Introduction
The Securities and Exchange Commission (SEC) on February 13, 2026, issued a notice regarding a proposed rule change filed by Cboe EDGX Exchange, Inc. This filing, effective immediately under Section 19(b)(3)(A) of the Securities Exchange Act of 1934, amends the exchange's fee schedule for its equities trading platform. The core purpose is to align with Regulation NMS Rule 610(d), which takes effect on February 2, 2026, and requires that fees or rebates for executing orders in NMS stocks be determinable at the time of execution. By shifting volume-based tier calculations from the current month to the prior month, Cboe EDGX ensures participants can know exact transaction costs upfront. This development reflects broader SEC efforts to enhance transparency in exchange pricing, potentially influencing how market participants route orders and manage costs.
Background on Regulation NMS Amendments
Regulation NMS, or National Market System, governs key aspects of U.S. securities markets to promote fair and efficient trading. On September 18, 2024, the SEC adopted amendments to increase transparency around exchange fees and rebates, as detailed in Securities Exchange Act Release No. 101070. Among these, Rule 610(d) prohibits national securities exchanges from imposing fees or providing rebates that cannot be determined at execution. This rule addresses concerns that retroactive calculations based on monthly volume obscure true costs, potentially distorting order routing decisions.
The compliance deadline for Rule 610(d) was initially set but delayed via temporary exemptive relief granted on October 31, 2025, in Securities Exchange Act Release No. 104172. The rule becomes effective on the first business day of February 2026, specifically February 2. Cboe EDGX's filing responds directly to this mandate, building on its existing fee structure that uses tiers tied to metrics like average daily added volume (ADAV) and total consolidated volume (TCV).
Prior to this change, Cboe EDGX calculated certain fees and rebates using activity from the ongoing month, meaning final rates were only known retroactively at month's end. The SEC's amendments stem from ongoing debates about market structure, where some stakeholders argue opaque pricing hinders competition, while others view tiered incentives as essential for liquidity provision.
Details of the Proposed Rule Change
Cboe EDGX's proposal, filed on February 9, 2026, introduces specific language to its fee schedule under the 'General Notes' section: 'In compliance with Regulation NMS Rule 610(d), effective February 2, 2026, unless otherwise indicated, all volume figures will be derived from quoting or trading activity in the prior month. Consequently, all new Members will receive the base rates in their first month of trading.' This ensures that fees and rebates for NMS stock executions are fixed at the time of trade, based on the previous month's data.
Additionally, the exchange revises definitions for terms like 'Step-Up ADAV,' 'Step-Up ADV,' 'Step-Up Add TCV,' and 'OCC Customer Volume' by replacing 'current' with 'the prior month's' to clarify that calculations rely on historical data. For instance, 'Step-Up ADAV' is now defined as ADAV in the relevant baseline month subtracted from the prior month's ADAV. These adjustments maintain the substance of existing incentives while eliminating uncertainty.
The filing notes that the exchange initially submitted a version on January 28, 2026, which was withdrawn before resubmission. No changes to actual fee or rebate amounts are proposed, preserving the competitive incentives that encourage quoting and trading activity.
Statutory Basis and SEC Justification
In its statement, Cboe EDGX asserts that the rule change complies with Section 6(b) of the Securities Exchange Act, particularly subsections promoting just and equitable principles of trade and protecting investors. The exchange argues the amendments foster transparency and remove impediments to a free and open market, as required by Section 6(b)(5). It also aligns with Section 6(b)(4) by ensuring equitable allocation of fees among members.
On competition, the filing states no undue burden on intramarket or intermarket dynamics, noting that all members will equally use prior-month data for tier determinations. Cboe EDGX highlights the highly competitive equities market, where no single exchange holds more than 15% market share, per publicly available data. This echoes SEC views in Regulation NMS, as cited in the 2005 release (No. 51808), emphasizing market forces over regulation in pricing. The exchange references court precedents like NetCoalition v. SEC (2010), underscoring fierce competition for order flow.
No comments were solicited or received on the proposal, and it became effective upon filing under Rule 19b-4(f).
Potential Implications and Perspectives
Short-term, this change could simplify compliance for market participants, allowing better prediction of costs when routing orders to Cboe EDGX. New members starting in a given month will default to base rates, potentially affecting their initial strategies but ensuring uniformity.
Longer-term, the shift might influence liquidity dynamics across exchanges. Proponents of the SEC's amendments, including investor advocates, view it as a step toward fairer markets by reducing hidden incentives that favor high-volume traders. Critics, often from the exchange industry, argue that retroactive tiers effectively reward consistent activity without harming transparency, as members can estimate qualifications mid-month.
Different perspectives emerge from market structure debates. Large broker-dealers might appreciate the predictability for algorithmic trading, while smaller firms could see it as leveling the playing field. The rule's broader adoption across exchanges may standardize practices, potentially reducing fragmentation but raising questions about innovation in fee models.
Conclusion
Cboe EDGX's fee schedule amendment addresses a key SEC mandate by recalibrating volume-based tiers to prior-month data, ensuring fees and rebates are known at execution. This maintains the exchange's incentive structure while enhancing transparency. Looking ahead, potential next steps include monitoring SEC feedback during the 60-day comment period ending March 12, 2026, which could lead to modifications or suspension if public interest concerns arise. Ongoing challenges involve balancing compliance with competitive pressures in a fragmented market, where exchanges must adapt to evolving regulations. Debates may continue on whether such rules truly benefit retail investors or inadvertently shift order flow to off-exchange venues.
