Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating To Amend Its Fees Schedule, 73091-73095 [2020-25182]
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Federal Register / Vol. 85, No. 221 / Monday, November 16, 2020 / Notices
terminations. This notice informs the
public of PBGC’s intent and solicits
public comment on the collection of
information.
DATES: Comments must be submitted on
or before January 15, 2021.
ADDRESSES: Comments may be
submitted by any of the following
methods:
• Federal eRulemaking Portal: https://
www.regulations.gov. Follow the
website instructions for submitting
comments.
• Email: paperwork.comments@
pbgc.gov. Refer to Disclosure of
Termination Information or OMB
control number 1212–0065 in the
subject line.
• Mail or Hand Delivery: Regulatory
Affairs Division, Office of the General
Counsel, Pension Benefit Guaranty
Corporation, 1200 K Street NW,
Washington, DC 20005–4026.
All submissions received must
include the agency’s name (Pension
Benefit Guaranty Corporation, or PBGC)
and refer to the Disclosure of
Termination Information. All comments
received will be posted without change
to PBGC’s website, https://www.pbgc.gov,
including any personal information
provided.
Copies of the collection of
information may be obtained by writing
to Disclosure Division, Office of the
General Counsel, Pension Benefit
Guaranty Corporation, 1200 K Street
NW, Washington, DC 20005–4026, or
calling 202–326–4040 during normal
business hours. TTY users may call the
Federal relay service toll-free at 800–
877–8339 and ask to be connected to
202–326–4040.
FOR FURTHER INFORMATION CONTACT:
Melissa Rifkin (rifkin.melissa@
pbgc.gov), Attorney, Regulatory Affairs
Division, Office of the General Counsel,
Pension Benefit Guaranty Corporation,
1200 K Street NW, Washington DC
20005–4026; 202–229–6563. (TTY users
may call the Federal relay service tollfree at 800–877–8339 and ask to be
connected to 202–229–6563.)
SUPPLEMENTARY INFORMATION: Sections
4041 and 4042 of the Employee
Retirement Income Security Act of 1974,
as amended (‘‘ERISA’’), 29 U.S.C
§ 1301–1461, govern the termination of
single-employer defined benefit pension
plans that are subject to Title IV of
ERISA. A plan administrator may
initiate a distress termination pursuant
to section 4041(c), and PBGC may itself
initiate proceedings to terminate a
pension plan under section 4042 if
PBGC determines that certain
conditions are present. Section 506 of
the Pension Protection Act of 2006
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amended sections 4041 and 4042 of
ERISA. These amendments require that,
upon a request by an affected party, a
plan administrator must disclose
information it has submitted to PBGC in
connection with a distress termination
filing, and that a plan administrator or
plan sponsor must disclose information
it has submitted to PBGC in connection
with a PBGC-initiated termination. The
provisions also require PBGC to disclose
the administrative record relating to a
PBGC-initiated termination upon
request by an affected party.
PBGC estimates that approximately 70
plans will terminate as distress or
PBGC-initiated terminations each year.
PBGC further estimates that two
participants or other affected parties of
every nine distress terminations or
PBGC-initiated terminations filed will
annually make requests for termination
information, or 2/9 of 70 (approximately
16 plans per year). PBGC estimates that
the hour burden for each request will be
about 20 hours. The total annual hour
burden is estimated to be 320 hours (16
plans x 20 hours). PBGC expects that the
staff of plan administrators and
sponsors will perform the work inhouse and that no work will be
contracted to third parties. Therefore,
the annual cost burden is estimated to
be $0.
The existing collection of information
was approved under OMB control
number 1212–0065 (expires March 31,
2021). PBGC intends to request that
OMB extend its approval of this
collection of information for 3 years. An
agency may not conduct or sponsor, and
a person is not required to respond to,
a collection of information unless it
displays a currently valid OMB control
number.
PBGC is soliciting public comments
to—
• Evaluate whether the proposed
collection of information is necessary
for the proper performance of the
functions of the agency, including
whether the information will have
practical utility;
• Evaluate the accuracy of the
agency’s estimate of the burden of the
proposed collection of information,
including the validity of the
methodologies and assumptions used;
• Enhance the quality, utility, and
clarity of the information to be
collected; and
• Minimize the burden of the
collection of information on those who
are to respond, including through the
use of appropriate automated,
electronic, mechanical, or other
technological collection techniques or
other forms of information technology,
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e.g. permitting electronic submission of
responses.
Issued in Washington, DC.
Stephanie Cibinic,
Deputy Assistant General Counsel for
Regulatory Affairs, Pension Benefit Guaranty
Corporation.
[FR Doc. 2020–25213 Filed 11–13–20; 8:45 am]
BILLING CODE 7709–02–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90379; File No. SR–
CboeBZX–2020–079]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change Relating To
Amend Its Fees Schedule
November 9, 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 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
1 15
2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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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.
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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’’), 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 options venues to which market
participants may direct their order flow.
Based on publicly available information,
no single options exchange has more
than 18% of the market share and
currently the Exchange represents less
than 8% of the market share.3 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 be more favorable. The
Exchange’s fee schedule sets forth
standard rebates and rates applied per
contract. For example, the Exchange
assesses a standard rebate of $0.29 per
contract for Market Maker orders that
add liquidity in Penny Pilot Securities
and a standard rebate of $0.40 per
contract in Non-Penny Pilot Securities.
Additionally, in response to the
competitive environment, the Exchange
also offers tiered pricing, as discussed in
further detail in the following
paragraphs, which provides Members
opportunities to qualify for higher
rebates or reduced fees where certain
3 See Cboe Global Markets U.S. Options Market
Volume Summary (October 29, 2020), available at
https://markets.cboe.com/us/options/market_
statistics/.
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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 10 Market
Maker Penny Add Volume Tiers (‘‘MM
Penny Add Tier’’) under footnote 6 of
the fee schedule which provide rebates
between $0.33 and $0.46 per contract
for qualifying Market Maker orders
which meet certain add liquidity
thresholds and yield fee code PM.4
The Exchange proposes to adopt two
new MM Penny Add Tiers, specifically
Tiers 9 and 10.5 First, the Exchange
proposes to adopt new MM Penny Add
Tier 9, which will provide Members an
additional opportunity and alternative
means to receive an enhanced rebate for
meeting the corresponding proposed
criteria. Particularly, proposed MM
Penny Add Tier 9 would provide an
enhanced rebate of $0.43 per contract
where a Member (1) has an ADAV 6 in
Market Maker orders greater than or
equal to 0.15% of average OCV; 7 (2) has
a Step Up ADAV in Market Maker
orders from September 2020 greater
than or equal to 0.10% of average OCV;
(3) has on BZX Equities an ADV 8 greater
than or equal to 0.60% of average TCV; 9
and (4) has on BZX Equities a Step Up
ADV from September 2020 greater than
or equal to 0.05% of average TCV.
Proposed MM Penny Add Tier 10 would
provide an enhanced rebate of $0.44 per
contract where a Member (1) has an
ADAV in Market Maker orders greater
than or equal to 0.20% of average OCV;
(2) has a Step Up ADAV in Market
Maker orders from September 2020
greater than or equal to 0.15% of
average OCV; (3) has on BZX Equities an
ADV greater than or equal to 0.60% of
average TCV; and (4) has on BZX
4 Orders yielding fee code PM are Market Maker
orders that add liquidity in Penny Pilot securities.
5 The Exchange would renumber current MM
Penny Add Tiers 9 and 10 to MM Penny Add Tiers
11 and 12, respectively.
6 ‘‘ADAV’’ means average daily added volume
calculated as the number of contracts added.
7 ‘‘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.
8 ‘‘ADV’’ means average daily volume calculated
as the number of shares added to, removed from,
or routed by, the Exchange, or any combination or
subset thereof, per day. ADV is calculated on a
monthly basis.
9 ‘‘TCV’’ means total consolidated volume
calculated as the volume reported by all exchanges
and trade reporting facilities to a consolidated
transaction reporting plan for the month for which
the fees apply.
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Equities a Step Up ADV from September
2020 greater than or equal to 0.10% of
average TCV.10 The Exchange believes
the proposed tiers, along with the
existing tiers, continue to provide an
incremental incentive for Members to
strive for the highest tier levels, which
provide increasingly higher rebates for
such transactions. Additionally, the
Exchange notes two of the prongs of the
proposed criteria in both tiers are
similar to the criteria set forth in MM
Penny Add Tier 9.11 Particularly, those
thresholds include a threshold relating
to ADAV in Market Maker orders and a
cross-asset threshold, which is designed
to incentivize Members to achieve
certain levels of participation on both
the Exchange’s options and equities
platform (‘‘BZX Equities’’). The
Exchange also proposes to add step-up
ADAV thresholds (one relating to just
options volume and the other equities
volume), both of which are designed to
encourage growth (i.e., Members must
increase their relative liquidity each
month over a predetermined baseline
(in this case the month being September
2020)). Overall, the proposed enhanced
rebates and corresponding criteria is
designed to encourage Members to
increase their order flow, thereby
contributing to a deeper and more liquid
market, which benefits all market
participants and provides greater
execution opportunities on the
Exchange.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
Section 6 of the Act,12 in general, and
furthers the requirements of Section
6(b)(4),13 in particular, as it is designed
to provide for the equitable allocation of
reasonable dues, fees and other charges
among its facilities and does not
unfairly discriminate between
customers, issuers, brokers or dealers.
The Exchange operates in a highlycompetitive 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
10 The Exchange also proposes to add the
proposed rebate amounts to the Standard Rates
Table. The Exchange notes that although current
MM Penny Add Tier 9 offers a rebate of $0.44 per
share, the Exchange inadvertently omitted to add
that rate to the Standard Rates Table previously.
11 See BZX Options Fees Schedule, current Tier
9 of the Market Maker Penny Add Volume Tiers
(footnote 6).
12 15 U.S.C. 78f.
13 15 U.S.C. 78f(b)(4).
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the Exchange, which the Exchange
believes would enhance market quality
to the benefit of all Members.
In particular, the Exchange believes
the proposed Market Maker Penny Add
Volume Tiers are reasonable because
they provides additional opportunities
for Members to receive a higher rebate
by providing alternative criteria for
which they can reach. The Exchange
notes that volume-based incentives and
discounts have been widely adopted by
exchanges,14 including the Exchange,15
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. These competing
pricing schedules, moreover, are
presently comparable to those that the
Exchange provides.
Moreover, the Exchange believes the
proposed MM Penny Add Tiers 9 and
10 are a reasonable means to encourage
Members to increase their liquidity on
the Exchange and also their
participation on BZX Equities. The
Exchange believes that adopting tiers
with alternative criteria to the existing
Market Maker Volume Tiers may
encourage those Members who could
not previously achieve the criteria
under existing Market Maker Volume
Tiers 9 and 10 (proposed to be
renumbered to Tiers 11 and 12) to
increase their order flow on BZX
Options and Equities. For example, the
proposed tiers would provide an
opportunity for Members who have an
ADAV in Market Makers Orders of at
least 0.15% of average OCV, but less
than the more stringent 0.50% of
14 See e.g., Cboe EDGX U.S. Options Exchange
Fee Schedule, Footnote 2, Market Maker Volume
Tiers, which provide reduced fees between $0.01
and $0.17 per contract for Market Maker Penny and
Non-Penny orders where Members meet certain
volume thresholds.
15 See e.g., Cboe BZX U.S. Options Exchange Fee
Schedule, Footnotes 6 and 7, Market Maker Penny
Pilot and Non-Penny Pilot Volume Tiers which
provide enhanced rebates for Market Maker orders
where Members meet certain volume thresholds.
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average OCV (the requirement under
current Tier 9, i.e. new Tier 11), to
receive a higher rebate than they may
currently receive but slightly lower than
the rebate they would receive for
reaching the more stringent criteria
under current Tier 9 (new Tier 11), if
they also meet the threshold
requirement based on BZX Equities
participation and can grow a modest
amount since September 2020.
Similarly, for Market Makers that
participate on both BZX Options and
Equities, and do not currently meet the
1.00% ADAV threshold under current
Tier 9 (i.e., new Tier 11), but can or do
meet the proposed equities ADV
threshold, the proposed tier may
incentivize those participants to grow
their options volume in order to receive
enhanced rebates. Increased liquidity
benefits all investors by deepening the
Exchange’s liquidity pool, offering
additional flexibility for all investors to
enjoy cost savings, supporting the
quality of price discovery, promoting
market transparency and improving
investor protection. The Exchange also
believes that proposed enhanced rebates
are reasonable based on the difficulty of
satisfying the tiers’ criteria and ensures
the proposed rebates and thresholds
appropriately reflect the incremental
difficulty to achieve the existing MM
Penny Add Tiers. The proposed
enhanced rebate amounts also do not
represent a significant departure from
the enhanced rebates currently offered
under the Exchange’s existing MM
Penny Add Tiers. Indeed, the proposed
enhanced rebate amount under
proposed MM Penny Add Tier 9 ($0.43)
is incrementally higher than current
Tiers 7 and 8 ($0.42), which the
Exchange believes offer slightly less
stringent criteria than the proposed Tier
9, but is incrementally lower than the
rebate offered under existing Tier 9 (i.e.,
new Tier 11) ($0.44), which the
Exchange believes is more stringent
than the proposed criteria under
proposed Tier 9. Similarly, the proposed
enhanced rebate amount under
proposed MM Penny Add Tier 10
($0.44) is the same as current Tier 9 (i.e.,
new Tier 11) ($0.44), which the
Exchange believes reflects a similar
level of difficulty but using alternative
types of criteria. The Exchange also
notes that the proposed rebates remain
within the range of the enhanced rebates
offered under the current MM Penny
Add Tiers (i.e., $0.33–$0.46).
The Exchange believes that the
proposal represents an equitable
allocation of fees and is not unfairly
discriminatory because it applies
uniformly to all Market Makers.
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Additionally, a number of Market
Makers have a reasonable opportunity to
satisfy proposed Tier 9’s criteria, which
the Exchange believes is less stringent
than the existing Market Maker Add
Penny Tiers 9 and 10 (new Tiers 11 and
12) and proposed Tier 10. The Exchange
also believes a number of MarketMakers have a reasonable opportunity to
satisfy proposed Tier 10’s criteria,
which the Exchange believes has a
similar level of difficulty to current Tier
10 (new Tier 12) but using alternative
types of criteria. While the Exchange
has no way of knowing whether this
proposed rule change would
definitively result in any particular
Market Maker qualifying for the
proposed tiers, the Exchange anticipates
that approximately two Market Makers
will be able to compete for and achieve
the proposed criteria in either proposed
Tier 9 or Tier 10; however, the proposed
tiers are open to any Market-Maker that
satisfies the applicable tier’s criteria.
The Exchange believes the proposed
tiers could provide an incentive for
other Members to submit additional
liquidity on BZX Options and Equities
to qualify for the proposed enhanced
rebates. To the extent a Member
participates on the Exchange but not on
BZX Equities, the Exchange does believe
that the proposal is still reasonable,
equitably allocated and nondiscriminatory with respect to such
Member based on the overall benefit to
the Exchange resulting from the success
of BZX Equities. Particularly, the
Exchange believes such success allows
the Exchange to continue to provide and
potentially expand its existing incentive
programs to the benefit of all
participants on the Exchange, whether
they participate on BZX Equities or not.
The proposed pricing program is also
fair and equitable in that membership in
BZX Equities is available to all market
participants, which would provide them
with access to the benefits on BZX
Equities provided by the proposed
change, even where a member of BZX
Equities is not necessarily eligible for
the proposed enhanced rebates on the
Exchange.
The Exchange lastly notes that it does
not believe the proposed tiers will
adversely impact any Member’s pricing
or ability to qualify for other tiers.
Rather, should a Member not meet the
proposed criteria, the Member will
merely not receive the proposed
enhanced rebates, and has ten
alternative choices (including eight with
criteria the Exchange believes is less
stringent) to aim to achieve under the
MM Penny Add Tiers. Furthermore, the
proposed enhanced rebates would apply
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to all Members that meet the required
criteria under proposed tiers.
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
necessary or appropriate in furtherance
of the purposes of the Act. Rather, as
discussed above, the Exchange believes
that the proposed changes 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.’’ 16
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 uniformly
to all Market Makers. As discussed
above, to the extent a Member
participates on the Exchange but not on
BZX Equities, the Exchange notes that
the proposed change can provide an
overall benefit to the Exchange resulting
from the success of BZX Equities. Such
success enables the Exchange to
continue to provide and potentially
expand its existing incentive programs
to the benefit of all participants on the
Exchange, whether they participate on
BZX Equities or not. The proposed
pricing program is also fair and
equitable in that membership in BZX
Equities is available to all market
participants. Additionally, the proposed
change is designed to attract additional
order flow to the Exchange and BZX
Equities. Greater liquidity benefits all
market participants on the Exchange by
providing more trading opportunities
and encourages Members to send orders,
thereby contributing to robust levels of
liquidity, which benefits all market
participant.
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
16 Securities Exchange Act Release No. 51808, 70
FR 37495, 37498–99 (June 29, 2005) (S7–10–04)
(Final Rule).
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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 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 18% of the
market share. 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.’’ 17 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’ . . . .’’.18 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.
17 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
18 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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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 19 and paragraph (f) of Rule
19b–4 20 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–2020–079 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–2020–079. 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
19 15
20 17
E:\FR\FM\16NON1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
16NON1
Federal Register / Vol. 85, No. 221 / Monday, November 16, 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–2020–079 and
should be submitted on or before
December 7, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–25182 Filed 11–13–20; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
Self-Regulatory Organizations; Nasdaq
BX, Inc.; Notice of Filing of Proposed
Rule Change To Utilize the FIX
Protocol To Submit Orders to BX’s
Price Improvement Auction
Mechanism
November 9, 2020.
jbell on DSKJLSW7X2PROD with NOTICES
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 October
27, 2020, Nasdaq BX, Inc. (‘‘BX’’ or
‘‘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 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
Options 3, Section 7(d)(1)(A) relating to
‘‘Financial Information eXchange’’ or
‘‘FIX’’ in connection with offering BX
Participants the ability to utilize FIX to
submit orders to its Price Improvement
Auction (‘‘PRISM’’) mechanism.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
VerDate Sep<11>2014
20:13 Nov 13, 2020
Jkt 253001
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
1. Purpose
[Release No. 34–90383; File No. SR–BX–
2020–033]
1 15
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
BILLING CODE 8011–01–P
21 17
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/bx/rules, at the principal office
of the Exchange, and at the
Commission’s Public Reference Room.
The Exchange proposes to offer BX
Participants a manner in which to send
messages through FIX, to other BX
Participants, for the specific purpose of
requesting another BX Participant
submit an ‘‘Initiating Order’’ 3 along
with the sender’s PRISM Order 4 into
the Price Improvement Auction
(‘‘PRISM’’) mechanism for execution
pursuant to Options 3, Section 13.
Specifically, the Exchange proposes to
amend BX Options 3, Section 7(d)(1)(A)
relating to ‘‘Financial Information
eXchange’’ or ‘‘FIX’’ in connection with
this offering. This functionality would
provide an additional workflow to BX
Participants seeking to enter paired
orders into PRISM. This proposal does
not amend the PRISM rule within
Options 3, Section 13 in connection
with offering Participants the ability to
submit a Request for PRISM through
FIX.
FIX is an interface that allows
Participants and their Sponsored
Customers to connect, send, and receive
messages related to orders and auction
orders and responses to and from the
Exchange. Features include the
following: (1) Execution messages; (2)
order messages; and (3) risk protection
3 An Initiating Order is an order executed against
principal interest or against any other order it
represents as agent. See Options 3, Section 13.
4 A PRISM Order is an order submitted by a BX
Participant that it represents as agent on behalf of
a Public Customer, broker dealer, or any other
entity, electronically, for execution. See Options 3,
Section 13.
PO 00000
Frm 00079
Fmt 4703
Sfmt 4703
73095
triggers and cancel notifications.5
Today, all BX Participants utilize FIX to
submit orders to BX.
This proposal would expand the
capabilities of the FIX protocol to allow
a BX Participant (sender) to utilize FIX
to send a message to other BX
Participants (responders) with an order
the sender represents as agent (‘‘PRISM
Order’’) on behalf of a Public Customer,
broker dealer or other entity requesting
the responders provide a contra-side
Initiating Order (a ‘‘response’’) and
begin a PRISM auction (collectively a
‘‘Request for PRISM’’).6 Today,
Participants communicate their desire to
have their orders paired in other ways,7
which may be less efficient. This
proposal would permit BX Participants
to streamline their workflow and utilize
FIX as a tool to message a Request for
PRISM to all BX Participants that opted
to receive these notifications, as
described below. If a BX Participant
desires to respond to the request, the BX
Participant would add an Initiating
Order to the sender’s PRISM Order and
submit the paired order directly into
PRISM, through FIX, for processing in
accordance with Options 3, Section 13.
BX Participants may elect to ‘‘opt in’’ to
receive Requests for PRISM. BX
Participants that do not elect to ‘‘opt in’’
will not receive such requests. Once a
BX Participant elects to receive Requests
for PRISM, they would receive all
requests from any BX Participant
submitting a Request for PRISM. The BX
Participant cannot elect to only receive
requests from certain Participants and
the sender may not elect to send the
request to a select group of BX
Participants.
Specifically, the Request for PRISM
created by the BX Participant would be
systematized so that a BX Participant
may add an Initiating Order to the
previously submitted sender PRISM
Order and directly submit the PRISM
Order through FIX. The Exchange will
set a certain time period up to one
second 8 within which the PRISM Order
must be submitted or it would otherwise
cancel or book pursuant to the sending
5 See
Options 3, Section 7(d)(1)(A).
Request for PRISM, if accepted and
submitted into PRISM, would become the ‘‘PRISM
Order’’ pursuant to Options 3, Section 13.
7 This proposal represents an alternative to the
other methods of submitting an order which may
include: telephone, electronically using an external
order management system, or utilizing instant
message.
8 The Exchange will initially set the time period
to 100 milliseconds to respond to the Request for
PRISM or otherwise not respond before the Request
for PRISM would become unavailable. The
Exchange will post the time period on its System
settings page.
6 The
E:\FR\FM\16NON1.SGM
16NON1
]]>Agencies
[Federal Register Volume 85, Number 221 (Monday, November 16, 2020)]
[Notices]
[Pages 73091-73095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25182]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90379; File No. SR-CboeBZX-2020-079]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
To Amend Its Fees Schedule
November 9, 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 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
[[Page 73092]]
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''), 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 options venues to which market participants
may direct their order flow. Based on publicly available information,
no single options exchange has more than 18% of the market share and
currently the Exchange represents less than 8% of the market share.\3\
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 be more favorable. The Exchange's fee schedule sets forth
standard rebates and rates applied per contract. For example, the
Exchange assesses a standard rebate of $0.29 per contract for Market
Maker orders that add liquidity in Penny Pilot Securities and a
standard rebate of $0.40 per contract in Non-Penny Pilot Securities.
Additionally, in response to the competitive environment, the Exchange
also offers tiered pricing, as discussed in further detail in the
following paragraphs, 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 10
Market Maker Penny Add Volume Tiers (``MM Penny Add Tier'') under
footnote 6 of the fee schedule which provide rebates between $0.33 and
$0.46 per contract for qualifying Market Maker orders which meet
certain add liquidity thresholds and yield fee code PM.\4\
---------------------------------------------------------------------------
\3\ See Cboe Global Markets U.S. Options Market Volume Summary
(October 29, 2020), available at https://markets.cboe.com/us/options/market_statistics/.
\4\ Orders yielding fee code PM are Market Maker orders that add
liquidity in Penny Pilot securities.
---------------------------------------------------------------------------
The Exchange proposes to adopt two new MM Penny Add Tiers,
specifically Tiers 9 and 10.\5\ First, the Exchange proposes to adopt
new MM Penny Add Tier 9, which will provide Members an additional
opportunity and alternative means to receive an enhanced rebate for
meeting the corresponding proposed criteria. Particularly, proposed MM
Penny Add Tier 9 would provide an enhanced rebate of $0.43 per contract
where a Member (1) has an ADAV \6\ in Market Maker orders greater than
or equal to 0.15% of average OCV; \7\ (2) has a Step Up ADAV in Market
Maker orders from September 2020 greater than or equal to 0.10% of
average OCV; (3) has on BZX Equities an ADV \8\ greater than or equal
to 0.60% of average TCV; \9\ and (4) has on BZX Equities a Step Up ADV
from September 2020 greater than or equal to 0.05% of average TCV.
Proposed MM Penny Add Tier 10 would provide an enhanced rebate of $0.44
per contract where a Member (1) has an ADAV in Market Maker orders
greater than or equal to 0.20% of average OCV; (2) has a Step Up ADAV
in Market Maker orders from September 2020 greater than or equal to
0.15% of average OCV; (3) has on BZX Equities an ADV greater than or
equal to 0.60% of average TCV; and (4) has on BZX Equities a Step Up
ADV from September 2020 greater than or equal to 0.10% of average
TCV.\10\ The Exchange believes the proposed tiers, along with the
existing tiers, continue to provide an incremental incentive for
Members to strive for the highest tier levels, which provide
increasingly higher rebates for such transactions. Additionally, the
Exchange notes two of the prongs of the proposed criteria in both tiers
are similar to the criteria set forth in MM Penny Add Tier 9.\11\
Particularly, those thresholds include a threshold relating to ADAV in
Market Maker orders and a cross-asset threshold, which is designed to
incentivize Members to achieve certain levels of participation on both
the Exchange's options and equities platform (``BZX Equities''). The
Exchange also proposes to add step-up ADAV thresholds (one relating to
just options volume and the other equities volume), both of which are
designed to encourage growth (i.e., Members must increase their
relative liquidity each month over a predetermined baseline (in this
case the month being September 2020)). Overall, the proposed enhanced
rebates and corresponding criteria is designed to encourage Members to
increase their order flow, thereby contributing to a deeper and more
liquid market, which benefits all market participants and provides
greater execution opportunities on the Exchange.
---------------------------------------------------------------------------
\5\ The Exchange would renumber current MM Penny Add Tiers 9 and
10 to MM Penny Add Tiers 11 and 12, respectively.
\6\ ``ADAV'' means average daily added volume calculated as the
number of contracts added.
\7\ ``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.
\8\ ``ADV'' means average daily volume calculated as the number
of shares added to, removed from, or routed by, the Exchange, or any
combination or subset thereof, per day. ADV is calculated on a
monthly basis.
\9\ ``TCV'' means total consolidated volume calculated as the
volume reported by all exchanges and trade reporting facilities to a
consolidated transaction reporting plan for the month for which the
fees apply.
\10\ The Exchange also proposes to add the proposed rebate
amounts to the Standard Rates Table. The Exchange notes that
although current MM Penny Add Tier 9 offers a rebate of $0.44 per
share, the Exchange inadvertently omitted to add that rate to the
Standard Rates Table previously.
\11\ See BZX Options Fees Schedule, current Tier 9 of the Market
Maker Penny Add Volume Tiers (footnote 6).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with Section 6 of the Act,\12\ in general, and furthers the
requirements of Section 6(b)(4),\13\ in particular, as it is designed
to provide for the equitable allocation of reasonable dues, fees and
other charges among its facilities and does not unfairly discriminate
between customers, issuers, brokers or dealers. 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
[[Page 73093]]
the Exchange, which the Exchange believes would enhance market quality
to the benefit of all Members.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f.
\13\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
In particular, the Exchange believes the proposed Market Maker
Penny Add Volume Tiers are reasonable because they provides additional
opportunities for Members to receive a higher rebate by providing
alternative criteria for which they can reach. The Exchange notes that
volume-based incentives and discounts have been widely adopted by
exchanges,\14\ including the Exchange,\15\ 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. These competing pricing
schedules, moreover, are presently comparable to those that the
Exchange provides.
---------------------------------------------------------------------------
\14\ See e.g., Cboe EDGX U.S. Options Exchange Fee Schedule,
Footnote 2, Market Maker Volume Tiers, which provide reduced fees
between $0.01 and $0.17 per contract for Market Maker Penny and Non-
Penny orders where Members meet certain volume thresholds.
\15\ See e.g., Cboe BZX U.S. Options Exchange Fee Schedule,
Footnotes 6 and 7, Market Maker Penny Pilot and Non-Penny Pilot
Volume Tiers which provide enhanced rebates for Market Maker orders
where Members meet certain volume thresholds.
---------------------------------------------------------------------------
Moreover, the Exchange believes the proposed MM Penny Add Tiers 9
and 10 are a reasonable means to encourage Members to increase their
liquidity on the Exchange and also their participation on BZX Equities.
The Exchange believes that adopting tiers with alternative criteria to
the existing Market Maker Volume Tiers may encourage those Members who
could not previously achieve the criteria under existing Market Maker
Volume Tiers 9 and 10 (proposed to be renumbered to Tiers 11 and 12) to
increase their order flow on BZX Options and Equities. For example, the
proposed tiers would provide an opportunity for Members who have an
ADAV in Market Makers Orders of at least 0.15% of average OCV, but less
than the more stringent 0.50% of average OCV (the requirement under
current Tier 9, i.e. new Tier 11), to receive a higher rebate than they
may currently receive but slightly lower than the rebate they would
receive for reaching the more stringent criteria under current Tier 9
(new Tier 11), if they also meet the threshold requirement based on BZX
Equities participation and can grow a modest amount since September
2020. Similarly, for Market Makers that participate on both BZX Options
and Equities, and do not currently meet the 1.00% ADAV threshold under
current Tier 9 (i.e., new Tier 11), but can or do meet the proposed
equities ADV threshold, the proposed tier may incentivize those
participants to grow their options volume in order to receive enhanced
rebates. Increased liquidity benefits all investors by deepening the
Exchange's liquidity pool, offering additional flexibility for all
investors to enjoy cost savings, supporting the quality of price
discovery, promoting market transparency and improving investor
protection. The Exchange also believes that proposed enhanced rebates
are reasonable based on the difficulty of satisfying the tiers'
criteria and ensures the proposed rebates and thresholds appropriately
reflect the incremental difficulty to achieve the existing MM Penny Add
Tiers. The proposed enhanced rebate amounts also do not represent a
significant departure from the enhanced rebates currently offered under
the Exchange's existing MM Penny Add Tiers. Indeed, the proposed
enhanced rebate amount under proposed MM Penny Add Tier 9 ($0.43) is
incrementally higher than current Tiers 7 and 8 ($0.42), which the
Exchange believes offer slightly less stringent criteria than the
proposed Tier 9, but is incrementally lower than the rebate offered
under existing Tier 9 (i.e., new Tier 11) ($0.44), which the Exchange
believes is more stringent than the proposed criteria under proposed
Tier 9. Similarly, the proposed enhanced rebate amount under proposed
MM Penny Add Tier 10 ($0.44) is the same as current Tier 9 (i.e., new
Tier 11) ($0.44), which the Exchange believes reflects a similar level
of difficulty but using alternative types of criteria. The Exchange
also notes that the proposed rebates remain within the range of the
enhanced rebates offered under the current MM Penny Add Tiers (i.e.,
$0.33-$0.46).
The Exchange believes that the proposal represents an equitable
allocation of fees and is not unfairly discriminatory because it
applies uniformly to all Market Makers. Additionally, a number of
Market Makers have a reasonable opportunity to satisfy proposed Tier
9's criteria, which the Exchange believes is less stringent than the
existing Market Maker Add Penny Tiers 9 and 10 (new Tiers 11 and 12)
and proposed Tier 10. The Exchange also believes a number of Market-
Makers have a reasonable opportunity to satisfy proposed Tier 10's
criteria, which the Exchange believes has a similar level of difficulty
to current Tier 10 (new Tier 12) but using alternative types of
criteria. While the Exchange has no way of knowing whether this
proposed rule change would definitively result in any particular Market
Maker qualifying for the proposed tiers, the Exchange anticipates that
approximately two Market Makers will be able to compete for and achieve
the proposed criteria in either proposed Tier 9 or Tier 10; however,
the proposed tiers are open to any Market-Maker that satisfies the
applicable tier's criteria. The Exchange believes the proposed tiers
could provide an incentive for other Members to submit additional
liquidity on BZX Options and Equities to qualify for the proposed
enhanced rebates. To the extent a Member participates on the Exchange
but not on BZX Equities, the Exchange does believe that the proposal is
still reasonable, equitably allocated and non-discriminatory with
respect to such Member based on the overall benefit to the Exchange
resulting from the success of BZX Equities. Particularly, the Exchange
believes such success allows the Exchange to continue to provide and
potentially expand its existing incentive programs to the benefit of
all participants on the Exchange, whether they participate on BZX
Equities or not. The proposed pricing program is also fair and
equitable in that membership in BZX Equities is available to all market
participants, which would provide them with access to the benefits on
BZX Equities provided by the proposed change, even where a member of
BZX Equities is not necessarily eligible for the proposed enhanced
rebates on the Exchange.
The Exchange lastly notes that it does not believe the proposed
tiers will adversely impact any Member's pricing or ability to qualify
for other tiers. Rather, should a Member not meet the proposed
criteria, the Member will merely not receive the proposed enhanced
rebates, and has ten alternative choices (including eight with criteria
the Exchange believes is less stringent) to aim to achieve under the MM
Penny Add Tiers. Furthermore, the proposed enhanced rebates would apply
[[Page 73094]]
to all Members that meet the required criteria under proposed tiers.
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
necessary or appropriate in furtherance of the purposes of the Act.
Rather, as discussed above, the Exchange believes that the proposed
changes 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.'' \16\
---------------------------------------------------------------------------
\16\ 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 uniformly to all Market Makers. As discussed above, to
the extent a Member participates on the Exchange but not on BZX
Equities, the Exchange notes that the proposed change can provide an
overall benefit to the Exchange resulting from the success of BZX
Equities. Such success enables the Exchange to continue to provide and
potentially expand its existing incentive programs to the benefit of
all participants on the Exchange, whether they participate on BZX
Equities or not. The proposed pricing program is also fair and
equitable in that membership in BZX Equities is available to all market
participants. Additionally, the proposed change is designed to attract
additional order flow to the Exchange and BZX Equities. Greater
liquidity benefits all market participants on the Exchange by providing
more trading opportunities and encourages Members to send orders,
thereby contributing to robust levels of liquidity, which benefits all
market participant.
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 18% of the market
share. 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.'' \17\ 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' . . . .''.\18\
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.
---------------------------------------------------------------------------
\17\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\18\ 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 \19\ and paragraph (f) of Rule 19b-4 \20\
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.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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-2020-079 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-2020-079. 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 73095]]
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-2020-079 and should be submitted on or before December 7, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-25182 Filed 11-13-20; 8:45 am]
BILLING CODE 8011-01-P
