On February 10, 2026, the Securities and Exchange Commission published a notice of a proposed rule change filed by Cboe EDGX Exchange, Inc. on January 29, 2026. The change seeks to amend the exchange's fees schedule by clarifying that fees for logical ports apply only when the corresponding port type is available in the live production environment. This development addresses the need for market participants to test new or updated connectivity options without incurring costs during preparatory phases, potentially enhancing system reliability and reducing operational risks in the equities trading landscape. The rule change became effective immediately under Section 19(b)(3)(A) of the Securities Exchange Act of 1934, with the SEC soliciting comments from interested parties until March 6, 2026.
Background on Logical Ports and Testing Environments
Logical ports serve as connections that enable market participants, including members and non-members of the exchange, to perform functions such as order entry, data receipt, and access to market information. Cboe EDGX offers various types, including FIX and BOE ports for order entry, drop logical ports for receiving order copies, purge ports for canceling orders across symbols, and multicast PITCH ports for data retransmission. Each port type follows a specific protocol that dictates message formatting and processing.
To support testing, the exchange provides a certification environment where users can evaluate systems and applications. Additionally, Cboe EDGX conducts weekend testing in the production environment, allowing participants to simulate real market conditions without affecting live operations. This testing is voluntary and focuses on operational validation, particularly for updates like the migration to Binary Order Entry Version 3 (BOEv3), which introduces changes such as removing optional fields, adjusting message sizes, and implementing stricter sequencing. The proposed clarification ensures that fees do not apply to ports used solely for such testing until they are operational in live trading.
Purpose of the Proposed Rule Change
The primary goal of the amendment is to explicitly state in the fees schedule that logical port fees are assessed only for port types available in the live production environment. According to the filing, this prevents charges during weekend testing periods for new or updated protocols, encouraging participants to verify system compatibility and manage risks before launch. For instance, a participant could obtain a logical port free of charge during designated weekend sessions in the production environment.
The exchange emphasizes that this approach reduces the potential for disruptive failures in live trading, which could impact all market participants. It notes that similar testing opportunities are offered by other exchanges, such as Nasdaq Stock Market LLC and MIAX Options Exchange, often at discounted or no cost. By adding this note to the fees schedule, Cboe EDGX aims to provide clarity and reduce confusion about when fees apply, while maintaining that participation in testing remains optional based on individual business needs.
Statutory Basis and Regulatory Justification
Cboe EDGX asserts that the proposal aligns with Section 6(b) of the Securities Exchange Act of 1934, particularly subsections requiring exchanges to promote just and equitable principles of trade, remove impediments to a free and open market, and protect investors. The filing argues that free access to testing ports fosters cooperation in regulating transactions and prevents manipulative practices by minimizing system failures.
Furthermore, the change is presented as consistent with Section 6(b)(4), which mandates equitable allocation of reasonable fees. The exchange contends that waiving fees for pre-launch testing is reasonable, as it encourages thorough preparation without discouraging participation. It applies uniformly to all users, avoiding unfair discrimination. On competition, the filing states that the rule imposes no undue burden, as it is optional and operates in a highly competitive market with numerous alternative venues for trading.
No comments were solicited or received by the exchange prior to filing, and the proposal draws on precedents like the Act's emphasis on competition over regulatory intervention in pricing services.
Implications and Perspectives
From a short-term perspective, this clarification could immediately benefit market participants preparing for updates like BOEv3 by allowing cost-free testing, potentially accelerating adoption and ensuring smoother transitions. In the long term, it may contribute to greater market stability by incentivizing robust pre-launch validation, reducing the likelihood of technical disruptions that could affect trading efficiency or investor confidence.
Different stakeholders offer varied views. Exchange operators like Cboe EDGX see this as a proactive measure to enhance infrastructure without additional costs during development phases. Market participants, including brokers and traders, may appreciate the flexibility to test without fees, viewing it as a reduction in barriers to innovation. Regulators, represented by the SEC, emphasize the need for such changes to comply with statutory requirements, ensuring they do not favor specific groups or stifle competition. Critics, however, might argue that any fee structure adjustments warrant scrutiny to prevent unintended advantages, though the filing addresses this by highlighting uniformity and optionality.
The proposal also intersects with broader trends in exchange technology, where rapid protocol updates demand efficient testing mechanisms. Legal precedents, such as those under Rule 19b-4, support immediate effectiveness for non-controversial changes, allowing swift implementation while permitting SEC review.
In summary, the proposed rule change by Cboe EDGX represents a targeted adjustment to its fees schedule, designed to support innovation and risk management in trading connectivity. Key takeaways include the promotion of free testing for emerging port types and alignment with federal securities laws. Looking ahead, the comment period may reveal additional insights or challenges, potentially leading to refinements. If no issues arise, the change could set a model for how exchanges handle fees in evolving technological landscapes, while ongoing debates might focus on balancing cost structures with market accessibility. Future trajectories could involve similar clarifications across affiliated exchanges or responses to technological advancements, ensuring continued regulatory harmony.
