2019, NYSE Arca, Inc. (``NYSE Arca'' or ``Exchange'')
filed with the Securities and Exchange Commission (``Commission''),
pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ a proposal to: (1) Amend
NYSE Arca Rule 8.700-E to add futures contracts and swaps on the Cboe
Volatility Index (``VIX'' or ``VIX Index'') to the financial
instruments that an issue of Managed Trust Securities \3\ may hold; and
(2) to list and trade shares (``Shares'') of the Dynamic Short Short-
Term Volatility Futures ETF (``Fund''), a

series of Dynamic Shares Trust (``Trust'') under proposed amended NYSE
Arca Rule 8.700-E. The proposed rule change was published for comment
in the Federal Register on August 26, 2019.\4\ The Commission has
received no comments on the proposed rule change. This order approves
the proposed rule change.
---------------------------------------------------------------------------

    \1\ 15 U.S.C.78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ Managed Trust Security means a security that is registered
under the Securities Act of 1933 (15 U.S.C. 77a), as amended (the
``Securities Act''), and (i) is issued by a trust (``Trust''), or
any series thereof, that (1) is a commodity pool as defined in the
Commodity Exchange Act and regulations thereunder, is not registered
or required to be registered as an investment company under the
Investment Company Act of 1940, as amended, and is managed by a
commodity pool operator registered with the Commodity Futures
Trading Commission, and (2) holds long and/or short positions in
exchange-traded futures contracts and/or certain currency forward
contracts and/or swaps selected by the Trust's advisor consistent
with the Trust's investment objectives, which will only include
exchange-traded futures contracts involving commodities, commodity
indices, currencies, currency indices, stock indices, the EURO STOXX
50 Volatility Index (VSTOXX), fixed income indices, interest rates
and sovereign, private and mortgage or asset backed debt
instruments, and/or forward contracts on specified currencies, and/
or swaps on stock indices, fixed income indices, commodity indices,
VSTOXX, commodities, currencies, currency indices, or interest
rates, each as disclosed in the Trust's prospectus as such may be
amended from time to time, and cash and cash equivalents; and (ii)
is issued and redeemed continuously in specified aggregate amounts
at the next applicable net asset value. See NYSE Arca Rule 8.700-
E(c)(1).
    \4\ See Securities Exchange Act Release No. 86714 (August 209,
2019), 84 FR 44642 (``Notice'').
---------------------------------------------------------------------------

II. Summary of the Proposed Rule Change 5
---------------------------------------------------------------------------

    \5\ For a complete description of the Exchange's proposal, see
Notice, supra note 3.
---------------------------------------------------------------------------

A. Proposed Amendments to NYSE Arca Rule 8.700-E

    NYSE Arca Rule 8.700-E governs the listing and trading of Managed
Trust Securities. The Exchange proposes to amend NYSE Arca Rule 8.700-
E(c)(1) by expanding the definition of ``Managed Trust Securities.''
Currently, the definition of Managed Trust Securities specifies (among
other things) that the trust that issues Managed Trust Securities may
hold futures and swaps overlying certain types of reference assets, in
addition to certain currency forwards.\6\ The proposed rule change
would add the VIX Index to the list of permitted reference assets
underlying such futures and swaps.
---------------------------------------------------------------------------

    \6\ See supra note 3
---------------------------------------------------------------------------

    The Exchange states the following regarding the VIX Index.\7\ The
VIX Index is an up-to-the-minute market estimate of expected volatility
that is calculated by using real-time prices of options on the S&P
500[supreg] Index (``SPX options'') listed on Cboe Exchange, Inc.
(``Cboe''). It is designed to reflect investors' consensus view of
future (30-day) expected stock market volatility. Only SPX options with
Friday expirations are used to calculate the VIX Index. The VIX Index
is calculated between 2:15 a.m. Central Time (``C.T.'') and 8:15 a.m.
C.T. and between 8:30 a.m. C.T. and 3:15 p.m. C.T. The VIX Index is
calculated by using the midpoints of real-time SPX option bid/ask
quotes. Only SPX options with more than 23 days and less than 37 days
to the Friday SPX expiration are used to calculate the VIX Index. These
SPX options are then weighted to yield a constant, 30-day measure of
the expected volatility of the S&P 500 Index. VIX levels are calculated
by Cboe and disseminated at 15-second intervals to market information
vendors via the Options Price Reporting Authority.
---------------------------------------------------------------------------

    \7\ See Notice, supra note 4, 84 FR at 44644.
---------------------------------------------------------------------------

    The Exchange states the following regarding futures on the VIX
Index (``VIX Futures'' or ``VIX Futures Contracts'').\8\ The Cboe
Futures Exchange (``CFE'') began listing and trading VIX Futures'' on
March 26, 2004 under the ticker symbol VX. VIX Futures reflect the
market's estimate of the value of the VIX Index on various expiration
dates in the future. According to the Registration Statement,\9\ the
value of a VIX Futures Contract is based on the expected reading of the
VIX Index at the expiration of such VIX Futures, and therefore
represents forward implied volatility of the S&P 500 over the 30-day
period following the expiration of the VIX Futures. As a result, a
movement in the VIX Index today will not necessarily result in a
corresponding movement in the price of VIX Futures. VIX Futures, which
trade only on CFE, trade between the hours of 8:30 a.m.-3:15 p.m. C.T.
The CFE is a member of the Intermarket Surveillance Group (``ISG'').
Monthly and weekly expirations in VIX Futures are available and trade
nearly 24 hours a day, five days a week. VIX Weekly futures began
trading on CFE in 2015.
---------------------------------------------------------------------------

    \8\ See id. at 44644.
    \9\ On June 5, 2019, the Trust submitted to the Commission its
draft registration statement on Form S-1 under the Securities Act.
---------------------------------------------------------------------------

B. Listing and Trading of the Shares

    The Exchange proposes to list and trade the Shares under proposed
amended NYSE Arca Rule 8.700-E. The Exchange states the following
regarding the Fund. The Trust's sponsor, Dynamic Shares LLC
(``Sponsor''), will serve as its commodity pool operator upon its
registration with the Commodity Futures Trading Commission and is not
registered or affiliated with a broker-dealer. Wilmington Trust Company
is the sole ``Trustee'' of the Trust. The Nottingham Company will be
the ``Administrator'' for the Fund. Nottingham Shareholder Services,
LLC will serve as the ``Transfer Agent'' for the Fund for ``Authorized
Participants.'' Capital Investment Group, Inc. will serve as the
``Distributor'' for the Fund. The Fund will seek to provide investors
with inverse exposure to the implied volatility of the broad-based,
large-cap U.S. equity market. Such exposure will be for one full
trading day. The Fund will be actively managed and will not be
benchmarked to the VIX Index.\10\ The pursuit of the Fund's daily
investment objective means that the Fund's return for a period longer
than a full trading day will be the product of the series of daily
returns, with daily repositioned exposure, for each trading day during
the relevant period. As a consequence, the return for investors that
invest for periods less than a full trading day or for a period
different than a trading day will not be the product of the return of
the Fund's stated daily inverse investment objective. Under normal
market conditions,\11\ the Fund will seek to achieve its investment
objective by obtaining investment exposure to an actively managed
portfolio of short positions in VIX Futures Contracts with monthly
expirations. The Fund expects to primarily take short positions in VIX
Futures by shorting the next two near term VIX Futures and rolling the
nearest month VIX Futures Contract to the next month on a daily basis.
As such, the Fund expects to have a constant one-month rolling short
position in first and second month VIX Futures. The Fund also may hold
cash and cash equivalents, including U.S. Treasury securities. The Fund
will seek to dynamically manage its notional exposure to VIX Futures.
For example, when the VIX Index is below its historical average, the
Fund's notional exposure will be lower than a traditional short VIX
short term futures ETF, which may maintain a fixed notional exposure
every day. When the VIX Index is going up, the Fund will gradually
increase its notional exposure, up to a ceiling of -0.5 times its net
asset value (``NAV''). The Fund expects that its notional exposure will
not exceed -0.5 times its NAV, but that its notional exposure may
exceed -0.5 times its NAV during intraday trading before recalibration.
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    \10\ The Fund does not seek to track the performance of the VIX
Index or the S&P 500[supreg] and can be expected to perform very
differently from the VIX Index over all periods of time.
    \11\ Normal market conditions'' is defined in NYSE Arca Rule
8.600-E(c)(5).
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III. Discussion and Commission Findings

    After careful review, the Commission finds that the proposed rule
change is consistent with the requirements of Section 6 of the Act \12\
and the rules and regulations thereunder applicable to a national
securities exchange.\13\ In particular, the Commission finds that the
proposed rule change is consistent with Section 6(b)(5) of the Act,\14\
which requires, among other things, that the Exchange's rules be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, 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. The Commission
also finds that the proposal is consistent with Section
11A(a)(1)(C)(iii) of the Act,\15\ which sets forth Congress' finding
that it is in the public interest and appropriate for the protection of
investors and the maintenance of fair and orderly markets to assure the
availability to brokers, dealers, and investors of information with
respect to quotations for, and transactions in, securities.
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    \12\ 15 U.S.C. 78f.
    \13\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
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A. Exchange's Proposal To Amend Rule 8.700-E

    The Commission believes that the proposal to amend NYSE Arca Rule
8.700-E(c)(1) to add futures contracts and swaps on the VIX Index to
the financial instruments in which an issue of Managed Trust Securities
may hold long and/or short positions is consistent with Section 6(b)(5)
of the Act. The Commission notes that it has previously approved: (1)
The addition of VIX Futures to the definition of Futures Reference
Assets applicable to ``Futures-Linked Securities'' in NYSE Arca Rule
5.2-E(j)(6) (Index-Linked Securities); \16\ (2) the listing and trading
on the Exchange of series of Trust Issued Receipts that reference VIX
Futures; \17\ and (3) an earlier expansion of NYSE Arca Rule 8.700-E to
add the VSTOXX as a permitted reference asset to the futures contracts
and swaps that may be held by trusts that issue Managed Trust
Securities.\18\
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    \16\ See Securities Exchange Act Release No. 58968 (November 17,
2008), 73 FR 71082 (November 24, 2008) (SR-NYSEArca-2008-111).
    \17\ See Securities Exchange Act Release No. 58968 (November 17,
2008), 73 FR 71082 (November 24, 2008) (SR-NYSEArca-2008-111).
    \18\ See Securities Exchange Act Release No. 82066 (November 13,
2007), 82 FR 54434 (November 17, 2017) (SR-NYSEArca-2017-85). The
VSTOXX is designed to reflect market expectations of near-term to
long-term volatility by measuring the square root of the implied
variances across all options of a given time to expiration. See id.
at 54434.
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    The existing initial and continued listing criteria applicable to
Managed Trust Securities would continue to apply, and the continued
listing standards require, among other things, that: (1) The Disclosed
Portfolio (as defined in NYSE Arca Rule 8.700-E(c)(2) be disseminated
at least daily and to all market participants at the same time; (2) an
intraday indicative value (``IIV'') be calculated and widely
disseminated by one or more major market data vendors at least every 15
seconds during the Exchange's Core Trading Session; and (3) following
the initial 12-month period after the commencement of trading of an
issue of Managed Trust Securities, (a) the trust must have 50,000 or
more Managed Trust Securities issued and outstanding, (b) the market
value of all Managed Trust Securities issued and outstanding must be
$1,000,000 or more, and (c) there must be 50 or more record and/or
beneficial holders.\19\
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    \19\ See NYSE Arca Rule 8.700-E(e)(2).
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    Further, the Commission notes that the Exchange has represented
that its surveillance procedures are adequate to deter and detect
violations of Exchange rules.\20\
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    \20\ See Notice, supra note 4, at 44647.
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B. Exchange's Proposal To List and Trade the Shares

    The Commission believes that the proposal to list and trade the
Shares is consistent with Section 11A(a)(1)(C)(iii) of the Act.
Quotation and last-sale information for the Shares will be available
via the Consolidated Tape Association (``CTA'') high-speed line, and
the previous day's closing price and trading volume information for the
Shares will be published daily in the financial section of newspapers.
Additionally, information regarding market price and trading volume of
the Shares will be continually available on a real-time basis
throughout the day on brokers' computer screens and other electronic
services.
    The Commission also believes that the proposal to list and trade
the Shares is consistent with Section 6(b)(5) of the Act. The
Commission believes that the proposal to list and trade the Shares is
reasonably designed to promote fair disclosure of information that may
be necessary to price the Shares appropriately and to prevent trading
when a reasonable degree of transparency cannot be assured. The Trust's
NAV and the NAV per Share will be calculated and disseminated daily.
The Exchange will disseminate for the Trust on a daily basis by means
of the CTA high-speed line information with respect to the most recent
NAV per Share, and the number of Shares outstanding. The Exchange also
will make available on its website daily trading volume, closing prices
and the NAV per Share. The IIV for the Shares will be calculated and
disseminated by one or more major market data vendors at least every 15
seconds during the Exchange's Core Trading Session. On a daily basis,
the Trust will disclose on its website (www.dynamicsharesetf.com) for
all of the assets held by the Fund the following information: Name;
ticker symbol (if applicable); CUSIP or other identifier (if
applicable); description of the holding; with respect to derivatives,
the identity of the security, commodity, index or other underlying
asset; the quantity or aggregate amount of the holding as measured by
par value, notional value or amount, number of contracts or number of
units (if applicable); maturity date; coupon rate (if applicable);
effective date or issue date (if applicable); market value; percentage
weighting in the Disclosed Portfolio; and expiration date (if
applicable). The Trust's website information will be publicly available
at no charge. Pricing for VIX, VIX Futures, as well as the underlying
SPX options, will be available from major market data vendors. Pricing
for VIX Futures will also be available from CFE. Pricing for SPX
options is also available from Cboe. Price information for cash
equivalents is available from major market data vendors.
    The Exchange will obtain a representation from the Trust that the
NAV and the NAV per Share will be calculated daily and that the NAV,
the NAV per Share, and the composition of the Disclosed Portfolio will
be made available to all market participants at the same time. Further,
trading in the Shares will be subject to NYSE Arca Rule 7.12-E and
8.700-E(e)(2)(D), which set forth circumstances under which trading in
the Shares may be halted. Trading may also be halted because of market
conditions or for reasons that, in the view of the Exchange, make
trading in the Shares inadvisable.
    The Exchange deems the Shares to be equity securities, thus
rendering trading in the Shares subject to the Exchange's existing
rules governing the trading of equity securities. The Commission notes
that the Exchange has represented that its surveillance procedures are
adequate to continue to properly monitor the Exchange trading of the
Shares in all trading sessions.\21\
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    \21\ See Notice, supra note 4, at 44647.
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    Additionally, the Reporting Authority that provides the Disclosed
Portfolio must implement and maintain, or be subject to, procedures
designed to prevent the use and dissemination of material, non-public
information regarding the actual components of the portfolio.\22\ The
Exchange represents that it has a general policy prohibiting the
distribution of material, non-public information by its employees.
---------------------------------------------------------------------------

    \22\ See NYSE Arca Rule 8.700-E(c)(2)(B)(ii).
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    In support of this proposal, the Exchange has made the following
representations:
    1. The Trust will be subject to the criteria in NYSE Arca Rule
8.700-E for

initial and continued listing of the Shares.\23\
---------------------------------------------------------------------------

    \23\ See Notice, supra note 4, at 44647.
---------------------------------------------------------------------------

    2. In the event (a) the Sponsor becomes registered as a broker-
dealer or newly affiliated with a broker-dealer, or (b) any new sponsor
is a registered broker-dealer or becomes affiliated with a broker-
dealer, it will implement and maintain a fire wall with respect to its
relevant personnel or its broker-dealer affiliate regarding access to
information concerning the composition and/or changes to the Disclosed
Portfolio.\24\
---------------------------------------------------------------------------

    \24\ See id. at 44644.
---------------------------------------------------------------------------

    3. The Exchange has appropriate rules to facilitate transactions in
the Shares during all trading sessions.\25\
---------------------------------------------------------------------------

    \25\ See id. at 44647.
---------------------------------------------------------------------------

    4. Trading in the Shares will be subject to the existing trading
surveillances administered by the Exchange, as well as cross-market
surveillances administered by the Financial Industry Regulatory
Authority (``FINRA'') on behalf of the Exchange, and these procedures
are adequate to properly monitor Exchange trading of the Shares in all
trading sessions and to deter and detect violations of Exchange rules
and applicable federal securities laws.\26\
---------------------------------------------------------------------------

    \26\ See id. at 44647.
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    5. The Exchange or FINRA, on behalf of the Exchange, or both, will
communicate as needed regarding trading in the Shares and VIX Futures
with other markets or other entities that are members of the ISG, and
the Exchange or FINRA, on behalf of the Exchange, or both, may obtain
trading information regarding trading in the Shares and VIX Futures
from such markets or entities. In addition, the Exchange may obtain
information regarding trading in the Shares and VIX Futures from
markets or other entities that are members of ISG or with which the
Exchange has in place a comprehensive surveillance sharing agreement.
FINRA, on behalf of the Exchange, is able to access, as needed, trade
information for certain cash equivalents held by the Fund reported to
FINRA's Trade Reporting and Compliance Engine.\27\
---------------------------------------------------------------------------

    \27\ See id. at 44647.
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    6. Prior to the commencement of trading, the Exchange will inform
its ETP Holders in an Information Bulletin (``Bulletin'') of the
special characteristics and risks associated with trading the Shares.
Specifically, the Bulletin will discuss the following: (1) The
procedures for purchases and redemptions of Shares (and that Shares are
not individually redeemable); (2) NYSE Arca Rule 9.2-E(a), which
imposes a duty of due diligence on its ETP Holders to learn the
essential facts relating to every customer prior to trading the Shares;
(3) the requirement that ETP Holders deliver a prospectus to investors
purchasing newly issued Shares prior to or concurrently with the
confirmation of a transaction; (4) how information regarding the IOPV
and the Disclosed Portfolio is disseminated; (5) the risks involved in
trading the Shares during the opening and late trading sessions when an
updated IOPV will not be calculated or publicly disseminated; and (6)
trading information.\28\
---------------------------------------------------------------------------

    \28\ See id. at 44647-44648.
---------------------------------------------------------------------------

    7. The Exchange represents that, for the initial and continued
listing of the Shares, the Trust must be in compliance with NYSE Arca
Rule 5.3-E and Rule 10A-3 under the Act.\29\
---------------------------------------------------------------------------

    \29\ See id. at 44647.
---------------------------------------------------------------------------

    8. A minimum of 100,000 Shares will be outstanding at the start of
trading on the Exchange.\30\
---------------------------------------------------------------------------

    \30\ See id. at 44647.
---------------------------------------------------------------------------

    9. All statements and representations made in this filing regarding
(a) the description of the portfolio of the Fund, (b) limitations on
portfolio of the Fund, or (c) the applicability of Exchange listing
rules specified in this rule filing shall constitute continued listing
requirements for listing the Shares on the Exchange.\31\
---------------------------------------------------------------------------

    \31\ See id. at 44647.
---------------------------------------------------------------------------

    10. The issuer has represented to the Exchange that it will advise
the Exchange of any failure by the Fund to comply with the continued
listing requirements, and, pursuant to its obligations under Section
19(g)(1) of the Act, the Exchange will monitor for compliance with the
continued listing requirements. If the Fund is not in compliance with
the applicable listing requirements, the Exchange will commence
delisting procedures under NYSE Arca Rule 5.5-E(m).\32\
---------------------------------------------------------------------------

    \32\ See id. at 44647.

This approval order is based on all of the Exchange's representations,
including those set forth above and in the Notice.
    For the foregoing reasons, the Commission finds that the proposed
rule change is consistent with the Act \33\ the rules and regulations
thereunder applicable to a national securities exchange.
---------------------------------------------------------------------------

    \33\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

IV. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\34\ that the proposed rule change (SR-NYSEArca-2019-55), be, and
hereby is, approved.
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    \34\ 15 U.S.C. 78s(b)(2).

    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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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-22137 Filed 10-9-19; 8:45 am]
 BILLING CODE 8011-01-P