Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule To Institute a Derived Data API Service, 43237-43240 [2019-17863]

Download as PDF Federal Register / Vol. 84, No. 161 / Tuesday, August 20, 2019 / Notices 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. 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–CboeBZX–2019–069 and should be submitted on or before September 10, 2019. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.20 Jill M. Peterson, Assistant Secretary. [FR Doc. 2019–17861 Filed 8–19–19; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–86671; File No. SR– CboeBZX–2019–070] jbell on DSK3GLQ082PROD with NOTICES August 14, 2019. 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, 2019, Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the Securities and Exchange Commission CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. VerDate Sep<11>2014 20:49 Aug 19, 2019 Jkt 247001 Cboe BZX Exchange, Inc. (‘‘BZX’’ or the ‘‘Exchange’’) is filing with the Securities and Exchange Commission (the ‘‘Commission’’) a proposed rule change to amend the fee schedule to institute a Derived Data API Service. The text of the proposed rule change is attached as Exhibit 5 [sic]. The text of the proposed rule change is also available on the Exchange’s website (https://markets.cboe.com/us/ equities/regulation/rule_filings/bzx/), 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. 1. Purpose Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule To Institute a Derived Data API Service 1 15 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION 20 17 (the ‘‘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. The purpose of the proposed rule change is to implement a new pricing structure that would reduce fees changed to Distributors that distribute Derived Data through an Application Programming Interface (‘‘API’’)—i.e., the Derived Data API Service (the ‘‘Program’’). ‘‘Derived Data’’ is pricing data or other data that (i) is created in whole or in part from Exchange Data, (ii) is not an index or financial product, and (iii) cannot be readily reverseengineered to recreate Exchange Data or used to create other data that is a reasonable facsimile or substitute for Exchange Data. The Exchange currently offers a Derived Data White Label Service Program that allows Distributors to benefit from discounted fees when PO 00000 Frm 00139 Fmt 4703 Sfmt 4703 43237 distributing Derived Data taken from BZX Top, which is a proprietary data product that provides top of book quotations and execution information for all equity securities traded on the Exchange.3 The current program is limited to the distribution of Derived Data to subscribers within a White Label Service which is a type of hosted display solution in which a Distributor hosts or maintains a website or platform on behalf of a third-party entity. The Derived Data API Service would supplement the current Derived Data White Label Service Program by offering discounted fees for Distributors that make Derived Data available through an API,4 thereby allowing Distributors to benefit from reduced fees when distributing Derived Data to subscribers that establish their own platforms rather than relying on a hosted display solution. Current Fee Structure The Exchange currently charges a fee of $2,500 per month for external distribution of BZX Top. In addition, external distributors of BZX Top are charged a fee of $4 per month for each Professional User and $0.10 per month for each Non-Professional User. The Exchange also offers special pricing for Derived Data provided through a White Label Service, as mentioned above. This service allows Distributors to make Derived Data available on a platform that is branded with a third-party brand, or co-branded with a third party and a Distributor.5 The White Label Service Program can be used for a number of different purposes, including the display of information or data, or the creation of derivative instruments, such as swaps,6 swaptions,7 or contracts for difference,8 but is unavailable to distributors that make such information available through an API. Such distributors are not eligible for discounted Derived Data pricing today, and are instead liable for the fees 3 See Rule 13.8(c) [sic]. the proposed introduction of the Derived Data API Service, the Exchange would bring together the BZX Top Derived Data White Label Service and Derived Data API Service under the common heading ‘‘Financial Product Distribution Program.’’ The Financial Product Distribution Program would encompass both of these products. 5 The Distributor maintains control of the application’s data, entitlements and display. 6 A swap is a derivative contract in which two parties agree to exchange financial instruments. 7 A swaption, or swap option, is an option to enter into a swap at a specified time. 8 A contract for difference is an agreement to exchange the difference between the current value of an asset and its future value. If the price increases, the seller pays the buyer the amount of the increase. If the price decreases, the buyer pays the seller the amount of the decrease. 4 With E:\FR\FM\20AUN1.SGM 20AUN1 43238 Federal Register / Vol. 84, No. 161 / Tuesday, August 20, 2019 / Notices jbell on DSK3GLQ082PROD with NOTICES normally applicable for the distribution of BZX Top, as listed at the beginning of this paragraph. Discounted Fees for Derived Data API Service As proposed, a Distributor that provides a Derived Data API Service for Derived Data taken from BZX Top would be liable for the following fees instead of the fees normally applicable for the distribution of BZX Top. Instead of the regular fee for external distribution, Distributors would be charged a tiered External Subscriber Fee based on the number of API Service Platforms (i.e., ‘‘External Subscribers’’) that receive Derived Data from the Distributor through a Derived Data API Service. As proposed, Distributors would continue to be charged a fee of $2,500 per month for each External Subscriber if the Distributor makes Derived Data available to 1–5 External Subscribers. Distributors that make Derived Data available to additional External Subscribers would benefit from discounted pricing based on the number of External Subscribers. Specifically, the external distribution fee would be lowered by 20% to $2,000 per month for each External Subscriber if the Distributor makes Derived Data available to 6–20 External Subscribers, and further lowered another 20% to $1,500 per month for each External Subscriber if the Distributor makes Derived Data available to 21 or more External Subscribers. As is the case under the Derived Data White Label Service, the External Subscriber Fee would be non-progressive and based on the number of External Subscribers that receive Derived Data from the Distributor. For example, a Distributor providing Derived Data based on BZX Top to six External Subscribers that are API Service Platforms would be charged a monthly fee of $12,000 (i.e., 6 External Subscribers × $2,000 each). The Exchange would continue to charge a monthly Professional User fee of $4 per month for each Professional User that accesses Derived Data through an API Service. The current Non-Professional User fee of $0.10 per month would be eliminated when participating in the Derived Data API Service, further reducing costs for Distributors that provide access to such data to downstream investors. With the proposed introduction of the Derived Data API Service, the Exchange would bring together the Derived Data White Label Service and Derived Data API Service under the common heading ‘‘Financial Product Distribution Program.’’ The Financial Product Distribution Program would encompass VerDate Sep<11>2014 20:49 Aug 19, 2019 Jkt 247001 both of these products. Similar to the Derived Data White Label Service, the Derived Data API Service would be entirely optional, in that it applies only to Distributors that opt to use Derived Data from BZX Top to create an API Service, as described herein. It does not impact or raise the cost of any other Exchange product, nor does it affect the cost of BZX Top, except in instances where Derived Data is made available on an API Service. A Distributor that provides a White Label Service or API Service for Derived Data taken from BZX Top would be liable for the fees associated with the White Label Service or API Service instead of the fees normally applicable for the distribution of BZX Top. A Distributor that provides a White Label Service or API Service for BZX Top data that is not Derived Data or distributes Derived Data through a platform other than a White Label Service or API Service would be liable for the fees normally applicable for the distribution of BZX Top. Market Background The market for top of book data is highly competitive as national securities exchanges compete both with each other and with the securities information processors (‘‘SIPs’’) to provide efficient, reliable, and low cost data to a wide range of investors and market participants. In fact, Regulation NMS requires all U.S. equities exchanges to provide their best bids and offers, and executed transactions, to the two registered SIPs for dissemination to the public. Top of book data is therefore widely available to investors today at a relatively modest cost. National securities exchanges may also disseminate their own top of book data, but no rule or regulation of the Commission requires market participants to purchase top of book data from an exchange. In an effort to widen distribution to market participants that use equities market data to compute pricing for certain derivatives instruments, national securities exchanges including the Exchange, its affiliate, Cboe EDGX Exchange Inc., and The Nasdaq Stock Market LLC (‘‘Nasdaq’’) offer discounted pricing for Derived Data that is created using their top of book products. The Program would therefore compete with similar products offered by other national securities exchanges that offer discounted fees to market participants that purchase Derived Data. 2. Statutory Basis 9 15 The Exchange believes that the proposed rule change is consistent with PO 00000 Frm 00140 Fmt 4703 the objectives of Section 6 of the Act,9 in general, and furthers the objectives of Section 6(b)(4),10 in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its members and other recipients of Exchange data. The Exchange also believes that the proposed rule change is consistent with Section 11(A) of the Act.11 Specifically, the proposed rule change supports (i) fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets, and (ii) the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities. In addition, the proposed rule change is consistent with Rule 603 of Regulation NMS,12 which provides that any national securities exchange that distributes information with respect to quotations for or transactions in an NMS stock do so on terms that are not unreasonably discriminatory. In adopting Regulation NMS, the Commission granted SROs and brokerdealers increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also spur innovation and competition for the provision of market data. The Exchange believes that the proposed fee change would further broaden the availability of U.S. equity market data to investors, consistent with the principles of Regulation NMS. The Exchange operates in a highly competitive environment. Indeed, there are thirteen registered national securities exchanges that trade U.S. equities and offer associated top of book market data products to their customers. The national securities exchanges also compete with the SIPs for market data customers. 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 Sfmt 4703 U.S.C. 78f. U.S.C. 78f(b)(4). 11 15 U.S.C. 78k–1. 12 See 17 CFR 242.603. 10 15 E:\FR\FM\20AUN1.SGM 20AUN1 jbell on DSK3GLQ082PROD with NOTICES Federal Register / Vol. 84, No. 161 / Tuesday, August 20, 2019 / Notices investors and listed companies.’’ 13 The proposed fee change is a result of the competitive environment, as the Exchange seeks to amend its fees to attract additional subscribers for one of its proprietary top of book data offerings through the introduction of a Derived Data API Service. The Exchange believes that it is reasonable to introduce reduced fees for the use of Derived Data on API Services as the proposed fee reduction would facilitate cost effective access to market information that is used primarily to create certain derivative instruments rather than to trade U.S. equity securities. The fees that are the subject of this rule filing are constrained by competition, and it is this competition that is driving the proposed fee change. Indeed, the Program is designed to allow the Exchange to compete more effectively for market data distributors that purchase market information to offer Derived Data to investors. The existence of alternatives to the Program ensures that the Exchange cannot set unreasonable or unfairly discriminatory fees, as subscribers are free to elect such alternatives. That is, the Exchange competes with other exchanges that provide similar market data products and pricing programs. As mentioned above, Derived Data is primarily purchased for the creation of certain derivative instruments rather than for the trading of U.S. equity securities. As a result, distributors of Derived Data do not need a consolidated view of the market across multiple exchanges, and generally purchase such data from a single exchange. If a competing exchange were to charge less for a similar product than the Exchange charges under the proposed fee structure, prospective subscribers may choose not subscribe to, or cease subscribing to, the Program. The Exchange believes that lowering the cost of accessing Derived Data may make the Exchange’s market information more attractive, and encourage additional Distributors to subscribe to BZX Top market data instead of competitor products. Distributors can discontinue use at any time and for any reason, including due to an assessment of the reasonableness of fees charged. Furthermore, firms have a wide variety of alternative market data products from which to choose, such as similar proprietary data products offered by other national securities exchanges, including those that choose to offer discounted fees for the distribution of 13 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS Adopting Release’’). VerDate Sep<11>2014 20:49 Aug 19, 2019 Jkt 247001 Derived Data in an effort to compete for this business. The proposed rule change would provide an alternate fee structure for providing BZX Top market data to Distributors that make Derived Data available to External Subscribers via API Services. As proposed, if a Distributor uses an API Service to distribute Derived Data, the Distributor will be charged a fee that is tiered based on the number of External Subscribers that are provided access to that data instead of the higher fee normally charged for external distribution. The Exchange believes that this fee is equitable and not unfairly discriminatory because the Exchange will apply the same fees to any similarly situated Distributors that elect to participate in the Program based on the number of External Subscribers provided access to Derived Data through an API Service, with Distributors providing access to six or more External Subscribers receiving a discount compared to the current pricing applicable for external distribution of BZX Top. The Exchange believes that it is equitable and not unfairly discriminatory to begin providing discounted rates to Distributors that provide access to at least six External Subscribers as the discounted rates are designed to incentivize firms to grow the number of External Subscribers that purchase Derived Data from the Exchange. The Exchange understands that Distributors that may provide this sort of API Service typically serve a relatively larger number of External Subscribers, and would therefore be able to meet the proposed threshold by providing Derived Data taken from BZX Top to those customers. The Exchange would also continue to charge a small fee for Professional Users but would eliminate Non-Professional User fees for data provided under the Program. The Exchange believes that it is equitable and not unfairly discriminatory to charge a fee for Professional Users but no fee for NonProfessional Users. Non-Professional Users are already subject to a heavily discounted fee for BZX Top market data relative to Professional Users. Differential fees for Professional and Non-Professional Users are widely used by the Exchange and other exchanges for their proprietary market data as this reduces costs for retail investors and makes market data more broadly available. The Exchange believes that eliminating fees for Non-Professional Users that access Derived Data from Distributors pursuant to the Program is consistent with longstanding precedent indicating that it is consistent with the Act to provide reasonable incentives to PO 00000 Frm 00141 Fmt 4703 Sfmt 4703 43239 retail investors that rely on the public markets for their investment needs. Furthermore, the proposed fees will only apply to Distributors that elect to participate in the Program by distributing Derived Data through an API Service. BZX Top market data is distributed and purchased on a voluntary basis, in that neither the Exchange nor market data distributors are required by any rule or regulation to make this data available. Distributors of BZX Top are not required to participate in the proposed Program, which is merely an alternative option being proposed by the Exchange to potentially lower costs for market data that is Derived Data. As previously explained, the Exchange currently offers discounted fees for Distributors that distribute Derived Data on a While [sic] Label Service. Expanding the universe of customers that can benefit from discounted fees for distributing Derived Data would serve to further increase the accessibility of the Exchange’s market data products. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change would result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. The Exchange operates in a highly competitive environment, and its ability to price these data products is constrained by: (i) Competition among exchanges that offer similar data products, and pricing options, to their customers; and (ii) the existence of inexpensive real-time consolidated data disseminated by the SIPs. Top of book data is disseminated by both the SIPs and the thirteen equities exchanges. There are therefore a number of alternative products available to market participants and investors. In this competitive environment potential subscribers are free to choose which competing product to purchase to satisfy their need for market information. Often, the choice comes down to price, as broker-dealers or vendors look to purchase the cheapest top of book data product, or quality, as market participants seek to purchase data that represents significant market liquidity. In order to better compete for this segment of the market, the Exchange is proposing to reduce fees charged to Distributors that distribute Derived Data through an API. The Exchange believes that this would facilitate greater access to such data, ultimately benefiting investors that are provided access to such data. E:\FR\FM\20AUN1.SGM 20AUN1 43240 Federal Register / Vol. 84, No. 161 / Tuesday, August 20, 2019 / Notices The proposed fees apply to data derived from BZX Top, which is subject to competition from both the SIPs and exchanges that offer similar products, including but not limited to those that choose to provide similar pricing options for Derived Data. A number of national securities exchanges, including the Exchange, its affiliated Cboe U.S. equities exchanges, and Nasdaq offer pricing discounts for Derived Data today. These pricing programs reduce the cost of accessing top of book market information that is used, among other things, to create derivative instruments rather than to trade U.S. equity securities. In order to better compete for this segment of the market, the Exchange is proposing to expand the programs that it offers to include a Derived Data API Service, allowing additional market data customers to benefit from discounted pricing. The Exchange does not believe that the proposed price reduction for Derived Data offered through an API would cause any unnecessary or inappropriate burden on intermarket competition as other exchanges and data vendors are free to lower their prices to better compete with the Exchange’s offering. The Exchange believes that the proposed rule change is pro-competitive as it seeks to offer pricing incentives to customers to better position the Exchange as it competes to attract additional market data subscribers. 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. jbell on DSK3GLQ082PROD with NOTICES 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 14 and paragraph (f) of Rule 19b–4 15 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. 14 15 15 17 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). VerDate Sep<11>2014 20:49 Aug 19, 2019 Jkt 247001 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: • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CboeBZX–2019–070 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–CboeBZX–2019–070. 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. 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–CboeBZX–2019–070, and should be submitted on or before September 10, 2019. Frm 00142 Fmt 4703 [FR Doc. 2019–17863 Filed 8–19–19; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION Electronic Comments PO 00000 For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Jill M. Peterson, Assistant Secretary. Sfmt 4703 [Investment Company Act Release No. 33590; File No. 812–15035] American Century ETF Trust, et al. August 14, 2019. Securities and Exchange Commission (‘‘Commission’’). ACTION: Notice. AGENCY: Notice of an application for an order under section 6(c) of the Investment Company Act of 1940 (‘‘Act’’) for an exemption from sections 2(a)(32), 5(a)(1), and 22(d) of the Act and rule 22c–1 under the Act, under sections 6(c) and 17(b) of the Act for an exemption from sections 17(a)(1) and 17(a)(2) of the Act, and under section 12(d)(1)(J) of the Act for an exemption from sections 12(d)(1)(A) and 12(d)(1)(B) of the Act. Applicants: American Century ETF Trust (the ‘‘Trust’’), American Century Investment Management, Inc. (the ‘‘Adviser’’) and Foreside Fund Services, LLC (the ‘‘Distributor’’). Summary of Application: Applicants request an order (‘‘Order’’) that permits: (a) ActiveShares ETFs (as described in the Reference Order (as defined below)) to issue shares (‘‘Shares’’) redeemable in large aggregations only (‘‘creation units’’); (b) secondary market transactions in Shares to occur at negotiated market prices rather than at net asset value; (c) certain affiliated persons of an ActiveShares ETF to deposit securities into, and receive securities from, the ActiveShares ETF in connection with the purchase and redemption of creation units; and (d) certain registered management investment companies and unit investment trusts outside of the same group of investment companies as the ActiveShares ETFs to acquire Shares of the ActiveShares ETFs. The Order would incorporate by reference terms and conditions of a previous order granting the same relief sought by applicants, as that order may be amended from time to time (‘‘Reference Order’’).1 16 17 CFR 200.30–3(a)(12). ETFs Trust, et al., Investment Company Act Rel. Nos. 33440 (April 8, 2019) (notice) and 33477 (May 20, 2019) (order). 1 Precidian E:\FR\FM\20AUN1.SGM 20AUN1

Agencies

[Federal Register Volume 84, Number 161 (Tuesday, August 20, 2019)]
[Notices]
[Pages 43237-43240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-17863]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-86671; File No. SR-CboeBZX-2019-070]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Fee Schedule To Institute a Derived Data API Service

August 14, 2019.
    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, 2019, Cboe BZX Exchange, Inc. (the ``Exchange'' or 
``BZX'') filed with the Securities and Exchange Commission (the 
``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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (the ``Commission'') a 
proposed rule change to amend the fee schedule to institute a Derived 
Data API Service. The text of the proposed rule change is attached as 
Exhibit 5 [sic].
    The text of the proposed rule change is also available on the 
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), 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 purpose of the proposed rule change is to implement a new 
pricing structure that would reduce fees changed to Distributors that 
distribute Derived Data through an Application Programming Interface 
(``API'')--i.e., the Derived Data API Service (the ``Program''). 
``Derived Data'' is pricing data or other data that (i) is created in 
whole or in part from Exchange Data, (ii) is not an index or financial 
product, and (iii) cannot be readily reverse-engineered to recreate 
Exchange Data or used to create other data that is a reasonable 
facsimile or substitute for Exchange Data. The Exchange currently 
offers a Derived Data White Label Service Program that allows 
Distributors to benefit from discounted fees when distributing Derived 
Data taken from BZX Top, which is a proprietary data product that 
provides top of book quotations and execution information for all 
equity securities traded on the Exchange.\3\ The current program is 
limited to the distribution of Derived Data to subscribers within a 
White Label Service which is a type of hosted display solution in which 
a Distributor hosts or maintains a website or platform on behalf of a 
third-party entity. The Derived Data API Service would supplement the 
current Derived Data White Label Service Program by offering discounted 
fees for Distributors that make Derived Data available through an 
API,\4\ thereby allowing Distributors to benefit from reduced fees when 
distributing Derived Data to subscribers that establish their own 
platforms rather than relying on a hosted display solution.
---------------------------------------------------------------------------

    \3\ See Rule 13.8(c) [sic].
    \4\ With the proposed introduction of the Derived Data API 
Service, the Exchange would bring together the BZX Top Derived Data 
White Label Service and Derived Data API Service under the common 
heading ``Financial Product Distribution Program.'' The Financial 
Product Distribution Program would encompass both of these products.
---------------------------------------------------------------------------

Current Fee Structure
    The Exchange currently charges a fee of $2,500 per month for 
external distribution of BZX Top. In addition, external distributors of 
BZX Top are charged a fee of $4 per month for each Professional User 
and $0.10 per month for each Non-Professional User. The Exchange also 
offers special pricing for Derived Data provided through a White Label 
Service, as mentioned above. This service allows Distributors to make 
Derived Data available on a platform that is branded with a third-party 
brand, or co-branded with a third party and a Distributor.\5\ The White 
Label Service Program can be used for a number of different purposes, 
including the display of information or data, or the creation of 
derivative instruments, such as swaps,\6\ swaptions,\7\ or contracts 
for difference,\8\ but is unavailable to distributors that make such 
information available through an API. Such distributors are not 
eligible for discounted Derived Data pricing today, and are instead 
liable for the fees

[[Page 43238]]

normally applicable for the distribution of BZX Top, as listed at the 
beginning of this paragraph.
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    \5\ The Distributor maintains control of the application's data, 
entitlements and display.
    \6\ A swap is a derivative contract in which two parties agree 
to exchange financial instruments.
    \7\ A swaption, or swap option, is an option to enter into a 
swap at a specified time.
    \8\ A contract for difference is an agreement to exchange the 
difference between the current value of an asset and its future 
value. If the price increases, the seller pays the buyer the amount 
of the increase. If the price decreases, the buyer pays the seller 
the amount of the decrease.
---------------------------------------------------------------------------

Discounted Fees for Derived Data API Service
    As proposed, a Distributor that provides a Derived Data API Service 
for Derived Data taken from BZX Top would be liable for the following 
fees instead of the fees normally applicable for the distribution of 
BZX Top. Instead of the regular fee for external distribution, 
Distributors would be charged a tiered External Subscriber Fee based on 
the number of API Service Platforms (i.e., ``External Subscribers'') 
that receive Derived Data from the Distributor through a Derived Data 
API Service. As proposed, Distributors would continue to be charged a 
fee of $2,500 per month for each External Subscriber if the Distributor 
makes Derived Data available to 1-5 External Subscribers. Distributors 
that make Derived Data available to additional External Subscribers 
would benefit from discounted pricing based on the number of External 
Subscribers. Specifically, the external distribution fee would be 
lowered by 20% to $2,000 per month for each External Subscriber if the 
Distributor makes Derived Data available to 6-20 External Subscribers, 
and further lowered another 20% to $1,500 per month for each External 
Subscriber if the Distributor makes Derived Data available to 21 or 
more External Subscribers. As is the case under the Derived Data White 
Label Service, the External Subscriber Fee would be non-progressive and 
based on the number of External Subscribers that receive Derived Data 
from the Distributor. For example, a Distributor providing Derived Data 
based on BZX Top to six External Subscribers that are API Service 
Platforms would be charged a monthly fee of $12,000 (i.e., 6 External 
Subscribers x $2,000 each). The Exchange would continue to charge a 
monthly Professional User fee of $4 per month for each Professional 
User that accesses Derived Data through an API Service. The current 
Non-Professional User fee of $0.10 per month would be eliminated when 
participating in the Derived Data API Service, further reducing costs 
for Distributors that provide access to such data to downstream 
investors.
    With the proposed introduction of the Derived Data API Service, the 
Exchange would bring together the Derived Data White Label Service and 
Derived Data API Service under the common heading ``Financial Product 
Distribution Program.'' The Financial Product Distribution Program 
would encompass both of these products. Similar to the Derived Data 
White Label Service, the Derived Data API Service would be entirely 
optional, in that it applies only to Distributors that opt to use 
Derived Data from BZX Top to create an API Service, as described 
herein. It does not impact or raise the cost of any other Exchange 
product, nor does it affect the cost of BZX Top, except in instances 
where Derived Data is made available on an API Service. A Distributor 
that provides a White Label Service or API Service for Derived Data 
taken from BZX Top would be liable for the fees associated with the 
White Label Service or API Service instead of the fees normally 
applicable for the distribution of BZX Top. A Distributor that provides 
a White Label Service or API Service for BZX Top data that is not 
Derived Data or distributes Derived Data through a platform other than 
a White Label Service or API Service would be liable for the fees 
normally applicable for the distribution of BZX Top.
Market Background
    The market for top of book data is highly competitive as national 
securities exchanges compete both with each other and with the 
securities information processors (``SIPs'') to provide efficient, 
reliable, and low cost data to a wide range of investors and market 
participants. In fact, Regulation NMS requires all U.S. equities 
exchanges to provide their best bids and offers, and executed 
transactions, to the two registered SIPs for dissemination to the 
public. Top of book data is therefore widely available to investors 
today at a relatively modest cost. National securities exchanges may 
also disseminate their own top of book data, but no rule or regulation 
of the Commission requires market participants to purchase top of book 
data from an exchange. In an effort to widen distribution to market 
participants that use equities market data to compute pricing for 
certain derivatives instruments, national securities exchanges 
including the Exchange, its affiliate, Cboe EDGX Exchange Inc., and The 
Nasdaq Stock Market LLC (``Nasdaq'') offer discounted pricing for 
Derived Data that is created using their top of book products. The 
Program would therefore compete with similar products offered by other 
national securities exchanges that offer discounted fees to market 
participants that purchase Derived Data.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\9\ in general, and 
furthers the objectives of Section 6(b)(4),\10\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its members and other recipients of 
Exchange data.
---------------------------------------------------------------------------

    \9\ 15 U.S.C. 78f.
    \10\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange also believes that the proposed rule change is 
consistent with Section 11(A) of the Act.\11\ Specifically, the 
proposed rule change supports (i) fair competition among brokers and 
dealers, among exchange markets, and between exchange markets and 
markets other than exchange markets, and (ii) the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities. In addition, the 
proposed rule change is consistent with Rule 603 of Regulation NMS,\12\ 
which provides that any national securities exchange that distributes 
information with respect to quotations for or transactions in an NMS 
stock do so on terms that are not unreasonably discriminatory.
---------------------------------------------------------------------------

    \11\ 15 U.S.C. 78k-1.
    \12\ See 17 CFR 242.603.
---------------------------------------------------------------------------

    In adopting Regulation NMS, the Commission granted SROs and broker-
dealers increased authority and flexibility to offer new and unique 
market data to the public. It was believed that this authority would 
expand the amount of data available to consumers, and also spur 
innovation and competition for the provision of market data. The 
Exchange believes that the proposed fee change would further broaden 
the availability of U.S. equity market data to investors, consistent 
with the principles of Regulation NMS.
    The Exchange operates in a highly competitive environment. Indeed, 
there are thirteen registered national securities exchanges that trade 
U.S. equities and offer associated top of book market data products to 
their customers. The national securities exchanges also compete with 
the SIPs for market data customers. 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

[[Page 43239]]

investors and listed companies.'' \13\ The proposed fee change is a 
result of the competitive environment, as the Exchange seeks to amend 
its fees to attract additional subscribers for one of its proprietary 
top of book data offerings through the introduction of a Derived Data 
API Service.
---------------------------------------------------------------------------

    \13\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
---------------------------------------------------------------------------

    The Exchange believes that it is reasonable to introduce reduced 
fees for the use of Derived Data on API Services as the proposed fee 
reduction would facilitate cost effective access to market information 
that is used primarily to create certain derivative instruments rather 
than to trade U.S. equity securities. The fees that are the subject of 
this rule filing are constrained by competition, and it is this 
competition that is driving the proposed fee change. Indeed, the 
Program is designed to allow the Exchange to compete more effectively 
for market data distributors that purchase market information to offer 
Derived Data to investors. The existence of alternatives to the Program 
ensures that the Exchange cannot set unreasonable or unfairly 
discriminatory fees, as subscribers are free to elect such 
alternatives. That is, the Exchange competes with other exchanges that 
provide similar market data products and pricing programs. As mentioned 
above, Derived Data is primarily purchased for the creation of certain 
derivative instruments rather than for the trading of U.S. equity 
securities. As a result, distributors of Derived Data do not need a 
consolidated view of the market across multiple exchanges, and 
generally purchase such data from a single exchange. If a competing 
exchange were to charge less for a similar product than the Exchange 
charges under the proposed fee structure, prospective subscribers may 
choose not subscribe to, or cease subscribing to, the Program. The 
Exchange believes that lowering the cost of accessing Derived Data may 
make the Exchange's market information more attractive, and encourage 
additional Distributors to subscribe to BZX Top market data instead of 
competitor products. Distributors can discontinue use at any time and 
for any reason, including due to an assessment of the reasonableness of 
fees charged. Furthermore, firms have a wide variety of alternative 
market data products from which to choose, such as similar proprietary 
data products offered by other national securities exchanges, including 
those that choose to offer discounted fees for the distribution of 
Derived Data in an effort to compete for this business.
    The proposed rule change would provide an alternate fee structure 
for providing BZX Top market data to Distributors that make Derived 
Data available to External Subscribers via API Services. As proposed, 
if a Distributor uses an API Service to distribute Derived Data, the 
Distributor will be charged a fee that is tiered based on the number of 
External Subscribers that are provided access to that data instead of 
the higher fee normally charged for external distribution. The Exchange 
believes that this fee is equitable and not unfairly discriminatory 
because the Exchange will apply the same fees to any similarly situated 
Distributors that elect to participate in the Program based on the 
number of External Subscribers provided access to Derived Data through 
an API Service, with Distributors providing access to six or more 
External Subscribers receiving a discount compared to the current 
pricing applicable for external distribution of BZX Top. The Exchange 
believes that it is equitable and not unfairly discriminatory to begin 
providing discounted rates to Distributors that provide access to at 
least six External Subscribers as the discounted rates are designed to 
incentivize firms to grow the number of External Subscribers that 
purchase Derived Data from the Exchange. The Exchange understands that 
Distributors that may provide this sort of API Service typically serve 
a relatively larger number of External Subscribers, and would therefore 
be able to meet the proposed threshold by providing Derived Data taken 
from BZX Top to those customers.
    The Exchange would also continue to charge a small fee for 
Professional Users but would eliminate Non-Professional User fees for 
data provided under the Program. The Exchange believes that it is 
equitable and not unfairly discriminatory to charge a fee for 
Professional Users but no fee for Non-Professional Users. Non-
Professional Users are already subject to a heavily discounted fee for 
BZX Top market data relative to Professional Users. Differential fees 
for Professional and Non-Professional Users are widely used by the 
Exchange and other exchanges for their proprietary market data as this 
reduces costs for retail investors and makes market data more broadly 
available. The Exchange believes that eliminating fees for Non-
Professional Users that access Derived Data from Distributors pursuant 
to the Program is consistent with longstanding precedent indicating 
that it is consistent with the Act to provide reasonable incentives to 
retail investors that rely on the public markets for their investment 
needs.
    Furthermore, the proposed fees will only apply to Distributors that 
elect to participate in the Program by distributing Derived Data 
through an API Service. BZX Top market data is distributed and 
purchased on a voluntary basis, in that neither the Exchange nor market 
data distributors are required by any rule or regulation to make this 
data available. Distributors of BZX Top are not required to participate 
in the proposed Program, which is merely an alternative option being 
proposed by the Exchange to potentially lower costs for market data 
that is Derived Data. As previously explained, the Exchange currently 
offers discounted fees for Distributors that distribute Derived Data on 
a While [sic] Label Service. Expanding the universe of customers that 
can benefit from discounted fees for distributing Derived Data would 
serve to further increase the accessibility of the Exchange's market 
data products.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
operates in a highly competitive environment, and its ability to price 
these data products is constrained by: (i) Competition among exchanges 
that offer similar data products, and pricing options, to their 
customers; and (ii) the existence of inexpensive real-time consolidated 
data disseminated by the SIPs. Top of book data is disseminated by both 
the SIPs and the thirteen equities exchanges. There are therefore a 
number of alternative products available to market participants and 
investors. In this competitive environment potential subscribers are 
free to choose which competing product to purchase to satisfy their 
need for market information. Often, the choice comes down to price, as 
broker-dealers or vendors look to purchase the cheapest top of book 
data product, or quality, as market participants seek to purchase data 
that represents significant market liquidity. In order to better 
compete for this segment of the market, the Exchange is proposing to 
reduce fees charged to Distributors that distribute Derived Data 
through an API. The Exchange believes that this would facilitate 
greater access to such data, ultimately benefiting investors that are 
provided access to such data.

[[Page 43240]]

    The proposed fees apply to data derived from BZX Top, which is 
subject to competition from both the SIPs and exchanges that offer 
similar products, including but not limited to those that choose to 
provide similar pricing options for Derived Data. A number of national 
securities exchanges, including the Exchange, its affiliated Cboe U.S. 
equities exchanges, and Nasdaq offer pricing discounts for Derived Data 
today. These pricing programs reduce the cost of accessing top of book 
market information that is used, among other things, to create 
derivative instruments rather than to trade U.S. equity securities. In 
order to better compete for this segment of the market, the Exchange is 
proposing to expand the programs that it offers to include a Derived 
Data API Service, allowing additional market data customers to benefit 
from discounted pricing. The Exchange does not believe that the 
proposed price reduction for Derived Data offered through an API would 
cause any unnecessary or inappropriate burden on intermarket 
competition as other exchanges and data vendors are free to lower their 
prices to better compete with the Exchange's offering. The Exchange 
believes that the proposed rule change is pro-competitive as it seeks 
to offer pricing incentives to customers to better position the 
Exchange as it competes to attract additional market data subscribers.

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 \14\ and paragraph (f) of Rule 19b-4 \15\ 
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.
---------------------------------------------------------------------------

    \14\ 15 U.S.C. 78s(b)(3)(A).
    \15\ 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-CboeBZX-2019-070 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-CboeBZX-2019-070. 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. 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-CboeBZX-2019-070, and should be 
submitted on or before September 10, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
---------------------------------------------------------------------------

    \16\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2019-17863 Filed 8-19-19; 8:45 am]
 BILLING CODE 8011-01-P
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