Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Equity Transaction Fee Rebate Tiers, 71952-71956 [2020-24962]
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71952
Federal Register / Vol. 85, No. 219 / Thursday, November 12, 2020 / Notices
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BILLING CODE 7590–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90352; File No. SR–
CboeBZX–2020–078]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend the
Equity Transaction Fee Rebate Tiers
November 5, 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 November
2, 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 the 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 00078
Fmt 4703
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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 applicable to its equities
trading platform (‘‘BZX Equities’’) to: (1)
Update the Supplemental Incentive
Program Tiers; (2) update the Lead
Market Maker (‘‘LMM’’) Add Volume
Tiers and (3) eliminate the NonDisplayed Tape A Tier 1, effective
November 2, 2020.
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 registered equities exchanges, as well
as a number of alternative trading
systems and other off-exchange venues
that do not have similar self-regulatory
responsibilities under the Exchange Act,
to which market participants may direct
their order flow. Based on publicly
available information,3 no single
registered equities exchange has more
than 18% of the market share. Thus, in
such a low-concentrated and highly
competitive market, no single equities
exchange possesses significant pricing
power in the execution of order flow.
The Exchange in particular operates a
‘‘Maker-Taker’’ model whereby it pays
credits to members that provide
liquidity and assesses fees to those that
remove liquidity. The Exchange’s fee
schedule sets forth the standard rebates
and rates applied per share for orders
3 See Cboe Global Markets, U.S. Equities Market
Volume Summary, Month-to-Date (October 28,
2020), available at https://markets.cboe.com/us/
equities/market_statistics/.
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Federal Register / Vol. 85, No. 219 / Thursday, November 12, 2020 / Notices
that provide and remove liquidity,
respectively. Currently, for orders
priced at or above $1.00, the Exchange
provides a standard rebate of $0.0020
per share for orders that add liquidity
and assesses a fee of $0.0030 per share
for orders that remove liquidity. For
orders priced below $1.00, the Exchange
provides a standard rebate of $0.0009
per share for orders that add liquidity
and assesses a fee of 0.30% of total
dollar value for orders that remove
liquidity. 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.
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Proposed Updates to the Supplemental
Incentive Program Tiers
The Exchange currently offers three
different Supplemental Incentive
Program Tiers under footnote 1 of the
Fee Schedule, wherein a Member may
receive an additional rebate for
qualifying orders where a Member adds
a certain Tape ADAV 4 as a percentage
of that Tape’s TCV. Specifically, the
Supplemental Incentive Program Tiers
offered are as follows:
• Supplemental Incentive Program—
Tape A Tier offers an additional rebate
of $0.0001 for orders yielding fee code
V 5 where a Member has a Tape A
ADAV greater than or equal to 0.30% of
the Tape A TCV;
• Supplemental Incentive Program—
Tape B Tier offers an additional rebate
of $0.0001 for orders yielding fee code
B 6 where a Member has a Tape B ADAV
greater than or equal to 0.30% of the
Tape B TCV; and
• Supplemental Incentive Program—
Tape C Tier offers an additional rebate
of $0.0001 for orders yielding fee code
Y 7 where a Member has a Tape C ADAV
greater than or equal to 0.30% of the
Tape C TCV;
The proposed rule change amends the
tiers’ criteria by increasing the
percentage of Tape ADAV over Tape
TCV from 0.30% to 0.40% for
Supplemental Incentive Program—Tape
4 ‘‘ADAV’’ means average daily added volume
calculated as the number of shares added per day.
5 Appended to orders that add liquidity to BZX
(Tape A) and offered a rebate of $0.002000 per
share.
6 Appended to orders that add liquidity to BZX
(Tape B) and offered a rebate of $0.00200 per share.
7 Appended to orders that add liquidity to BZX
(Tape C) and offered a rebate of $0.00200 per share.
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A and Tape C Tiers, and from 0.30% to
0.50% for Supplemental Incentive
Program—Tape B Tier. The proposed
rule change to the Supplemental
Incentive Program Tiers does not alter
any of the additional rebate amounts
currently offered. Although the
proposed changes to the thresholds
result in more stringent criteria,
Members still have an opportunity to
receive the additional rebate if they
meet the applicable tier threshold.
Moreover, the proposed changes are
designed to encourage Members to
increase their Displayed liquidity in
Tape A, B and C securities on the
Exchange, thereby contributing to a
deeper and more liquid market, which
benefits all market participants and
provides greater execution opportunities
on the Exchange.
Proposed Updates to the LMM Add
Volume Tiers
Under the Exchange’s LMM Program,
the Exchange offers daily incentives for
LMMs in securities listed on the
Exchange for which the LMM meets
certain Minimum Performance
Standards.8 Such daily incentives are
determined based on the number of
Cboe-listed securities for which the
LMM meets such Minimum
Performance Standards and the average
auction volume across such securities.
Generally, the more LMM Securities 9
for which the LMM meets the Minimum
Performance Standards and the higher
the auction volume across those
securities, the greater the total daily
payment to the LMM. Currently, the
Exchange offers 3 LMM Add Volume
Tiera [sic] under footnote 14 of the Fee
Schedule, which provides an additional
rebate for applicable LMM orders.
Specifically, the Supplemental
Incentive Program Tiers currently
offered are as follows:
• LMM Add Volume Tier 1 provides
an additional rebate of $0.0001 for
orders yielding fee codes B, V and Y
where an LMM (1) has an ADAV greater
than or equal to 0.20% of the TCV, (2)
8 As defined in Rule 11.8(e)(1)(E), the term
‘‘Minimum Performance Standards’’ means a set of
standards applicable to an LMM that may be
determined from time to time by the Exchange.
Such standards will vary between LMM Securities
depending on the price, liquidity, and volatility of
the LMM Security in which the LMM is registered.
The performance measurements will include: (A)
Percent of time at the NBBO; (B) percent of
executions better than the NBBO; (C) average
displayed size; and (D) average quoted spread. For
additional detail, see Original LMM Filing.
9 As defined in Rule 11.8(e)(1)(D), the term ‘‘LMM
Security’’ means a Listed Security that has an LMM.
As defined in Rule 11.8(e)(1)(B), the term ‘‘Listed
Security’’ means any ETP or any Primary Equity
Security or Closed-End Fund listed on the Exchange
pursuant to Rule 14.8 or 14.9.
PO 00000
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71953
has an Average Aggregate Daily Auction
Volume in LMM Securities greater than
or equal to 500,000 and (3) is enrolled
in at least 75 LMM Securities.
• LMM Add Volume Tier 2 provides
an additional rebate of $0.0006 for
orders yielding fee codes V and ‘‘HV’’ 10
where an LMM (1) is enrolled in at least
50 LMM Securities, and (2) has a Tape
A ADAV greater than or equal to 0.10%
of the Tape A TCV;
• LMM Add Volume Tier 3 provides
an additional rebate of $0.0003 for
orders yielding fee codes B and ‘‘HB’’ 11
where an LMM (1) is enrolled is
enrolled in at least 50 LMM Securities,
and (2) has a Tape B ADAV greater than
or equal to 0.20% of the Tape B TCV;
• LMM Add Volume Tier 4 provides
an additional rebate of $0.0006 for
orders yielding fee codes Y and ‘‘HY’’ 12
where an LMM (1) is enrolled in at least
50 LMM Securities, and (2) has a Tape
C ADAV greater than or equal to 0.10%
of the Tape C TCV.
The Exchange proposes to update the
TCV thresholds in LMM Add Volume
Tiers 2, 3 and 4 as follows below. The
Exchange notes that the additional
rebates currently provided in each tier
remain the same, as do the remaining
criteria for each tier.
• To meet the proposed criteria in
Tier 2, a Member must add a Tape A
ADV greater than or equal to 0.20%
(instead of 0.10%) of the Tape A TCV.
• To meet the proposed criteria in
Tier 3, a Member must add a Tape B
ADV greater than or equal to 0.35%
(instead of 0.20%) of the Tape B TCV.
• To meet the proposed criteria in
Tier 4, a Member must add a Tape C
ADV greater than or equal to 0.20%
(instead of 0.10%) of the Tape C TCV.
Although the proposed changes to
these thresholds result in more stringent
criteria, Members will still have an
opportunity to receive the additional
rebates for meeting the applicable tier
thresholds. Moreover, the proposed
changes are designed to encourage
LMMs to increase both their Displayed
and Non-Displayed liquidity in Tape A,
B and C securities on the Exchange,
thereby contributing to a deeper and
more liquid market, which benefits all
market participants and provides greater
execution opportunities on the
Exchange.
10 Appended to non-displayed orders that add
liquidity (Tape A) and are assessed a standard
rebate of $0.00150.
11 Appended to non-displayed orders that add
liquidity (Tape B) and are assessed a standard
rebate of $0.00150.
12 Appended to non-displayed orders that add
liquidity (Tape C) and are assessed a standard
rebate of $0.00150.
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Non-Displayed Add Volume Tape A
Tier 1
The Exchange also proposes to
eliminate Non-Displayed Add Volume
Tape A Tier 1, which is currently
described under footnote 1 of the fees
schedule. Particularly, this tier applies
to orders yielding fee code HV and
provides a $0.00275 per share rebate to
Members that add an ADV greater than
or equal to 0.20% of the TCV as NonDisplayed orders that yield fee codes HI
or HV. Particularly, no Member has
reached this tier in several months and
the Exchange therefore no longer wishes
to, nor is it required to, maintain such
tiers.
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,13
in general, and furthers the objectives of
Section 6(b)(4),14 in particular, as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its Members,
issuers and other persons using its
facilities. 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 changes
reflect 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. The
Exchange notes that relative volumebased incentives and discounts have
been widely adopted by exchanges,
including the Exchange, 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 highly
competitive market. The Exchange is
only one of several equity venues to
which market participants may direct
their order flow, and it represents a
small percentage of the overall market.
It is also only one of several maker-taker
exchanges. Competing equity exchanges
offer similar tiered pricing structures,
including schedules of rebates and fees
13 15
14 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
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that apply based upon members
achieving certain volume and/or growth
thresholds, as well as assess similar fees
or rebates for similar types of orders, to
that of the Exchange. These competing
pricing schedules, moreover, are
presently comparable to those that the
Exchange provides, including the
pricing of comparable criteria and/or
fees and rebates.
Regarding the proposed updates to the
Supplemental Incentive and LMM Add
Volume Tiers, the Exchange believes
that the proposed tiers are reasonable
because each of the tiers, as modified,
continue to be available to all Members
and provide Members an opportunity to
receive an additional rebate, albeit using
more stringent criteria. Additionally, the
Exchange also believes that the tiers,
even as amended, are reasonable,
equitable and not unfairly
discriminatory because competing
equity exchanges offer similar tiered
pricing structures with comparable
criteria to that of the Supplemental
Incentive 15 and LMM Add Volume
Tiers.16 The Exchange also believes that
the current additional rebates continue
to be commensurate with the proposed
criteria. That is, the additional rebates
reasonably reflect the difficulty in
achieving the corresponding criteria as
amended.
The Exchange further believes that the
proposed criteria and corresponding
additional rebates per tier are reasonable
and equitable. Generally, Tape B
experiences less variability in terms of
broader market share, whereas Tape A
and C tend to experience more
volatility. As a result, the Exchange has
observed that Members generally submit
less Tape volume in connection with
Tape A and Tape C. For example, the
average Tape ADAV as a percentage of
Tape TCV in Tape A and Tape C from
LMM Members in the last month was
lower than their average Tape ADAV
over Tape TCV in Tape B. As a result,
the Exchange believes Members are
more easily able to meet a volume
requirement for Tape B, and therefore,
it is equitable to provide for a slightly
higher ADAV Tape B threshold of Tape
B TCV than that for Tape A and C.
The Exchange believes the proposed
changes are also a reasonable means to
incentivize Members to continue to
provide liquidity adding, displayed
volume (Supplemental Incentive Tiers)
15 See NYSE Price List, ‘‘Credit Applicable to
Supplemental Liquidity Providers (‘‘SLPs’’)’’ and
Nasdaq Equity 7, Section 118(a)(1).
16 See e.g., Nasdaq Phlx Equity 7 Pricing
Schedule, Section 3(c), which provides up to an
additional credit of $0.0003 for various order and
quoting volume thresholds for the exchange’s
qualified market makers (‘‘QMMs’’).
PO 00000
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and displayed and non-displayed
volume (for LMM Add Volume Tiers),
which will benefit all market
participants by incentivizing continuous
liquidity and thus, deeper more liquid
markets as well as increased execution
opportunities. Particularly, the
proposed changes are designed to
incentivize continuous displayed
liquidity, which signals other market
participants to take the additional
execution opportunities provided by
such liquidity, while the proposed
incentives to provide non-displayed
liquidity will further contribute to a
deeper, more liquid market and provide
even more execution opportunities for
active market participants at improved
prices. 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.
In addition to this, 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
the Supplemental Incentive Tiers, as
amended, and for the LMM Add
Volume Tiers, as amended. 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. The
Exchange notes that most recently,
seven Members satisfied Supplemental
Incentive Tier Tape A, seven members
satisfied Supplemental Incentive Tier
Tape B, and five Members satisfied
Supplemental Incentive Tier Tape C.
While the Exchange has no way of
predicting with certainty how the
proposed tier will impact Member
activity, the Exchange anticipates that
approximately four Members will be
able to satisfy Supplemental Incentive
Tier Tape A (as amended), five Members
will be able to satisfy Supplemental
Incentive Tier Tape B (as amended) and
three Members will be able to satisfy
Supplemental Incentive Tier Tape C (as
amended). With respect to the LMM
Add Volume Tiers, the Exchange notes
that most recently, one Member satisfied
LMM Add Volume Tier 2, two Members
satisfied LMM Add Volume Tier 3 and
two Members satisfied LMM Add
Volume Tier 4. While the Exchange has
no way of predicting with certainty how
the proposed tier will impact Member
activity, the Exchange anticipates that
approximately one Member will be able
to satisfy LMM Add Volume Tier 2 (as
amended), one Member will be able to
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satisfy LMM Add Volume Tier 3 (as
amended) and one Member will be able
to satisfy LMM Add Volume Tier 4 (as
amended). The Exchange also notes that
the proposed tiers will not adversely
impact any Member’s 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.
Finally, the Exchange believes the
proposed amendment to remove NonDisplayed Add Volume Tape A Tier 1
is reasonable because no Member has
achieved this tier in several months.
Moreover, the Exchange is not required
to maintain this tier and Members still
have a number of other opportunities
and a variety of ways to receive
enhanced rebates for Non-Displayed
liquidity, including the enhanced
rebates under the Non-Displayed Add
Volume Tiers under footnote 1 of the
fees schedule. The Exchange believes
the proposal to eliminate these tiers is
also equitable and not unfairly
discriminatory because it applies to all
Members.
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 competition that is not
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
order flow to a public exchange, thereby
promoting market depth, execution
incentives and enhanced execution
opportunities, as well as price discovery
and transparency 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.’’ 17
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 changes apply to all
Members equally in that all Members
continue to be eligible for the
Supplemental Incentive Tiers and LMM
Add Volume Tiers (and have the same
opportunity to become an LMM
Member), have a reasonable opportunity
17 Securities Exchange Act Release No. 51808, 70
FR 37495, 37498–99 (June 29, 2005) (S7–10–04)
(Final Rule).
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to meet the tiers’ criteria and will all
receive the corresponding additional
rebates if such criteria are met.
Additionally, the proposed tier changes
are designed to attract additional order
flow to the Exchange. The Exchange
believes that the updated tier criteria
would incentivize market participants
to direct liquidity adding order flow to
the Exchange, bringing with it
additional execution opportunities for
market participants and improved price
transparency. Greater overall order flow,
trading opportunities, and pricing
transparency benefits all market
participants on the Exchange by
enhancing market quality and
continuing to encourage Members to
send orders, thereby contributing
towards a robust and well-balanced
market ecosystem.
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
direct their order flow, including 15
other equities exchanges and offexchange venues and alternative trading
systems. Additionally, the Exchange
represents a small percentage of the
overall market. Based on publicly
available information, no single equities
exchange has more than 18% of the
market share. Therefore, no exchange
possesses significant pricing power in
the execution of order flow. Indeed,
participants can readily choose to send
their orders to other exchange and offexchange 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.’’ 18 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
18 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
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71955
‘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’. . . .’’.19 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.
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 20 and paragraph (f) of Rule
19b–4 thereunder.21 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–2020–078 on the subject line.
19 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)).
20 15 U.S.C. 78s(b)(3)(A).
21 17 CFR 240.19b–4(f).
E:\FR\FM\12NON1.SGM
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71956
Federal Register / Vol. 85, No. 219 / Thursday, November 12, 2020 / Notices
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–2020–078. 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–2020–078 and
should be submitted on or before
December 3, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.22
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–24962 Filed 11–10–20; 8:45 am]
jbell on DSKJLSW7X2PROD with NOTICES
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
the most significant aspects of such
statements.
[Release No. 34–90365; File No. SR–
CboeEDGX–2020–052]
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change to Rule 14.10,
Requirements for Securities Issued by
the Exchange or Its Affiliates
November 6, 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 October
28, 2020, Cboe EDGX Exchange, Inc.
(the ‘‘Exchange’’ or ‘‘EDGX’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II 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
The Exchange proposes to amend
Rule 14.10 (Requirements for Securities
Issued by the Exchange or its Affiliates)
regarding the requirements for the
listing of securities that are issued by
the Exchange or any of its affiliates. The
Exchange notes that the changes
proposed herein are substantively
identical to changes adopted on Cboe
BZX Exchange, Inc. (‘‘BZX’’).3
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
options/regulation/rule_filings/edgx/),
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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 86623
(August 9, 2019) 84 FR 41771 (August 15, 2019)
(SR–CboeBZX–2019–073) (the ‘‘BZX Filing’’).
2 17
22 17
CFR 200.30–3(a)(12).
VerDate Sep<11>2014
17:07 Nov 10, 2020
Jkt 253001
PO 00000
Frm 00082
Fmt 4703
Sfmt 4703
1. Purpose
The Exchange proposes to amend
Rule 14.10 (Requirements for Securities
Issued by the Exchange or its Affiliates)
regarding the requirements for the
listing of securities that are issued by
the Exchange or any of its affiliates. The
Exchange notes that the changes
proposed herein are substantively
identical to changes adopted on Cboe
BZX Exchange, Inc. (‘‘BZX’’).4
Rule 14.10 sets forth certain
monitoring requirements that must be
met throughout the continued listing
and trading of securities issued by the
Exchange or its affiliates. More
specifically, Rule 14.10(b) and (c)
provide that:
• Throughout the continued listing
and trading of an Affiliate Security 5 on
the Exchange, the Exchange shall
prepare a quarterly report on the
Affiliate Security for the Regulatory
Oversight Committee (‘‘ROC’’) of the
Exchange’s Board of Directors that
describes the Exchange’s monitoring of
the Affiliate Security’s compliance with
the Exchange’s listing standards (the
‘‘Quarterly Listing Report’’);
• once a year, an independent
accounting firm shall review the listing
standards for the Affiliate Security to
ensure that the issuer is in compliance
with the listing requirements (‘‘Annual
Report’’), and a copy of the Annual
Report shall be forwarded promptly to
the ROC; and
• throughout the trading of an
Affiliate Security on the Exchange, the
Exchange shall prepare a quarterly
report on the Affiliate Security for the
Regulatory Oversight Committee of the
Exchange’s Board of Directors that
describes the Exchange’s monitoring of
the trading of the Affiliate Security,
including summaries of all related
surveillance alerts, complaints,
regulatory referrals, trades cancelled or
adjusted pursuant to Exchange Rules,
investigations, examinations, formal and
informal disciplinary actions, exception
reports and trading data used to ensure
the Affiliate Security’s compliance with
4 See Securities Exchange Act Release No. 86623
(August 9, 2019) 84 FR 41771 (August 15, 2019)
(SR–CboeBZX–2019–073) (the ‘‘BZX Filing’’).
5 As defined in Rule 14.10(a)(2), the term
‘‘Affiliate Security’’ means any security issued by
a EDGX Affiliate or any Exchange-listed option on
any such security, with the exception of Portfolio
Depository Receipts as defined in Rule 14.8(d) and
Investment Company Units as defined in Rule 14.2.
E:\FR\FM\12NON1.SGM
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]]>Agencies
[Federal Register Volume 85, Number 219 (Thursday, November 12, 2020)]
[Notices]
[Pages 71952-71956]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-24962]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90352; File No. SR-CboeBZX-2020-078]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Equity Transaction Fee Rebate Tiers
November 5, 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 November 2, 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 the 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 applicable to its
equities trading platform (``BZX Equities'') to: (1) Update the
Supplemental Incentive Program Tiers; (2) update the Lead Market Maker
(``LMM'') Add Volume Tiers and (3) eliminate the Non-Displayed Tape A
Tier 1, effective November 2, 2020.
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 registered equities exchanges, as well as a
number of alternative trading systems and other off-exchange venues
that do not have similar self-regulatory responsibilities under the
Exchange Act, to which market participants may direct their order flow.
Based on publicly available information,\3\ no single registered
equities exchange has more than 18% of the market share. Thus, in such
a low-concentrated and highly competitive market, no single equities
exchange possesses significant pricing power in the execution of order
flow. The Exchange in particular operates a ``Maker-Taker'' model
whereby it pays credits to members that provide liquidity and assesses
fees to those that remove liquidity. The Exchange's fee schedule sets
forth the standard rebates and rates applied per share for orders
[[Page 71953]]
that provide and remove liquidity, respectively. Currently, for orders
priced at or above $1.00, the Exchange provides a standard rebate of
$0.0020 per share for orders that add liquidity and assesses a fee of
$0.0030 per share for orders that remove liquidity. For orders priced
below $1.00, the Exchange provides a standard rebate of $0.0009 per
share for orders that add liquidity and assesses a fee of 0.30% of
total dollar value for orders that remove liquidity. 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.
---------------------------------------------------------------------------
\3\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (October 28, 2020), available at https://markets.cboe.com/us/equities/market_statistics/.
---------------------------------------------------------------------------
Proposed Updates to the Supplemental Incentive Program Tiers
The Exchange currently offers three different Supplemental
Incentive Program Tiers under footnote 1 of the Fee Schedule, wherein a
Member may receive an additional rebate for qualifying orders where a
Member adds a certain Tape ADAV \4\ as a percentage of that Tape's TCV.
Specifically, the Supplemental Incentive Program Tiers offered are as
follows:
---------------------------------------------------------------------------
\4\ ``ADAV'' means average daily added volume calculated as the
number of shares added per day.
---------------------------------------------------------------------------
Supplemental Incentive Program--Tape A Tier offers an
additional rebate of $0.0001 for orders yielding fee code V \5\ where a
Member has a Tape A ADAV greater than or equal to 0.30% of the Tape A
TCV;
---------------------------------------------------------------------------
\5\ Appended to orders that add liquidity to BZX (Tape A) and
offered a rebate of $0.002000 per share.
---------------------------------------------------------------------------
Supplemental Incentive Program--Tape B Tier offers an
additional rebate of $0.0001 for orders yielding fee code B \6\ where a
Member has a Tape B ADAV greater than or equal to 0.30% of the Tape B
TCV; and
---------------------------------------------------------------------------
\6\ Appended to orders that add liquidity to BZX (Tape B) and
offered a rebate of $0.00200 per share.
---------------------------------------------------------------------------
Supplemental Incentive Program--Tape C Tier offers an
additional rebate of $0.0001 for orders yielding fee code Y \7\ where a
Member has a Tape C ADAV greater than or equal to 0.30% of the Tape C
TCV;
---------------------------------------------------------------------------
\7\ Appended to orders that add liquidity to BZX (Tape C) and
offered a rebate of $0.00200 per share.
---------------------------------------------------------------------------
The proposed rule change amends the tiers' criteria by increasing
the percentage of Tape ADAV over Tape TCV from 0.30% to 0.40% for
Supplemental Incentive Program--Tape A and Tape C Tiers, and from 0.30%
to 0.50% for Supplemental Incentive Program--Tape B Tier. The proposed
rule change to the Supplemental Incentive Program Tiers does not alter
any of the additional rebate amounts currently offered. Although the
proposed changes to the thresholds result in more stringent criteria,
Members still have an opportunity to receive the additional rebate if
they meet the applicable tier threshold. Moreover, the proposed changes
are designed to encourage Members to increase their Displayed liquidity
in Tape A, B and C securities on the Exchange, thereby contributing to
a deeper and more liquid market, which benefits all market participants
and provides greater execution opportunities on the Exchange.
Proposed Updates to the LMM Add Volume Tiers
Under the Exchange's LMM Program, the Exchange offers daily
incentives for LMMs in securities listed on the Exchange for which the
LMM meets certain Minimum Performance Standards.\8\ Such daily
incentives are determined based on the number of Cboe-listed securities
for which the LMM meets such Minimum Performance Standards and the
average auction volume across such securities. Generally, the more LMM
Securities \9\ for which the LMM meets the Minimum Performance
Standards and the higher the auction volume across those securities,
the greater the total daily payment to the LMM. Currently, the Exchange
offers 3 LMM Add Volume Tiera [sic] under footnote 14 of the Fee
Schedule, which provides an additional rebate for applicable LMM
orders. Specifically, the Supplemental Incentive Program Tiers
currently offered are as follows:
---------------------------------------------------------------------------
\8\ As defined in Rule 11.8(e)(1)(E), the term ``Minimum
Performance Standards'' means a set of standards applicable to an
LMM that may be determined from time to time by the Exchange. Such
standards will vary between LMM Securities depending on the price,
liquidity, and volatility of the LMM Security in which the LMM is
registered. The performance measurements will include: (A) Percent
of time at the NBBO; (B) percent of executions better than the NBBO;
(C) average displayed size; and (D) average quoted spread. For
additional detail, see Original LMM Filing.
\9\ As defined in Rule 11.8(e)(1)(D), the term ``LMM Security''
means a Listed Security that has an LMM. As defined in Rule
11.8(e)(1)(B), the term ``Listed Security'' means any ETP or any
Primary Equity Security or Closed-End Fund listed on the Exchange
pursuant to Rule 14.8 or 14.9.
---------------------------------------------------------------------------
LMM Add Volume Tier 1 provides an additional rebate of
$0.0001 for orders yielding fee codes B, V and Y where an LMM (1) has
an ADAV greater than or equal to 0.20% of the TCV, (2) has an Average
Aggregate Daily Auction Volume in LMM Securities greater than or equal
to 500,000 and (3) is enrolled in at least 75 LMM Securities.
LMM Add Volume Tier 2 provides an additional rebate of
$0.0006 for orders yielding fee codes V and ``HV'' \10\ where an LMM
(1) is enrolled in at least 50 LMM Securities, and (2) has a Tape A
ADAV greater than or equal to 0.10% of the Tape A TCV;
---------------------------------------------------------------------------
\10\ Appended to non-displayed orders that add liquidity (Tape
A) and are assessed a standard rebate of $0.00150.
---------------------------------------------------------------------------
LMM Add Volume Tier 3 provides an additional rebate of
$0.0003 for orders yielding fee codes B and ``HB'' \11\ where an LMM
(1) is enrolled is enrolled in at least 50 LMM Securities, and (2) has
a Tape B ADAV greater than or equal to 0.20% of the Tape B TCV;
---------------------------------------------------------------------------
\11\ Appended to non-displayed orders that add liquidity (Tape
B) and are assessed a standard rebate of $0.00150.
---------------------------------------------------------------------------
LMM Add Volume Tier 4 provides an additional rebate of
$0.0006 for orders yielding fee codes Y and ``HY'' \12\ where an LMM
(1) is enrolled in at least 50 LMM Securities, and (2) has a Tape C
ADAV greater than or equal to 0.10% of the Tape C TCV.
---------------------------------------------------------------------------
\12\ Appended to non-displayed orders that add liquidity (Tape
C) and are assessed a standard rebate of $0.00150.
---------------------------------------------------------------------------
The Exchange proposes to update the TCV thresholds in LMM Add
Volume Tiers 2, 3 and 4 as follows below. The Exchange notes that the
additional rebates currently provided in each tier remain the same, as
do the remaining criteria for each tier.
To meet the proposed criteria in Tier 2, a Member must add
a Tape A ADV greater than or equal to 0.20% (instead of 0.10%) of the
Tape A TCV.
To meet the proposed criteria in Tier 3, a Member must add
a Tape B ADV greater than or equal to 0.35% (instead of 0.20%) of the
Tape B TCV.
To meet the proposed criteria in Tier 4, a Member must add
a Tape C ADV greater than or equal to 0.20% (instead of 0.10%) of the
Tape C TCV.
Although the proposed changes to these thresholds result in more
stringent criteria, Members will still have an opportunity to receive
the additional rebates for meeting the applicable tier thresholds.
Moreover, the proposed changes are designed to encourage LMMs to
increase both their Displayed and Non-Displayed liquidity in Tape A, B
and C securities on the Exchange, thereby contributing to a deeper and
more liquid market, which benefits all market participants and provides
greater execution opportunities on the Exchange.
[[Page 71954]]
Non-Displayed Add Volume Tape A Tier 1
The Exchange also proposes to eliminate Non-Displayed Add Volume
Tape A Tier 1, which is currently described under footnote 1 of the
fees schedule. Particularly, this tier applies to orders yielding fee
code HV and provides a $0.00275 per share rebate to Members that add an
ADV greater than or equal to 0.20% of the TCV as Non-Displayed orders
that yield fee codes HI or HV. Particularly, no Member has reached this
tier in several months and the Exchange therefore no longer wishes to,
nor is it required to, maintain such tiers.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\13\ in general, and
furthers the objectives of Section 6(b)(4),\14\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its Members, issuers and other persons
using its facilities. 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 changes
reflect 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. The Exchange notes that relative volume-based incentives and
discounts have been widely adopted by exchanges, including the
Exchange, 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
highly competitive market. The Exchange is only one of several equity
venues to which market participants may direct their order flow, and it
represents a small percentage of the overall market. It is also only
one of several maker-taker exchanges. Competing equity exchanges offer
similar tiered pricing structures, including schedules of rebates and
fees that apply based upon members achieving certain volume and/or
growth thresholds, as well as assess similar fees or rebates for
similar types of orders, to that of the Exchange. These competing
pricing schedules, moreover, are presently comparable to those that the
Exchange provides, including the pricing of comparable criteria and/or
fees and rebates.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f.
\14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Regarding the proposed updates to the Supplemental Incentive and
LMM Add Volume Tiers, the Exchange believes that the proposed tiers are
reasonable because each of the tiers, as modified, continue to be
available to all Members and provide Members an opportunity to receive
an additional rebate, albeit using more stringent criteria.
Additionally, the Exchange also believes that the tiers, even as
amended, are reasonable, equitable and not unfairly discriminatory
because competing equity exchanges offer similar tiered pricing
structures with comparable criteria to that of the Supplemental
Incentive \15\ and LMM Add Volume Tiers.\16\ The Exchange also believes
that the current additional rebates continue to be commensurate with
the proposed criteria. That is, the additional rebates reasonably
reflect the difficulty in achieving the corresponding criteria as
amended.
---------------------------------------------------------------------------
\15\ See NYSE Price List, ``Credit Applicable to Supplemental
Liquidity Providers (``SLPs'')'' and Nasdaq Equity 7, Section
118(a)(1).
\16\ See e.g., Nasdaq Phlx Equity 7 Pricing Schedule, Section
3(c), which provides up to an additional credit of $0.0003 for
various order and quoting volume thresholds for the exchange's
qualified market makers (``QMMs'').
---------------------------------------------------------------------------
The Exchange further believes that the proposed criteria and
corresponding additional rebates per tier are reasonable and equitable.
Generally, Tape B experiences less variability in terms of broader
market share, whereas Tape A and C tend to experience more volatility.
As a result, the Exchange has observed that Members generally submit
less Tape volume in connection with Tape A and Tape C. For example, the
average Tape ADAV as a percentage of Tape TCV in Tape A and Tape C from
LMM Members in the last month was lower than their average Tape ADAV
over Tape TCV in Tape B. As a result, the Exchange believes Members are
more easily able to meet a volume requirement for Tape B, and
therefore, it is equitable to provide for a slightly higher ADAV Tape B
threshold of Tape B TCV than that for Tape A and C.
The Exchange believes the proposed changes are also a reasonable
means to incentivize Members to continue to provide liquidity adding,
displayed volume (Supplemental Incentive Tiers) and displayed and non-
displayed volume (for LMM Add Volume Tiers), which will benefit all
market participants by incentivizing continuous liquidity and thus,
deeper more liquid markets as well as increased execution
opportunities. Particularly, the proposed changes are designed to
incentivize continuous displayed liquidity, which signals other market
participants to take the additional execution opportunities provided by
such liquidity, while the proposed incentives to provide non-displayed
liquidity will further contribute to a deeper, more liquid market and
provide even more execution opportunities for active market
participants at improved prices. 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.
In addition to this, 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 the
Supplemental Incentive Tiers, as amended, and for the LMM Add Volume
Tiers, as amended. 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. The Exchange notes that most
recently, seven Members satisfied Supplemental Incentive Tier Tape A,
seven members satisfied Supplemental Incentive Tier Tape B, and five
Members satisfied Supplemental Incentive Tier Tape C. While the
Exchange has no way of predicting with certainty how the proposed tier
will impact Member activity, the Exchange anticipates that
approximately four Members will be able to satisfy Supplemental
Incentive Tier Tape A (as amended), five Members will be able to
satisfy Supplemental Incentive Tier Tape B (as amended) and three
Members will be able to satisfy Supplemental Incentive Tier Tape C (as
amended). With respect to the LMM Add Volume Tiers, the Exchange notes
that most recently, one Member satisfied LMM Add Volume Tier 2, two
Members satisfied LMM Add Volume Tier 3 and two Members satisfied LMM
Add Volume Tier 4. While the Exchange has no way of predicting with
certainty how the proposed tier will impact Member activity, the
Exchange anticipates that approximately one Member will be able to
satisfy LMM Add Volume Tier 2 (as amended), one Member will be able to
[[Page 71955]]
satisfy LMM Add Volume Tier 3 (as amended) and one Member will be able
to satisfy LMM Add Volume Tier 4 (as amended). The Exchange also notes
that the proposed tiers will not adversely impact any Member's 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.
Finally, the Exchange believes the proposed amendment to remove
Non-Displayed Add Volume Tape A Tier 1 is reasonable because no Member
has achieved this tier in several months. Moreover, the Exchange is not
required to maintain this tier and Members still have a number of other
opportunities and a variety of ways to receive enhanced rebates for
Non-Displayed liquidity, including the enhanced rebates under the Non-
Displayed Add Volume Tiers under footnote 1 of the fees schedule. The
Exchange believes the proposal to eliminate these tiers is also
equitable and not unfairly discriminatory because it applies to all
Members.
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 competition that is not 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 order flow to a public exchange, thereby
promoting market depth, execution incentives and enhanced execution
opportunities, as well as price discovery and transparency 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.'' \17\
---------------------------------------------------------------------------
\17\ 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
changes apply to all Members equally in that all Members continue to be
eligible for the Supplemental Incentive Tiers and LMM Add Volume Tiers
(and have the same opportunity to become an LMM Member), have a
reasonable opportunity to meet the tiers' criteria and will all receive
the corresponding additional rebates if such criteria are met.
Additionally, the proposed tier changes are designed to attract
additional order flow to the Exchange. The Exchange believes that the
updated tier criteria would incentivize market participants to direct
liquidity adding order flow to the Exchange, bringing with it
additional execution opportunities for market participants and improved
price transparency. Greater overall order flow, trading opportunities,
and pricing transparency benefits all market participants on the
Exchange by enhancing market quality and continuing to encourage
Members to send orders, thereby contributing towards a robust and well-
balanced market ecosystem.
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 direct their order flow, including 15 other equities exchanges and
off-exchange venues and alternative trading systems. Additionally, the
Exchange represents a small percentage of the overall market. Based on
publicly available information, no single equities exchange has more
than 18% of the market share. Therefore, no exchange possesses
significant pricing power in the execution of 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.'' \18\ 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'. . . .''.\19\ 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.
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\18\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\19\ 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)).
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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 \20\ and paragraph (f) of Rule 19b-4
thereunder.\21\ 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.
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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 17 CFR 240.19b-4(f).
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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-2020-078 on the subject line.
[[Page 71956]]
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-2020-078. 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-2020-078 and should be submitted
on or before December 3, 2020.
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\22\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-24962 Filed 11-10-20; 8:45 am]
BILLING CODE 8011-01-P
