On March 11, 2026, the Securities and Exchange Commission published a notice of Cboe EDGX Exchange's proposed rule change to amend its fees schedule. The filing, effective immediately under Section 19(b)(3)(A) of the Securities Exchange Act of 1934, adjusts rebates and fees for certain order types to encourage higher trading volumes. This development occurs amid intense competition in the U.S. options market, where no single exchange holds more than 17 percent market share. By refining tiered incentives, Cboe EDGX seeks to attract more order flow without granting any exchange undue pricing power. The changes target customer orders, market maker activity, and cross-asset participation, potentially influencing liquidity and market quality for participants.
Background and Context
Cboe EDGX operates as one of 18 options exchanges in a fragmented market where participants can easily redirect orders to competitors if fees seem unfavorable. The exchange's fee schedule includes standard rebates and fees per contract, with tiered programs offering enhanced rebates or reduced fees for meeting volume thresholds. These tiers apply to specific fee codes, such as PC for customer orders removing liquidity in penny securities, NC for non-penny securities, and CA for customer orders adding liquidity against non-customers.
The proposal emerges from Cboe's ongoing efforts to adapt incentives in response to market dynamics. For instance, customer volume tiers currently provide rebates from $0.10 to $0.22 per contract based on criteria like average daily volume (ADV) as a percentage of options contract volume (OCV). Market maker tiers offer reduced fees from $0.02 to $0.17 per contract. The Firm Penny Program Cross-Asset Tier, which links options and equities activity, provides a reduced fee of $0.32 per contract for firm orders in penny securities. This filing proposes targeted amendments to consolidate programs and redirect resources, reflecting no current members qualifying for certain tiers.
Key players include Cboe EDGX as the self-regulatory organization submitting the filing, and the SEC as the oversight body soliciting public comments. Market participants, such as customers, market makers, and firms, stand to be affected, with the changes designed to benefit those achieving higher volumes.
Key Changes to Customer Volume Tiers
The proposal eliminates the Customer Cross-Asset Tier, which offered a $0.18 rebate per contract for members meeting thresholds across options and equities volumes. No members currently qualify for this tier, and its removal allows Cboe to streamline incentives. A new Tier 5 introduces a $0.20 rebate for members with customer ADV at or above 2.00 percent of average OCV, simple customer non-crossing add volume at or above 0.75 percent of OCV, and customer crossing orders at or above 0.75 percent of OCV.
Existing Tier 5, renumbered to Tier 6, sees its criteria simplified to require customer ADV at or above 2.00 percent of OCV and simple customer non-crossing add volume at or above 1.25 percent of OCV, providing a $0.22 rebate. This removes a prior requirement for qualified contingent cross (QCC) agency volume of at least 2,000,000 contracts monthly with non-customer, non-professional sides.
These adjustments aim to make tiers more achievable while maintaining incentives for increased customer order flow, which enhances liquidity by attracting market makers and tightening spreads.
Amendments to Market Maker Volume Tiers
For market maker orders yielding fee codes PM (adding liquidity in penny securities) and NM (non-penny), the proposal eliminates Tier 2, which provided a $0.13 reduced fee but had no qualifying members. Remaining tiers are renumbered, with Tier 4 (formerly 5) now requiring market maker ADV at or above 1.00 percent of OCV for a $0.08 fee, down from 1.20 percent. Tier 5 (formerly 6) adjusts to 1.25 percent of OCV for a $0.02 fee, eased from 1.45 percent.
Market makers bear unique obligations, such as quoting requirements, justifying targeted incentives. The changes encourage more market maker activity, potentially deepening the exchange's liquidity pool and improving price discovery for all participants.
Elimination of Firm Penny Program Cross-Asset Tier
The Firm Penny Program Cross-Asset Tier, offering a $0.32 fee for firm orders in penny securities (fee code PF), is removed. It required firm ADV at or above 0.15 percent of total consolidated volume (TCV) and equities ADAV at or above 0.12 percent of TCV. With no current qualifiers, elimination consolidates the fee schedule, reserving Footnote 4 and removing the rebate from standard rates.
This reflects Cboe's strategy to focus resources on high-impact incentives, without affecting members' access to other tiers.
Legal and Regulatory Basis
The proposal aligns with Section 6(b)(4) and 6(b)(5) of the Act, ensuring equitable fee allocation and preventing unfair discrimination. Cboe argues the changes foster competition, as members can shift order flow elsewhere. No specific legal precedents are cited in the filing, but it references Regulation NMS, which emphasizes market forces in pricing. The SEC's notice invites comments, underscoring the process for public input before potential suspension within 60 days.
Perspectives vary: proponents may view the updates as pro-competitive, enhancing market quality. Critics could argue they favor high-volume participants, though Cboe notes uniform application and opportunities for all. The filing emphasizes no burden on competition, given the market's fragmentation.
Potential Implications
Short-term effects include possible shifts in order routing as members adapt to new tiers, potentially increasing volume on Cboe EDGX if incentives prove effective. Long-term, streamlined programs could improve efficiency, but failure to attract flow might prompt further adjustments. Broader market transparency and investor protection could benefit from deeper liquidity, though outcomes depend on participant responses.
In summary, these amendments refine Cboe's fee structure to promote trading in a competitive landscape, balancing incentives with operational efficiency.
