Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Amend Its Fees Schedule, 50055-50059 [2020-17823]
Download as PDF
<![CDATA[
Federal Register / Vol. 85, No. 159 / Monday, August 17, 2020 / Notices
Table of Contents
I. Introduction
II. Docketed Proceeding(s)
I. Introduction
The Commission gives notice that the
Postal Service filed request(s) for the
Commission to consider matters related
to negotiated service agreement(s). The
request(s) may propose the addition or
removal of a negotiated service
agreement from the market dominant or
the competitive product list, or the
modification of an existing product
currently appearing on the market
dominant or the competitive product
list.
Section II identifies the docket
number(s) associated with each Postal
Service request, the title of each Postal
Service request, the request’s acceptance
date, and the authority cited by the
Postal Service for each request. For each
request, the Commission appoints an
officer of the Commission to represent
the interests of the general public in the
proceeding, pursuant to 39 U.S.C. 505
(Public Representative). Section II also
establishes comment deadline(s)
pertaining to each request.
The public portions of the Postal
Service’s request(s) can be accessed via
the Commission’s website (https://
www.prc.gov). Non-public portions of
the Postal Service’s request(s), if any,
can be accessed through compliance
with the requirements of 39 CFR
3011.301.1
The Commission invites comments on
whether the Postal Service’s request(s)
in the captioned docket(s) are consistent
with the policies of title 39. For
request(s) that the Postal Service states
concern market dominant product(s),
applicable statutory and regulatory
requirements include 39 U.S.C. 3622, 39
U.S.C. 3642, 39 CFR part 3030, and 39
CFR part 3040, subpart B. For request(s)
that the Postal Service states concern
competitive product(s), applicable
statutory and regulatory requirements
include 39 U.S.C. 3632, 39 U.S.C. 3633,
39 U.S.C. 3642, 39 CFR part 3035, and
39 CFR part 3040, subpart B. Comment
deadline(s) for each request appear in
section II.
II. Docketed Proceeding(s)
1. Docket No(s).: MC2020–216 and
CP2020–244; Filing Title: USPS Request
to Add Priority Mail Express Contract
81 to Competitive Product List and
Notice of Filing Materials Under Seal;
Filing Acceptance Date: August 11,
1 See Docket No. RM2018–3, Order Adopting
Final Rules Relating to Non-Public Information,
June 27, 2018, Attachment A at 19–22 (Order No.
4679).
VerDate Sep<11>2014
17:13 Aug 14, 2020
Jkt 250001
2020; Filing Authority: 39 U.S.C. 3642,
39 CFR 3040.130 through 3040.135, and
39 CFR 3035.105; Public Representative:
Kenneth R. Moeller; Comments Due:
August 19, 2020.
2. Docket No(s).: MC2020–217 and
CP2020–245; Filing Title: USPS Request
to Add Priority Mail Contract 649 to
Competitive Product List and Notice of
Filing Materials Under Seal; Filing
Acceptance Date: August 11, 2020;
Filing Authority: 39 U.S.C. 3642, 39 CFR
3040.130 through 3040.135, and 39 CFR
3035.105; Public Representative:
Kenneth R. Moeller; Comments Due:
August 19, 2020.
This Notice will be published in the
Federal Register.
Erica A. Barker,
Secretary.
[FR Doc. 2020–17912 Filed 8–14–20; 8:45 am]
BILLING CODE 7710–FW–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89525; File No. SR–
CboeBZX–2020–065]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change Relating To
Amend Its Fees Schedule
August 11, 2020.
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 4,
2020, 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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) is filing with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
to amend its Fee Schedule. The text of
the proposed rule change is provided in
Exhibit 5.
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
1 15
2 17
PO 00000
U.S.C. 78s(b)(1).
CFR 240.19b–4.
Frm 00054
Fmt 4703
Sfmt 4703
50055
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 Exchange proposes to amend its
fee schedule for its equity options
platform (‘‘BZX Options’’).3
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
16 options venues to which market
participants may direct their order flow.
Based on publicly available information,
no single options exchange has more
than 17% of the market share and
currently the Exchange represents only
approximately 8% of the market share.4
Thus, in such a low-concentrated and
highly competitive market, no single
options exchange, including the
Exchange, possesses significant pricing
power in the execution of option order
flow. The Exchange believes that the
ever-shifting market share among the
exchanges from month to month
demonstrates that market participants
can shift order flow, or discontinue to
reduce use of certain categories of
products, in response to fee changes.
Accordingly, competitive forces
constrain the Exchange’s transaction
fees, and market participants can readily
trade on competing venues if they deem
pricing levels at those other venues to
3 The Exchange initially filed the proposed fee
changes on July 31, 2020 (SR–CboeBZX–2020–062).
On August 4, 2020, the Exchange withdrew that
filing and submitted this filing.
4 See Cboe Global Markets U.S. Options Market
Month-to-Date Volume Summary (July 27, 2020),
available at https://markets.cboe.com/us/options/
market_statistics/.
E:\FR\FM\17AUN1.SGM
17AUN1
50056
Federal Register / Vol. 85, No. 159 / Monday, August 17, 2020 / Notices
be more favorable. The Exchange’s fee
schedule sets forth standard rebates and
rates applied per contract, which varies
depending on the Member’s Capacity
(Customer, Firm, Market Maker, etc.),
whether the order adds or removes
liquidity, and whether the order is in
Penny or Non-Penny Pilot Securities.
Additionally, in response to the
competitive environment, the Exchange
also offers tiered pricing which provides
Members opportunities to qualify for
higher rebates or reduced fees where
certain volume criteria and thresholds
are met. Tiered pricing provides an
incremental incentive for Members to
strive for higher tier levels, which
provides increasingly higher benefits or
discounts for satisfying increasingly
more stringent criteria.
For example, the Exchange currently
offers five NBBO Setter Tiers under
footnote 7 of the Fee Schedule which
provide additional rebates between
$0.01 and $0.05 per contract for
qualifying orders which establish a new
NBBO and yield fee code PM or PN,5
where a Member meets certain liquidity
thresholds. Under the current NBBO
Setter Tiers, a Member may receive an
additional rebate where the Member has
an ADAV 6 in Non-Customer orders, or
Firm/Market Maker/Away MM orders
greater or equal to a specified
percentage of OCV.7 The Exchange now
proposes to amend the criteria in NBBO
Setter Tiers 2 through 5 by increasing,
in each, a percentage of ADV into
average OCV within existing criteria and
also adding to Tier 5 a new, additional
criteria that that a Member must meet to
receive the existing additional rebate.
The Exchange notes that the proposed
changes do not alter the current rebates
provided under NBBO Setter Tiers 2
through 5.
Specifically, Tier 2 currently provides
an additional rebate of $0.02 for a
Member’s qualifying orders (i.e., that
yield fee code PM or PN and establish
a new NBBO) for Members that have (1)
an ADAV in Non-Customer orders
greater than or equal to 0.40% of
average OCV, and (2) an ADAV in Firm/
5 Orders yielding fee code PM are Market Maker
orders that add liquidity in Penny Pilot Securities
and are offered a rebate of $0.29, and orders
yielding fee code PN are Away Market Maker orders
that add liquidity in Penny Pilot Securities and are
offered a rebate of $0.26.
6 ‘‘ADAV’’ means average daily added volume
calculated as the number of contracts added, per
day.
7 ‘‘OCC Customer Volume’’ or ‘‘OCV’’ means the
total equity and ETF options volume that clears in
the Customer range at the Options Clearing
Corporation (‘‘OCC’’) for the month for which the
fees apply, excluding volume on any day that the
Exchange experiences an Exchange System
Disruption and on any day with a scheduled early
market close.
VerDate Sep<11>2014
17:13 Aug 14, 2020
Jkt 250001
Market Maker/Away Market Maker
(MM) orders that establish a new NBBO
greater than or equal to 0.05% of
average OCV. Tier 3 currently provides
an additional rebate of $0.03 for
qualifying orders for Members that have
(1) an ADAV in Non-Customer orders
greater than or equal to 0.75% of
average OCV, and (2) an ADAV in Firm/
Market Maker/Away MM orders that
establish a new NBBO greater than or
equal to 0.05% of average OCV. Tier 4
currently provides an additional rebate
of $0.04 for qualifying orders for
Members that have (1) an ADAV in NonCustomer orders greater than or equal to
1.80% of average OCV, (2) an ADAV in
Non-Customer Non-Penny orders greater
than or equal to 0.20% of average OCV,
and (3) an ADAV in Firm/Market
Maker/Away MM orders that establish a
new NBBO greater than or equal to
0.05% of average OCV. Tier 5 currently
provides an additional rebate of $0.05
for qualifying orders for Member that
have (1) an ADAV in Non-Customer
orders greater than or equal to 3.00% of
average OCV, and (2) Member has an
ADAV in Firm/Market Maker/Away
MM orders that establish a new NBBO
greater than or equal to 0.05% of
average OCV. The Exchange notes that
prong 2 of Tiers 2, 3, and 5 and prong
3 of Tier 4 (as well as prong 2 of Tier
1 which is not being amended) provide
the same criteria. The proposed change
updates these criteria in each tier to
instead become incrementally more
difficult. The proposed criteria in Tier 2
requires that a Member have an has an
ADAV in Firm/Market Maker/Away
MM orders that establish a new NBBO
greater than or equal to 0.15% of
average OCV, in Tier 3 requires a
threshold greater than or equal to 0.30%
of average OCV, in Tier 4 requires a
threshold of greater than or equal to
0.50% of average OCV, and in Tier 5
requires a threshold of 0.80% of average
OCV. In addition to this, the proposed
change amends the criteria in prong 1 of
Tier 5 to decrease the threshold of NonCustomer orders over average OCV from
3.00% to 2.55% and adopts an
additional criteria in Tier 5, a new
prong 2 (current prong 2 will become
prong 3), which requires an ADAV in
Non-Customer Non-Penny orders greater
than or equal to 0.25% of average OCV.
The proposed increases in Firm/Market
Maker/Away MM order ADAV that
establish a new NBBO as a percentage
of average OCV in Tiers 2 through 5 are
intended to incrementally increase the
level of difficulty in achieving each of
these tiers, thus, incentivizing Members
to increase their overall order flow to
the Exchange by encouraging those
PO 00000
Frm 00055
Fmt 4703
Sfmt 4703
Members to strive for the different,
incrementally more difficult tier criteria
under the proposed tiers to receive the
additional rebates. The proposed
additional prong of criteria in Tier 5 is
also designed to incrementally increase
the level of difficulty in achieving Tier
5, while the proposed decrease in the
threshold of ADAV over average OCV in
prong 1 is designed to balance the
entirety of Tier 5’s difficulty in light of
the proposed additional criteria,
incentivizing Members to continue to
submit Non-Customer orders to the
Exchange’s Order Book.
The Exchange believes that the
proposed fee changes are overall
designed to incentivize more Firm,
Market Maker, and Away Market Maker
add volume order flow to establish a
new NBBO as well as overall NonCustomer add volume order flow to the
Exchange. Increased add volume order
flow, particularly by liquidity providers,
contributes to a deeper, more liquid
market, which, in turn, provides for
increased execution opportunities and
thus overall enhanced price discovery
and price improvement opportunities
on the Exchange. As such, this benefits
all Members by contributing towards a
robust and well-balanced market
ecosystem, offering additional flexibility
for all investors to enjoy cost savings,
supporting the quality of price
discovery, promoting market
transparency and improving investor
protection.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,8
in general, and furthers the objectives of
Section 6(b)(4),9 in particular, as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its Members and
issuers and other persons using its
facilities. The Exchange also believes
that the proposed rule change is
consistent with the objectives of Section
6(b)(5) 10 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
8 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
10 15 U.S.C. 78f.(b)(5).
9 15
E:\FR\FM\17AUN1.SGM
17AUN1
Federal Register / Vol. 85, No. 159 / Monday, August 17, 2020 / Notices
investors and the public interest, and,
particularly, is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
As described above, the Exchange
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. The
proposed rule change reflects a
competitive pricing structure designed
to incentivize market participants to
direct their order flow to the Exchange,
which the Exchange believes would
enhance market quality to the benefit of
all Members.
In particular, the Exchange believes
the proposed tiers are reasonable
because they amend existing
opportunities in a manner that
incentivizes increased Non-Customer
(which would include, where
applicable, Firm, Market Maker, and
Away MM specifically) order flow via
incrementally more challenging criteria
in order to receive the same additional
rebates on a Member’s qualifying orders.
The Exchange notes that volume-based
incentives and discounts have been
widely adopted by exchanges,11
including the Exchange,12 and are
reasonable, equitable and nondiscriminatory because they are open to
all Members on an equal basis and
provide additional benefits or discounts
that are reasonably related to (i) the
value to an exchange’s market quality
and (ii) associated higher levels of
market activity, such as higher levels of
liquidity provision and/or growth
patterns. Additionally, as noted above,
the Exchange operates in a highly
competitive market. The Exchange is
only one of several options venues to
which market participants may direct
their order flow, and it represents a
small percentage of the overall market.
Competing options exchanges offer
similar tiered pricing structures to that
of the Exchange, including schedules of
rebates and fees that apply based upon
Members achieving certain volume and/
or growth thresholds.
Moreover, the Exchange believes the
amended NBBO Setter Tiers are a
reasonable means to encourage
Members to increase their liquidity on
the Exchange, specifically their NonCustomer add volume order flow. The
Exchange believes that modifying
existing criteria in Tiers 2 through 5 to
11 See e.g., NYSE Arca Options Fee Schedule,
Firm and Broker Dealer Penny Posting Credit Tiers,
and Non-Customer Non-Penny Posting Credit Tiers.
12 See e.g., The Exchange’s Fee Schedule,
Footnote 4, NBBO Setter Tiers.
VerDate Sep<11>2014
17:13 Aug 14, 2020
Jkt 250001
be incrementally more difficult to
achieve, as opposed to the current fixed
criteria pursuant to the same prong in
each tier, and adopting an additional
prong of criteria in Tier 5 are reasonable
modifications of existing criteria
because they are designed to
incrementally increase the difficulty in
achieving these tiers, thereby
incentivizing Members to increase their
overall add volume order flow, and
particularly, to strive to establish new
NBBOs. This benefits all market
participants by incentivizing continuous
display of and opportunity to execute at
the best prices, and by incentivizing
overall additional liquidity, which
signals other market participants to take
the additional execution opportunities
provided by such liquidity. This overall
increase in activity deepens the
Exchange’s liquidity pool, offers
additional cost savings, supports the
quality of price discovery, promotes
market transparency and improves
market quality, for all investors. The
Exchange also notes that it is reasonable
to decrease the threshold of ADAV as a
percentage average OCV in prong 1 of
Tier 5 in order to balance the ultimate
level of difficult in achieving the tier
with the added proposed prong of
criteria that a Member must meet to
achieve the current rebate.
Further, the Exchange believes that
the proposed rule changes are
reasonable as they represent
proportional increases in difficulty per
adjacent tiers and the criteria thresholds
appropriately reflect the incremental
difficulty to achieve the existing rebates
that increase with each ascending tier.
For example, the Exchange proposes to
simultaneously increase the ADAV
thresholds of Firm/Market Maker/Away
MM orders that establish a new NBBO
in each of Tier 2, 3, 4, and 5 in a manner
that poses a step up in difficulty per
each ascending tier to achieve the
current ascending rebates per each tier.
The Exchange also believes that the
proposed change to Tier 5 in adding
another prong of criteria, as well as
tempering the difficulty posed by the
added prong by decreasing the
threshold of ADAV over average OCV in
an existing prong, appropriately
balances the step up in difficulty from
Tier 4 to Tier 5. The Exchange again
notes that the proposed rule changes do
not alter the amount of any of the
current rebates in place.
The Exchange believes that the
proposal represents an equitable
allocation of fees and is not unfairly
discriminatory because all Members
will be eligible for the proposed tier and
the corresponding additional rebate will
apply uniformly to all Members that
PO 00000
Frm 00056
Fmt 4703
Sfmt 4703
50057
reach the proposed tier criteria. That is,
the proposed tiers are designed as an
incentive to any and all Members
interested in meeting the tier criteria to
submit additional order flow to the
Exchange and each will receive the
proposed additional rebate if the tier
criteria is met.
The Exchange believes that the
proposal represents an equitable
allocation of rebates and is not unfairly
discriminatory because all Members
will continue to be eligible for NBBO
Setter Tiers 2 through 5, as amended.
The proposed changes to the tiers’
criteria are designed as an incentive to
any and all Members interested in
meeting the tier criteria to submit
additional Non-Customer orders (with
opportunities to achieve such tiers via
criteria for Firm/Market Maker/Away
MM orders) to the Exchange. Each will
have the opportunity to submit the
requisite order flow and will receive the
applicable existing rebate if the tier
criteria are met. Without having a view
of activity on other markets and offexchange venues, the Exchange has no
way of knowing whether this proposed
rule change would definitely result in
any Members qualifying for the
proposed tiers. While the Exchange has
no way of predicting with certainty how
the proposed tiers will impact Member
activity, the Exchange anticipates that
approximately at least three Members
will be able to compete for and achieve
the amended criteria in each of Tier 2
and Tier 3, and at least one Member will
be able to compete for and achieve the
amended criteria in each of Tier 4 and
Tier 5. The Exchange anticipates that
the tiers will particularly include
liquidity providers, such as traditional
Market Makers, and wholesale or
consolidator firms that mainly make
markets for retail orders, each providing
distinct types of order flow to the
Exchange to the benefit of all market
participants. The Exchange also notes
that the proposed tiers will not
adversely impact any Member’s pricing
or their ability to qualify for other rebate
tiers. Rather, should a Member not meet
the proposed criteria for a tier, the
Member will merely not receive the
corresponding additional rebate.
Furthermore, the existing rebate and
fees will continue to uniformly apply to
all Members that meet the required
criteria, as amended, per each respective
tier.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on intramarket or
intermarket competition that is not
E:\FR\FM\17AUN1.SGM
17AUN1
50058
Federal Register / Vol. 85, No. 159 / Monday, August 17, 2020 / Notices
necessary or appropriate in furtherance
of the purposes of the Act. Rather, as
discussed above, the Exchange believes
that the proposed change would
encourage the submission of additional
liquidity to a public exchange, thereby
promoting market depth, price
discovery and transparency and
enhancing order execution
opportunities for all Members. As a
result, the Exchange believes that the
proposed change furthers the
Commission’s goal in adopting
Regulation NMS of fostering
competition among orders, which
promotes ‘‘more efficient pricing of
individual stocks for all types of orders,
large and small.’’ 13
The Exchange believes the proposed
rule change does not impose any burden
on intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Particularly,
the proposed change applies to all
Members equally in that all Members
are eligible to achieve the tiers’
proposed criteria, have a reasonable
opportunity to meet the tiers’ proposed
criteria and will all receive the existing
rebates if such criteria is met. Overall,
the proposed change is designed to
attract additional Non-Customer
(including, where applicable,
specifically Firm/Market Maker/Away
MM) order flow to the Exchange. The
Exchange believes that the modified tier
criteria would incentivize market
participants to strive to increase such
order flow to the Exchange to meet the
proposed criteria and, as a result,
provide for deeper levels of liquidity,
increasing trading opportunities for
other market participants, thus signaling
further trading activity, ultimately
incentivizing more overall order flow
and improving price transparency on
the Exchange. Greater overall order flow
and pricing transparency benefits all
market participants on the Exchange by
generally providing continuous trading
opportunities, enhancing market
quality, and continuing to encourage
Members to send orders, thereby
contributing towards a robust and wellbalanced market ecosystem, which
benefits all market participants.
Next, the Exchange believes the
proposed rule change does not impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
As previously discussed, the Exchange
operates in a highly competitive market.
Members have numerous alternative
venues that they may participate on and
13 Securities Exchange Act Release No. 51808, 70
FR 37495, 37498–99 (June 29, 2005) (S7–10–04)
(Final Rule).
VerDate Sep<11>2014
17:13 Aug 14, 2020
Jkt 250001
director their order flow, including 15
other options exchanges and offexchange venues. Additionally, the
Exchange represents a small percentage
of the overall market. Based on publicly
available information, no single options
exchange has more than 17% of the
market share.14 Therefore, no exchange
possesses significant pricing power in
the execution of option order flow.
Indeed, participants can readily choose
to send their orders to other exchange
and off-exchange venues if they deem
fee levels at those other venues to be
more favorable. Moreover, 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
investors and listed companies.’’ 15 The
fact that this market is competitive has
also long been recognized by the courts.
In NetCoalition v. Securities and
Exchange Commission, the D.C. Circuit
stated as follows: ‘‘[n]o one disputes
that competition for order flow is
‘fierce.’ . . . As the SEC explained, ‘[i]n
the U.S. national market system, buyers
and sellers of securities, and the brokerdealers that act as their order-routing
agents, have a wide range of choices of
where to route orders for execution’;
[and] ‘no exchange can afford to take its
market share percentages for granted’
because ‘no exchange possesses a
monopoly, regulatory or otherwise, in
the execution of order flow from broker
dealers’. . . .’’.16 Accordingly, the
Exchange does not believe its proposed
fee change imposes any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
14 See
supra note 3.
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
16 NetCoalition v. SEC, 615 F.3d 525, 539 (D.C.
Cir. 2010) (quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74782–
83 (December 9, 2008) (SR–NYSEArca–2006–21)).
15 See
PO 00000
Frm 00057
Fmt 4703
Sfmt 4703
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 17 and paragraph (f) of Rule
19b–4 18 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.
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 rule-comments@
sec.gov. Please include File Number SR–
CboeBZX–2020–065 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–2020–065. 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
17 15
18 17
E:\FR\FM\17AUN1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
17AUN1
Federal Register / Vol. 85, No. 159 / Monday, August 17, 2020 / Notices
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–2020–065 and
should be submitted on or before
September 8, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–17823 Filed 8–14–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–89520; File No. SR–BOX–
2020–33]
Self-Regulatory Organizations; BOX
Exchange LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend the Rule 16000
Series, the Exchange’s Compliance
Rule Regarding the National Market
System Plan Governing the
Consolidated Audit Trail To Be
Consistent With an Amendment to the
CAT NMS Plan Recently Approved by
the Commission
August 11, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on August 5,
2020, BOX Exchange LLC (the
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Rule 16000 Series, the Exchange’s
19 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
17:13 Aug 14, 2020
Jkt 250001
compliance rule (‘‘Compliance Rule’’)
regarding the National Market System
Plan Governing the Consolidated Audit
Trail (the ‘‘CAT NMS Plan’’ or ‘‘Plan’’) 3
to be consistent with an amendment to
the CAT NMS Plan recently approved
by the Commission. The text of the
proposed rule change is available from
the principal office of the Exchange, at
the Commission’s Public Reference
Room and also on the Exchange’s
internet website at https://
boxoptions.com.
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
self-regulatory organization 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 self-regulatory organization 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 this proposed rule
change is to amend the Rule 16000
Series, the Compliance Rule regarding
the CAT NMS Plan, to be consistent
with an amendment to the CAT NMS
Plan recently approved by the
Commission.4 The Commission
approved an amendment to the CAT
NMS Plan to amend the requirements
for Firm Designated IDs in four ways: (1)
To prohibit the use of account numbers
as Firm Designated IDs for trading
accounts that are not proprietary
accounts; (2) to require that the Firm
Designated ID for a trading account be
persistent over time for each Industry
Member so that a single account may be
tracked across time within a single
Industry Member; (3) to permit the use
of relationship identifiers as Firm
Designated IDs in certain circumstances;
and (4) to permit the use of entity
identifiers as Firm Designated IDs in
certain circumstances (the ‘‘FDID
Amendment’’). As a result, the
Exchange proposes to amend the
definition of ‘‘Firm Designated ID’’ in
3 Unless otherwise specified, capitalized terms
used in this rule filing are defined as set forth in
the Compliance Rule.
4 Securities Exchange Act Release No. 89397 (July
24, 2020) (Federal Register pending).
PO 00000
Frm 00058
Fmt 4703
Sfmt 4703
50059
Rule 16010 to reflect the changes to the
CAT NMS Plan regarding the
requirements for Firm Designated IDs.
Rule 16010(r) defines the term ‘‘Firm
Designated ID’’ to mean ‘‘a unique
identifier for each trading account
designated by Industry Members for
purposes of providing data to the
Central Repository, where each such
identifier is unique among all identifiers
from any given Industry Member for
each business date.’’
(1) Prohibit Use of Account Numbers
The Exchange proposes to amend the
definition of ‘‘Firm Designated ID’’ in
Rule 16010(r) to provide that Industry
Members may not use account numbers
as the Firm Designated ID for trading
accounts that are not proprietary
accounts. Specifically, the Exchange
proposes to add the following to the
definition of a Firm Designated ID:
‘‘provided, however, such identifier
may not be the account number for such
trading account if the trading account is
not a proprietary account.’’
(2) Persistent Firm Designated ID
The Exchange also proposes to amend
the definition of ‘‘Firm Designated ID’’
in Rule 16010(r) to require a Firm
Designated ID assigned by an Industry
Member to a trading account to be
persistent over time, not for each
business day.5 To effect this change, the
Exchange proposes to amend the
definition of ‘‘Firm Designated ID’’ in
Rule 16010(r) to add ‘‘and persistent’’
after ‘‘unique’’ and delete ‘‘for each
business date’’ so that the definition of
‘‘Firm Designated ID’’ would read, in
relevant part, as follows:
a unique and persistent identifier for each
trading account designated by Industry
Members for purposes of providing data to
the Central Repository . . . where each such
identifier is unique among all identifiers
from any given Industry Member.
(3) Relationship Identifiers
The FDID Amendment also permits
an Industry Member to provide a
relationship identifier as the Firm
5 If an Industry Member assigns a new account
number or entity identifier to a client or customer
due to a merger, acquisition or some other corporate
action, then the Industry Member should create a
new Firm Designated ID to identify the new account
identifier/relationship identifier/entity identifier in
use at the Industry Member for the entity. In
addition, if a previously assigned Firm Designated
ID is no longer in use by an Industry Member (e.g.,
if the trading account associated with the Firm
Designated ID has been closed), then an Industry
Member may reuse the Firm Designated ID for
another trading account. The Plan Processor will
maintain a history of the use of each Firm
Designated ID, including, for example, the effective
dates of the Firm Designated ID with respect to each
associated trading account.
E:\FR\FM\17AUN1.SGM
17AUN1
]]>Agencies
[Federal Register Volume 85, Number 159 (Monday, August 17, 2020)]
[Notices]
[Pages 50055-50059]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-17823]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-89525; File No. SR-CboeBZX-2020-065]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
To Amend Its Fees Schedule
August 11, 2020.
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 4, 2020, 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. (the ``Exchange'' or ``BZX'') is filing
with the Securities and Exchange Commission (``Commission'') a proposed
rule change to amend its Fee Schedule. The text of the proposed rule
change is provided in Exhibit 5.
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 Exchange proposes to amend its fee schedule for its equity
options platform (``BZX Options'').\3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed fee changes on
July 31, 2020 (SR-CboeBZX-2020-062). On August 4, 2020, the Exchange
withdrew that filing and submitted this filing.
---------------------------------------------------------------------------
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 options venues to which market participants
may direct their order flow. Based on publicly available information,
no single options exchange has more than 17% of the market share and
currently the Exchange represents only approximately 8% of the market
share.\4\ Thus, in such a low-concentrated and highly competitive
market, no single options exchange, including the Exchange, possesses
significant pricing power in the execution of option order flow. The
Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow, or discontinue to reduce use of certain categories of
products, in response to fee changes. Accordingly, competitive forces
constrain the Exchange's transaction fees, and market participants can
readily trade on competing venues if they deem pricing levels at those
other venues to
[[Page 50056]]
be more favorable. The Exchange's fee schedule sets forth standard
rebates and rates applied per contract, which varies depending on the
Member's Capacity (Customer, Firm, Market Maker, etc.), whether the
order adds or removes liquidity, and whether the order is in Penny or
Non-Penny Pilot Securities. Additionally, in response to the
competitive environment, the Exchange also offers tiered pricing which
provides Members opportunities to qualify for higher rebates or reduced
fees where certain volume criteria and thresholds are met. Tiered
pricing provides an incremental incentive for Members to strive for
higher tier levels, which provides increasingly higher benefits or
discounts for satisfying increasingly more stringent criteria.
---------------------------------------------------------------------------
\4\ See Cboe Global Markets U.S. Options Market Month-to-Date
Volume Summary (July 27, 2020), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------
For example, the Exchange currently offers five NBBO Setter Tiers
under footnote 7 of the Fee Schedule which provide additional rebates
between $0.01 and $0.05 per contract for qualifying orders which
establish a new NBBO and yield fee code PM or PN,\5\ where a Member
meets certain liquidity thresholds. Under the current NBBO Setter
Tiers, a Member may receive an additional rebate where the Member has
an ADAV \6\ in Non-Customer orders, or Firm/Market Maker/Away MM orders
greater or equal to a specified percentage of OCV.\7\ The Exchange now
proposes to amend the criteria in NBBO Setter Tiers 2 through 5 by
increasing, in each, a percentage of ADV into average OCV within
existing criteria and also adding to Tier 5 a new, additional criteria
that that a Member must meet to receive the existing additional rebate.
The Exchange notes that the proposed changes do not alter the current
rebates provided under NBBO Setter Tiers 2 through 5.
---------------------------------------------------------------------------
\5\ Orders yielding fee code PM are Market Maker orders that add
liquidity in Penny Pilot Securities and are offered a rebate of
$0.29, and orders yielding fee code PN are Away Market Maker orders
that add liquidity in Penny Pilot Securities and are offered a
rebate of $0.26.
\6\ ``ADAV'' means average daily added volume calculated as the
number of contracts added, per day.
\7\ ``OCC Customer Volume'' or ``OCV'' means the total equity
and ETF options volume that clears in the Customer range at the
Options Clearing Corporation (``OCC'') for the month for which the
fees apply, excluding volume on any day that the Exchange
experiences an Exchange System Disruption and on any day with a
scheduled early market close.
---------------------------------------------------------------------------
Specifically, Tier 2 currently provides an additional rebate of
$0.02 for a Member's qualifying orders (i.e., that yield fee code PM or
PN and establish a new NBBO) for Members that have (1) an ADAV in Non-
Customer orders greater than or equal to 0.40% of average OCV, and (2)
an ADAV in Firm/Market Maker/Away Market Maker (MM) orders that
establish a new NBBO greater than or equal to 0.05% of average OCV.
Tier 3 currently provides an additional rebate of $0.03 for qualifying
orders for Members that have (1) an ADAV in Non-Customer orders greater
than or equal to 0.75% of average OCV, and (2) an ADAV in Firm/Market
Maker/Away MM orders that establish a new NBBO greater than or equal to
0.05% of average OCV. Tier 4 currently provides an additional rebate of
$0.04 for qualifying orders for Members that have (1) an ADAV in Non-
Customer orders greater than or equal to 1.80% of average OCV, (2) an
ADAV in Non-Customer Non-Penny orders greater than or equal to 0.20% of
average OCV, and (3) an ADAV in Firm/Market Maker/Away MM orders that
establish a new NBBO greater than or equal to 0.05% of average OCV.
Tier 5 currently provides an additional rebate of $0.05 for qualifying
orders for Member that have (1) an ADAV in Non-Customer orders greater
than or equal to 3.00% of average OCV, and (2) Member has an ADAV in
Firm/Market Maker/Away MM orders that establish a new NBBO greater than
or equal to 0.05% of average OCV. The Exchange notes that prong 2 of
Tiers 2, 3, and 5 and prong 3 of Tier 4 (as well as prong 2 of Tier 1
which is not being amended) provide the same criteria. The proposed
change updates these criteria in each tier to instead become
incrementally more difficult. The proposed criteria in Tier 2 requires
that a Member have an has an ADAV in Firm/Market Maker/Away MM orders
that establish a new NBBO greater than or equal to 0.15% of average
OCV, in Tier 3 requires a threshold greater than or equal to 0.30% of
average OCV, in Tier 4 requires a threshold of greater than or equal to
0.50% of average OCV, and in Tier 5 requires a threshold of 0.80% of
average OCV. In addition to this, the proposed change amends the
criteria in prong 1 of Tier 5 to decrease the threshold of Non-Customer
orders over average OCV from 3.00% to 2.55% and adopts an additional
criteria in Tier 5, a new prong 2 (current prong 2 will become prong
3), which requires an ADAV in Non-Customer Non-Penny orders greater
than or equal to 0.25% of average OCV. The proposed increases in Firm/
Market Maker/Away MM order ADAV that establish a new NBBO as a
percentage of average OCV in Tiers 2 through 5 are intended to
incrementally increase the level of difficulty in achieving each of
these tiers, thus, incentivizing Members to increase their overall
order flow to the Exchange by encouraging those Members to strive for
the different, incrementally more difficult tier criteria under the
proposed tiers to receive the additional rebates. The proposed
additional prong of criteria in Tier 5 is also designed to
incrementally increase the level of difficulty in achieving Tier 5,
while the proposed decrease in the threshold of ADAV over average OCV
in prong 1 is designed to balance the entirety of Tier 5's difficulty
in light of the proposed additional criteria, incentivizing Members to
continue to submit Non-Customer orders to the Exchange's Order Book.
The Exchange believes that the proposed fee changes are overall
designed to incentivize more Firm, Market Maker, and Away Market Maker
add volume order flow to establish a new NBBO as well as overall Non-
Customer add volume order flow to the Exchange. Increased add volume
order flow, particularly by liquidity providers, contributes to a
deeper, more liquid market, which, in turn, provides for increased
execution opportunities and thus overall enhanced price discovery and
price improvement opportunities on the Exchange. As such, this benefits
all Members by contributing towards a robust and well-balanced market
ecosystem, offering additional flexibility for all investors to enjoy
cost savings, supporting the quality of price discovery, promoting
market transparency and improving investor protection.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\8\ in general, and
furthers the objectives of Section 6(b)(4),\9\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its Members and issuers and other persons
using its facilities. The Exchange also believes that the proposed rule
change is consistent with the objectives of Section 6(b)(5) \10\
requirements that the rules of an exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect
[[Page 50057]]
investors and the public interest, and, particularly, is not designed
to permit unfair discrimination between customers, issuers, brokers, or
dealers.
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78f.
\9\ 15 U.S.C. 78f(b)(4).
\10\ 15 U.S.C. 78f.(b)(5).
---------------------------------------------------------------------------
As described above, the Exchange operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. The proposed rule change
reflects a competitive pricing structure designed to incentivize market
participants to direct their order flow to the Exchange, which the
Exchange believes would enhance market quality to the benefit of all
Members.
In particular, the Exchange believes the proposed tiers are
reasonable because they amend existing opportunities in a manner that
incentivizes increased Non-Customer (which would include, where
applicable, Firm, Market Maker, and Away MM specifically) order flow
via incrementally more challenging criteria in order to receive the
same additional rebates on a Member's qualifying orders. The Exchange
notes that volume-based incentives and discounts have been widely
adopted by exchanges,\11\ including the Exchange,\12\ and are
reasonable, equitable and non-discriminatory because they are open to
all Members on an equal basis and provide additional benefits or
discounts that are reasonably related to (i) the value to an exchange's
market quality and (ii) associated higher levels of market activity,
such as higher levels of liquidity provision and/or growth patterns.
Additionally, as noted above, the Exchange operates in a highly
competitive market. The Exchange is only one of several options venues
to which market participants may direct their order flow, and it
represents a small percentage of the overall market. Competing options
exchanges offer similar tiered pricing structures to that of the
Exchange, including schedules of rebates and fees that apply based upon
Members achieving certain volume and/or growth thresholds.
---------------------------------------------------------------------------
\11\ See e.g., NYSE Arca Options Fee Schedule, Firm and Broker
Dealer Penny Posting Credit Tiers, and Non-Customer Non-Penny
Posting Credit Tiers.
\12\ See e.g., The Exchange's Fee Schedule, Footnote 4, NBBO
Setter Tiers.
---------------------------------------------------------------------------
Moreover, the Exchange believes the amended NBBO Setter Tiers are a
reasonable means to encourage Members to increase their liquidity on
the Exchange, specifically their Non-Customer add volume order flow.
The Exchange believes that modifying existing criteria in Tiers 2
through 5 to be incrementally more difficult to achieve, as opposed to
the current fixed criteria pursuant to the same prong in each tier, and
adopting an additional prong of criteria in Tier 5 are reasonable
modifications of existing criteria because they are designed to
incrementally increase the difficulty in achieving these tiers, thereby
incentivizing Members to increase their overall add volume order flow,
and particularly, to strive to establish new NBBOs. This benefits all
market participants by incentivizing continuous display of and
opportunity to execute at the best prices, and by incentivizing overall
additional liquidity, which signals other market participants to take
the additional execution opportunities provided by such liquidity. This
overall increase in activity deepens the Exchange's liquidity pool,
offers additional cost savings, supports the quality of price
discovery, promotes market transparency and improves market quality,
for all investors. The Exchange also notes that it is reasonable to
decrease the threshold of ADAV as a percentage average OCV in prong 1
of Tier 5 in order to balance the ultimate level of difficult in
achieving the tier with the added proposed prong of criteria that a
Member must meet to achieve the current rebate.
Further, the Exchange believes that the proposed rule changes are
reasonable as they represent proportional increases in difficulty per
adjacent tiers and the criteria thresholds appropriately reflect the
incremental difficulty to achieve the existing rebates that increase
with each ascending tier. For example, the Exchange proposes to
simultaneously increase the ADAV thresholds of Firm/Market Maker/Away
MM orders that establish a new NBBO in each of Tier 2, 3, 4, and 5 in a
manner that poses a step up in difficulty per each ascending tier to
achieve the current ascending rebates per each tier. The Exchange also
believes that the proposed change to Tier 5 in adding another prong of
criteria, as well as tempering the difficulty posed by the added prong
by decreasing the threshold of ADAV over average OCV in an existing
prong, appropriately balances the step up in difficulty from Tier 4 to
Tier 5. The Exchange again notes that the proposed rule changes do not
alter the amount of any of the current rebates in place.
The Exchange believes that the proposal represents an equitable
allocation of fees and is not unfairly discriminatory because all
Members will be eligible for the proposed tier and the corresponding
additional rebate will apply uniformly to all Members that reach the
proposed tier criteria. That is, the proposed tiers are designed as an
incentive to any and all Members interested in meeting the tier
criteria to submit additional order flow to the Exchange and each will
receive the proposed additional rebate if the tier criteria is met.
The Exchange believes that the proposal represents an equitable
allocation of rebates and is not unfairly discriminatory because all
Members will continue to be eligible for NBBO Setter Tiers 2 through 5,
as amended. The proposed changes to the tiers' criteria are designed as
an incentive to any and all Members interested in meeting the tier
criteria to submit additional Non-Customer orders (with opportunities
to achieve such tiers via criteria for Firm/Market Maker/Away MM
orders) to the Exchange. Each will have the opportunity to submit the
requisite order flow and will receive the applicable existing rebate if
the tier criteria are met. Without having a view of activity on other
markets and off-exchange venues, the Exchange has no way of knowing
whether this proposed rule change would definitely result in any
Members qualifying for the proposed tiers. While the Exchange has no
way of predicting with certainty how the proposed tiers will impact
Member activity, the Exchange anticipates that approximately at least
three Members will be able to compete for and achieve the amended
criteria in each of Tier 2 and Tier 3, and at least one Member will be
able to compete for and achieve the amended criteria in each of Tier 4
and Tier 5. The Exchange anticipates that the tiers will particularly
include liquidity providers, such as traditional Market Makers, and
wholesale or consolidator firms that mainly make markets for retail
orders, each providing distinct types of order flow to the Exchange to
the benefit of all market participants. The Exchange also notes that
the proposed tiers will not adversely impact any Member's pricing or
their ability to qualify for other rebate tiers. Rather, should a
Member not meet the proposed criteria for a tier, the Member will
merely not receive the corresponding additional rebate. Furthermore,
the existing rebate and fees will continue to uniformly apply to all
Members that meet the required criteria, as amended, per each
respective tier.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on intramarket or intermarket competition that is not
[[Page 50058]]
necessary or appropriate in furtherance of the purposes of the Act.
Rather, as discussed above, the Exchange believes that the proposed
change would encourage the submission of additional liquidity to a
public exchange, thereby promoting market depth, price discovery and
transparency and enhancing order execution opportunities for all
Members. As a result, the Exchange believes that the proposed change
furthers the Commission's goal in adopting Regulation NMS of fostering
competition among orders, which promotes ``more efficient pricing of
individual stocks for all types of orders, large and small.'' \13\
---------------------------------------------------------------------------
\13\ Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
---------------------------------------------------------------------------
The Exchange believes the proposed rule change does not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the proposed
change applies to all Members equally in that all Members are eligible
to achieve the tiers' proposed criteria, have a reasonable opportunity
to meet the tiers' proposed criteria and will all receive the existing
rebates if such criteria is met. Overall, the proposed change is
designed to attract additional Non-Customer (including, where
applicable, specifically Firm/Market Maker/Away MM) order flow to the
Exchange. The Exchange believes that the modified tier criteria would
incentivize market participants to strive to increase such order flow
to the Exchange to meet the proposed criteria and, as a result, provide
for deeper levels of liquidity, increasing trading opportunities for
other market participants, thus signaling further trading activity,
ultimately incentivizing more overall order flow and improving price
transparency on the Exchange. Greater overall order flow and pricing
transparency benefits all market participants on the Exchange by
generally providing continuous trading opportunities, enhancing market
quality, and continuing to encourage Members to send orders, thereby
contributing towards a robust and well-balanced market ecosystem, which
benefits all market participants.
Next, the Exchange believes the proposed rule change does not
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As previously
discussed, the Exchange operates in a highly competitive market.
Members have numerous alternative venues that they may participate on
and director their order flow, including 15 other options exchanges and
off-exchange venues. Additionally, the Exchange represents a small
percentage of the overall market. Based on publicly available
information, no single options exchange has more than 17% of the market
share.\14\ Therefore, no exchange possesses significant pricing power
in the execution of option order flow. Indeed, participants can readily
choose to send their orders to other exchange and off-exchange venues
if they deem fee levels at those other venues to be more favorable.
Moreover, 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 investors and listed companies.'' \15\ The fact
that this market is competitive has also long been recognized by the
courts. In NetCoalition v. Securities and Exchange Commission, the D.C.
Circuit stated as follows: ``[n]o one disputes that competition for
order flow is `fierce.' . . . As the SEC explained, `[i]n the U.S.
national market system, buyers and sellers of securities, and the
broker-dealers that act as their order-routing agents, have a wide
range of choices of where to route orders for execution'; [and] `no
exchange can afford to take its market share percentages for granted'
because `no exchange possesses a monopoly, regulatory or otherwise, in
the execution of order flow from broker dealers'. . . .''.\16\
Accordingly, the Exchange does not believe its proposed fee change
imposes any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
---------------------------------------------------------------------------
\14\ See supra note 3.
\15\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\16\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
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 \17\ and paragraph (f) of Rule 19b-4 \18\
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.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 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-2020-065 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-2020-065. 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
[[Page 50059]]
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-2020-065 and should be submitted on or before September 8,
2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------
\19\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-17823 Filed 8-14-20; 8:45 am]
BILLING CODE 8011-01-P
