83 FR 42329 - Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use on Cboe EDGA Exchange, Inc.

SECURITIES AND EXCHANGE COMMISSION

Federal Register Volume 83, Issue 162 (August 21, 2018)

[Federal Register Volume 83, Number 162 (Tuesday, August 21, 2018)]
[Notices]
[Pages 42329-42330]
From the Federal Register Online  [www.thefederalregister.org]
[FR Doc No: 2018-17960]



[[Page 42329]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-83855; File No. SR-CboeEDGA-2018-014]


Self-Regulatory Organizations; Cboe EDGA Exchange, Inc.; Notice 
of Filing and Immediate Effectiveness of a Proposed Rule Change Related 
to Fees for Use on Cboe EDGA Exchange, Inc.

August 15, 2018.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on August 1, 2018, Cboe EDGA Exchange, Inc. (the ``Exchange'' or 
``EDGA'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange. The 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the Exchange's fee schedule 
applicable to its equities trading platform to: (1) Eliminate rebates 
provided to orders in securities priced above $1.00 that remove 
liquidity from the Exchange's order book under fee codes DR, DT, HR, 
MT, and PT, and (2) increase the routing fee charged to orders routed 
to Investors Exchange LLC using the DIRC routing strategy under fee 
code IX.
    The text of the proposed rule change is available at the Exchange's 
website at www.markets.cboe.com, at the principal office of the 
Exchange, 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 parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The purpose of the proposed rule change is to amend the Exchange's 
fee schedule applicable to its equities trading platform (``EDGA 
Equities'') to: (1) Eliminate rebates provided to orders in securities 
priced above $1.00 that remove liquidity from the Exchange's order book 
under fee codes DR,\5\ DT,\6\ HR,\7\ MT,\8\ and PT,\9\ and (2) increase 
the routing fee charged to orders routed to Investors Exchange LLC 
(``IEX'') using the DIRC \10\ routing strategy under fee code IX.\11\
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    \5\ DR and DT are associated with MidPoint Discretionary Orders 
(``MDOs'') that remove liquidity, either not within discretionary 
range (i.e., DR) or within discretionary range (i.e., DT).
    \6\ Id.
    \7\ HR is associated with Non-Displayed orders that remove 
liquidity.
    \8\ MT is associated with Non-Displayed orders that remove 
liquidity using Mid-Point Peg.
    \9\ PT is associated with orders that remove liquidity from EDGA 
using RMPT or RMPL routing strategy.
    \10\ Destination Specific or ``DIRC'' is a routing option under 
which an order checks the System for available shares and then is 
sent to an away trading center or centers specified by the User. See 
Rule 11.11(g)(14).
    \11\ IX is associated with orders routed to IEX using the DIRC 
routing strategy.
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Fee Codes DR, DT, HR, MT, and PT: Non-Displayed Remove Fee
    The Exchange charges fees based on an inverted fee structure where 
orders are provided rebates for removing liquidity and charged a fee 
for adding liquidity. Currently, both displayed and non-displayed 
orders in securities priced at or above $1.00 are provided a rebate of 
$0.00040 for removing liquidity. The Exchange proposes to eliminate the 
rebate for orders that remove liquidity from the Exchange's order book 
under fee codes DR, DT, HR, MT, and PT, which all relate to liquidity 
removing orders that contain either an explicit non-displayed 
instruction or a non-displayed discretionary component.\12\ Orders 
executed under these fee codes will receive free executions instead of 
a rebate.
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    \12\ While MDOs may be displayed or non-displayed, these orders 
contain a non-displayed discretionary component to execute at prices 
up (down) to and including the midpoint of the NBBO. See Rule 
11.8(e).
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Fee Code IX: IEX Routing Fees
    Currently, the fee schedule provides that orders in securities 
priced at or above $1.00 routed to IEX using the Destination Specific 
(i.e., ``DIRC'') routing strategy are charged a fee of $0.0010 per 
share under fee code IX. The Exchange proposes to increase the routing 
fee charged to orders routed to IEX to $0.0030 so that the Exchange can 
recoup increased costs associated with routing order flow to that 
market.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\13\ in general, and 
furthers the objectives of Section 6(b)(4),\14\ in particular, 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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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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Fee Codes DR, DT, HR, MT, and PT: Non-Displayed Remove Fee
    The Exchange believes that the proposed fees for non-displayed 
orders are reasonable. While the Exchange currently provides a rebate 
for both displayed and non-displayed orders that remove liquidity, the 
Exchange has determined to instead charge no fee for non-displayed 
orders. This change is designed to incentivize Members to enter 
displayed liquidity on the Exchange since displayed orders would be 
eligible for rebates when removing liquidity while non-displayed orders 
would not. Furthermore, the Exchange's inverted fee structure would 
continue to incentivize liquidity takers since orders that remove 
liquidity would remain eligible for better pricing--including rebates 
for displayed orders and free executions for non-displayed orders--than 
orders that add liquidity and are charged a fee. In addition, the 
Exchange believes that this change is equitable and not unfairly 
discriminatory because the proposed taker fees would apply equally to 
all Members that choose to enter non-displayed orders. Members that 
would prefer to receive a rebate for orders that remove liquidity can 
utilize a range of displayed order types offered by the Exchange, 
thereby promoting a more transparent market.
Fee Code IX: IEX Routing Fees
    As other exchanges amend the fees charged for accessing liquidity, 
the Exchange believes that it is appropriate

[[Page 42330]]

to amend its own routing fees so that it can recoup costs associated 
with routing orders to such away markets. The Exchange believes that 
the proposed fees for orders routed to IEX are reasonable and equitable 
because they reflect the costs associated with executing orders on IEX 
and additional operational expenses incurred by the Exchange. The 
Exchange is proposing to increase its routing fees due to an announced 
change in IEX's fee schedule that would result in a significant 
increase in the transaction fees being charged by IEX to some orders, 
including orders routed by the Exchange.\15\ The Exchange believes that 
it is reasonable and equitable to pass these increased costs to Members 
that use the Exchange to route orders to that market. Members that do 
not wish to pay the proposed fee can send their routable orders 
directly to IEX instead of using routing functionality provided by the 
Exchange. The Exchange also believes that this change is equitable and 
not unfairly discriminatory because the proposed fees would apply 
equally to all Members that use the Exchange to route orders to IEX 
using the DIRC routing strategy. Routing through the Exchange is 
voluntary, 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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    \15\ See SR-IEX-2018-16 (pending publication).
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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 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. The 
proposed changes to the non-displayed remove fees are designed to 
incentivize displayed liquidity, which the Exchange believes will 
benefit all market participants by encouraging a transparent and 
competitive market. Furthermore, the proposed change to the IEX routing 
fee is meant to recoup costs associated with executing orders on that 
market, and is therefore not designed to have any significant impact on 
competition. The Exchange operates in a highly competitive market in 
which market participants can readily direct their order flow to 
competing venues. In such an environment, the Exchange must continually 
review, and consider adjusting, its fees and rebates to remain 
competitive with other exchanges. For the reasons described above, the 
Exchange believes that the proposed fee changes reflect this 
competitive environment.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

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\16\ and paragraph (f) of Rule 19b-4 
thereunder.\17\ 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.
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    \16\ 15 U.S.C. 78s(b)(3)(A).
    \17\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeEDGA-2018-014 on the subject line.

Paper Comments

     Send paper comments in triplicate to Secretary, Securities 
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeEDGA-2018-014. This 
file number should be included on the subject line if email is used. To 
help the Commission process and review your comments more efficiently, 
please use only one method. The Commission will post all comments on 
the Commission's internet website (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 this filing will also 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-CboeEDGA-2018-014 and should be 
submitted on or before September 11, 2018.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\18\
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    \18\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-17960 Filed 8-20-18; 8:45 am]
 BILLING CODE 8011-01-P