Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its Fee Schedule To Update the Add Volume Tiers, To Eliminate the Remove Volume Tier, and To Eliminate Unused Fee Codes, 79548-79552 [2020-27088]
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Rules 17Ad–22(e)(4)(i) and Rule 17Ad–
22(e)(6)(i) under the Act. 39
FICC also believes that the above
described burden on competition that
could be created by the proposed
changes would be appropriate in
furtherance of the Act because such
changes have been appropriately
designed to assure the safeguarding of
securities and funds which are in the
custody or control of FICC or for which
it is responsible, as described in detail
above. The proposed change to
incorporate the Minimum Margin
Amount would enable FICC to produce
margin levels more commensurate with
the risks and particular attributes of
each Clearing Member’s portfolio. Any
increase in Required Fund Deposit as a
result of such proposed changes for a
particular Clearing Member would be in
direct relation to the specific risks
presented by such Clearing Members’
portfolio, and each Clearing Member’s
Required Fund Deposit would continue
to be calculated with the same
parameters and at the same confidence
level. Therefore, Clearing Members with
portfolios that present similar risks,
regardless of the type of Clearing
Member, would have similar impacts on
their Required Fund Deposit amounts.
In addition, the proposed changes
would improve the risk-based margining
methodology that FICC employs to set
margin requirements and better limit
FICC’s credit exposures to its Clearing
Members. Impact studies indicate that
the proposed methodology would result
in backtesting coverage that more
appropriately addresses the risks
presented by each portfolio. Therefore,
because the proposed changes are
designed to provide FICC with a more
appropriate and complete measure of
the risks presented by Clearing
Members’ portfolios, FICC believes the
proposals are appropriately designed to
meet its risk management goals and its
regulatory obligations.
Therefore, FICC does not believe that
the proposed changes would impose
any burden on competition that is not
necessary or appropriate in furtherance
of the Act.40
jbell on DSKJLSW7X2PROD with NOTICES
(C) Clearing Agency’s Statement on
Comments on the Proposed Rule Change
Received From Members, Participants,
or Others
Written comments relating to the
proposed rule changes have not been
solicited or received. FICC will notify
the Commission of any written
comments received by FICC.
39 Id.
40 15.U.S.C.
78q–1(b)(3)(I).
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III. Date of Effectiveness of the
Proposed Rule Change, and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
The proposal shall not take effect
until all regulatory actions required
with respect to the proposal are
completed.
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–
FICC–2020–017 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File
Number SR–FICC–2020–017. 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,
PO 00000
Frm 00088
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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 FICC and on DTCC’s website
(https://dtcc.com/legal/sec-rulefilings.aspx). 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–FICC–
2020–017 and should be submitted on
or before December 31, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.41
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–27087 Filed 12–9–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90569; File No. SRCboeBZX–2020–088]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change To Amend Its
Fee Schedule To Update the Add
Volume Tiers, To Eliminate the
Remove Volume Tier, and To Eliminate
Unused Fee Codes
December 4, 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 December
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
41 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b-4.
1 15
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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
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1. Purpose
The Exchange proposes to amend its
fee schedule applicable to its equities
trading platform (‘‘BZX Equities’’) to: (1)
Update the Add Volume Tiers, (2)
eliminate the Remove Volume Tier, and
(3) eliminate unused fee codes.3
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
16 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,4 no single
registered equities exchange has more
than 16% 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
3 The Exchange initially filed the proposed fee
changes on December 1, 2020 (SR-CboeBZX–2020–
087). On December 2, 2020, the Exchange withdrew
that filing and submitted this proposal.
4 See Cboe Global Markets, U.S. Equities Market
Volume Summary, Month-to-Date (November 27,
2020), available at https://markets.cboe.com/us/
equities/market_statistics/.
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‘‘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
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 and
orders that are routed. 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 and for
orders that are routed. 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.
Proposed Updates to the Add Volume
Tiers
The Exchange currently offers six Add
Volume Tiers under footnote 1 of the
Fee Schedule. The Add Volume Tiers
provide Members with opportunities to
receive incrementally increasing
enhanced rebates for their liquidity
adding orders that yield fee codes ‘‘B’’ 5,
‘‘V’’ 6, and ‘‘Y’’ 7, upon reaching
incrementally more difficult criteria
under each tier. The Exchange proposes
to amend Tier 1 and remove Tier 3 (and
renumber the remaining tiers
accordingly).
Particularly Tier 1 offers an enhanced
rebate of $0.0025 for qualifying orders
(i.e., yielding fee codes B, V or Y) where
a Member has an ADAV 8 greater or
equal to 1,000,000. The Exchange
proposes to increase the ADAV
requirement to 3,000,000. The Exchange
notes Tier 1, as modified, continues to
be available to all Members and provide
Members an opportunity to receive an
5 Appended to displayed orders that adds
liquidity to BZX (Tape B) and is assessed a standard
rebate of $0.0025.
6 Appended to displayed orders that adds
liquidity to BZX (Tape A) and is assessed a
standard rebate of $0.0025.
7 Appended to displayed orders that adds
liquidity to BZX (Tape C) and is assessed a standard
rebate of $0.0025.
8 ‘‘ADAV’’ means average daily added volume
calculated as the number of shares added per day.
ADAV is calculated on a monthly basis.
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79549
enhanced rebate, albeit using a more
stringent criteria. Moreover, the
proposed change is designed to
encourage Members to increase order
flow on the Exchange in order to receive
the corresponding rebate, which further
contributes to a deeper, more liquid
market and provides even more
execution opportunities for active
market participants at improved prices.
Tier 3 offers an enhanced rebate of
$0.0028 for qualifying orders where a
Member has an ADAV as a percentage
of TCV greater than or equal to 0.20%.
The Exchange proposes to eliminate the
3 Tier as it no longer wishes to, nor is
it required to, maintain such tier. More
specifically, the proposed rule change
removes this tier as the Exchange would
rather redirect resources and funding
into other programs and tiers intended
to incentivize increased order flow.
Remove Volume Tier
The Exchange also proposes to
eliminate Remove Volume Tier, which
offers a reduced fee of $0.0029 for
orders in securities at or above $1.00
and 0.28% of total dollar value for
orders in securities below $1.00 yielding
fee code ‘‘N’’, ‘‘W’’ and ‘‘BB’’ where a
Member has an ADAV greater than or
equal to 0.20% TCV with displayed
orders that yield fee codes B, V or Y.
The Exchange proposes to eliminate the
Remove Volume Tier as it no longer
wishes to, nor is it required to, maintain
such tier. More specifically, the
proposed rule change removes this tier
as the Exchange would rather redirect
resources and funding into other
programs and tiers intended to
incentivize increased order flow.
Elimination of Certain Routing Fee
Codes
The Exchange assesses fees in
connection with orders routed away to
various exchanges. The Exchange
proposes to eliminate several routingrelated fee codes that have been unused
for several years. Particularly, the
Exchange proposes to eliminate the
following fee codes:
• Fee Code 9, which is appended to
orders routed to NYSE Arca and adds
liquidity (Tapes A or C) and provides a
rebate of $0.00210 per share for
securities priced at or above $1.00 and
are free for securities priced below
$1.00;
• Fee Code NB, which is appended to
orders routed to any exchange not
covered by Fee Code NA and adds nondisplayed liquidity and assesses a fee of
$0.00300 per share for securities priced
at or above $1.00 and a fee of 0.30% of
dollar value for securities priced below
$1.00;
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• Fee Code R, which is appended to
orders re-routed by NYSE and assesses
a fee of 0.00300 per share;
• Fee Code RA, which is appended to
orders re-routed to EDGA and adds
liquidity and assess a fee of 0.00300 per
share for securities priced at or above
$1.00 and are free for securities priced
below $1.00; and
• Fee Code RB, which is appended to
orders routed to BX and adds liquidity
and assess a fee of 0.00200 per share for
securities priced at or above $1.00 and
are free for securities priced below
$1.00.
As noted, above the Exchange has
observed no volume in recent years in
orders yielding fee codes 9, NB, R, RA
and RB. The Exchange believes that
because no Members elect to route their
orders that yield these fee codes, the
current demand (or lack thereof) does
not warrant the infrastructure and
ongoing Systems maintenance required
to support separate fee codes
specifically applicable to these types of
transactions. Therefore, the Exchange
now proposes to delete fee codes 9, NB,
R, RA and RB in the Fee Schedule. The
Exchange notes that Members will
continue to be able to choose to route
their orders to any exchange covered by
these fee codes and such orders will be
automatically and uniformly assessed
the current fees (or rebates) in place for
routed orders, as applicable (e.g., the
standard fees applied to routed orders,
which yields fee code X).
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,9
in general, and furthers the objectives of
Section 6(b)(4),10 in particular, as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its Members,
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
11 See, e.g., Cboe EDGX Equities Fees Schedule,
Footnote 1 which provides various Add Volume
Tiers.
9 15
U.S.C. 78f.
10 15 U.S.C. 78f(b)(4).
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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
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.
In particular, the Exchange believes
the proposed changes to Tier 1 is
reasonable because Tier 1 as modified
continues to be available to all Members
and provides Members an opportunity
to receive an enhanced rebate, albeit
using more stringent criteria. The
Exchange next notes that relative
volume-based 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. 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 to that
of the Exchange, including schedules of
rebates and fees that apply based upon
members achieving certain volume
thresholds.11 These competing pricing
schedules, moreover, are presently
comparable to those that the Exchange
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provides, including the pricing of
comparable tiers.
The Exchange also notes that the
enhanced rebate available under Tier 1
is not changing and further believes that
the current enhanced rebate continues
to be commensurate with the required
criteria, even as amended. Furthermore,
the Exchange believes the enhanced
rebates under each Add Volume Tier
continue to reasonably reflect the
difficulty in achieving the
corresponding criteria, even as
amended.
The Exchange believes the proposed
change is also a reasonable means to
incentivize Members to continue to
provide liquidity adding, displayed
volume, which will benefit all market
participants by incentivizing continuous
liquidity and thus, deeper more liquid
markets as well as increased execution
opportunities. 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.
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 amended
tier. The Exchange notes that most
recently, eleven Members satisfied Tier
1. While the Exchange has no way of
predicting with certainty how the
proposed tier will impact Member
activity, the Exchange anticipates that
approximately three Members will be
able to satisfy Tier 1 as amended. The
Exchange also notes that the proposed
amended tier will not adversely impact
any Member’s ability to qualify for other
rebate tiers. Rather, should a Member
not meet the criteria for Tier 1, as
amended, the Member will merely not
receive the corresponding proposed
enhanced rebate. Furthermore, the
proposed rebate would uniformly apply
to all Members that meet the required
criteria.
The Exchange also believes the
proposal to remove Add Volume Tier 3
is reasonable because 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 displayed
adding liquidity orders, including via
the existing add volume tiers. The
Exchange believes the proposal to
eliminate this tier is also equitable and
not unfairly discriminatory because it
applies to all Members (i.e., the tier
won’t be available for any Member). The
Exchange notes that recently two
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increases, such orders will be
automatically and uniformly assessed
the current fees (or rebates) in place for
routed orders, as applicable (e.g., the
standard fees applied to routed orders,
which yield fee code X). Finally, the
Exchange believes that the proposed
elimination of the fee codes is equitable
and not unfairly discriminatory as it
applies equally to all members that use
the Exchange to route orders. If
members do not favor the Exchange’s
pricing for routed orders, they can send
their routable orders directly to away
markets instead of using routing
functionality provided by the Exchange.
Routing through the Exchange is
voluntary, and the Exchange operates in
a competitive environment where
market participants can readily direct
order flow to competing venues or
providers of routing services if they
deem fee levels to be excessive.
Members had satisfied the criteria of
Add Volume Tier 3. The Exchange also
notes that the proposed change does not
preclude any Member, including the
Members that were receiving the rebates
under this tier, from achieving the
remaining add volume tiers to qualify
for the remaining enhanced rebates or
other available enhanced rebates under
other incentive tiers.12 Additionally,
those Members are still entitled to a
rebate for its displayed orders adding
liquidity (i.e., the standard rebate),
albeit a rebate that is lower than the
amount under Add Volume Tier 3. The
Exchange also notes that the proposed
rule change to remove Add Volume Tier
3 merely results in Members not
receiving the enhanced rebate, which as
noted above, the Exchange is not
required to offer or maintain.
Similarly, the Exchange believes the
proposal to eliminate the Remove
Volume Tier is reasonable because the
Exchange is not required to maintain
this tier or provide Members an
opportunity to receive reduced fees. The
Exchange believes the proposal to
eliminate this tier is also equitable and
not unfairly discriminatory because it
applies to all Members (i.e., the tier
won’t be available for any Member). The
Exchange notes that recently seven
Members had satisfied the criteria of
Remove Volume Tier. The Exchange
also notes that the proposed rule change
to remove the Remove Volume Tier
merely results in Members not receiving
a reduced fee, which as noted above, the
Exchange is not required to offer or
maintain. Furthermore, the proposed
rule change to eliminate both the Add
Volume Tier 3 and the Remove Volume
Tier enables the Exchange to redirect
resources and funding into other
programs and tiers intended to
incentivize increased order flow.
The Exchange also believes the
proposed rule change to remove fee
codes 9, NB, R, RA and RB is reasonable
as the Exchange has observed no
volume in orders yielding these fee
codes and, therefore, the Exchange
believes the proposed change will have
a de minimis impact. Additionally, the
Exchange believes that infrastructure
and ongoing Systems maintenance
required to support separate fee codes
specifically applicable to these types of
routed orders is not warranted or
necessary in light of the fact that it has
not received any recent volume yielding
these fee codes. As noted above, to the
extent volume for transactions currently
covered by these fee codes ever
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 to Add
Volume 1 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.’’ 13
The Exchange believes the proposed
rule change does not impose any burden
on intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Particularly,
the proposed changes apply to all
Members equally in that all Members
will continue to be eligible for Add
Volume tier 1 and have a reasonable
opportunity to meet the tier’s criteria
and will all receive the corresponding
additional rebate if such criteria is met.
Additionally, the proposed tier change
is designed to attract additional order
flow to the Exchange. The Exchange
believes that the updated tier criteria
would incentivize market participants
12 See, e.g., Cboe BZX Equities Fee Schedule,
Footnote 1, which provides various Add/Remove
Volume Tiers applicable to fee codes B, V, and Y.
13 Securities Exchange Act Release No. 51808, 70
FR 37495, 37498–99 (June 29, 2005) (S7–10–04)
(Final Rule).
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79551
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. The Exchange does
not believe the proposed rule change to
eliminate Add Volume Tier 3, the
Remove Volume Tier, and the unused
routing fee codes will impose any
burden on intramarket competition
because it applies to all Members
uniformly.
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 16% 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.’’ 14 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
14 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
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Federal Register / Vol. 85, No. 238 / Thursday, December 10, 2020 / Notices
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’. . . .’’.15 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 16 and paragraph (f) of Rule
19b–4 thereunder.17 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:
jbell on DSKJLSW7X2PROD with NOTICES
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 SRCboeBZX–2020–088 on the subject line.
15 NetCoalition v. SEC, 615 F.3d 525, 539 (DC Cir.
2010) (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782–83
(December 9, 2008) (SR–NYSEArca-2006–21)).
16 15 U.S.C. 78s(b)(3)(A).
17 17 CFR 240.19b–4(f).
VerDate Sep<11>2014
17:36 Dec 09, 2020
Jkt 253001
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–2020–088. 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–2020–088 and
should be submitted on or before
December 31, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.18
J. Matthew DeLesDernier,
Assistant Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90573; File No. SR-Phlx–
2020–41]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove a Proposed
Rule Change To List and Trade
Options on a Nasdaq-100 Volatility
Index
December 4, 2020.
I. Introduction
On August 24, 2020, Nasdaq PHLX
LLC (‘‘Exchange’’ or ‘‘Phlx’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to list and trade options on a
Nasdaq-100 Volatility Index (‘‘VOLQ’’
or ‘‘Volatility Index’’). The proposed
rule change was published for comment
in the Federal Register on September 8,
2020.3 On October 20, 2020, pursuant to
Section 19(b)(2) of the Act,4 the
Commission designated a longer period
within which to approve the proposed
rule change, disapprove the proposed
rule change, or institute proceedings to
determine whether to disapprove the
proposed rule change.5 This order
institutes proceedings under Section
19(b)(2)(B) of the Act 6 to determine
whether to approve or disapprove the
proposed rule change.
II. Description of and Comment on the
Proposed Rule Change
A. Description of the Proposal
The Exchange proposes to list and
trade options on VOLQ, a new index
that measures changes in 30-day
implied volatility of the Nasdaq-100
Index (‘‘Nasdaq-100 Index’’ or ‘‘NDX’’).
As proposed, options on the VOLQ will
be cash-settled and will have Europeanstyle exercise provisions. The Exchange
states that the Volatility Index will
measure ‘‘at-the-money’’ volatility. The
Volatility Index, calculated using
[FR Doc. 2020–27088 Filed 12–9–20; 8:45 am]
1 15
BILLING CODE 8011–01–P
18 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00092
Fmt 4703
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 89725
(September 1, 2020), 85 FR 55544 (‘‘Notice’’).
Comment received on the Notice is available on the
Commission’s website at: https://www.sec.gov/
comments/sr-phlx-2020-41/srphlx202041.htm.
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 90226,
85 FR 67781 (October 26, 2020). The Commission
designated December 7, 2020 as the date by which
the Commission shall approve or disapprove, or
institute proceedings to determine whether to
disapprove, the proposed rule change.
6 15 U.S.C. 78s(b)(2)(B).
2 17
Sfmt 4703
E:\FR\FM\10DEN1.SGM
10DEN1
]]>Agencies
[Federal Register Volume 85, Number 238 (Thursday, December 10, 2020)]
[Notices]
[Pages 79548-79552]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27088]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90569; File No. SR-CboeBZX-2020-088]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Amend Its
Fee Schedule To Update the Add Volume Tiers, To Eliminate the Remove
Volume Tier, and To Eliminate Unused Fee Codes
December 4, 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 December 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.
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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
[[Page 79549]]
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 Add
Volume Tiers, (2) eliminate the Remove Volume Tier, and (3) eliminate
unused fee codes.\3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed fee changes on
December 1, 2020 (SR-CboeBZX-2020-087). On December 2, 2020, the
Exchange withdrew that filing and submitted this proposal.
---------------------------------------------------------------------------
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,\4\ no single registered
equities exchange has more than 16% 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 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 and orders that are
routed. 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
and for orders that are routed. Additionally, in response to the
competitive environment, the Exchange also offers tiered pricing which
provides Members opportunities to qualify for higher rebates or reduced
fees where certain volume criteria and thresholds are met. Tiered
pricing provides an incremental incentive for Members to strive for
higher tier levels, which provides increasingly higher benefits or
discounts for satisfying increasingly more stringent criteria.
---------------------------------------------------------------------------
\4\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (November 27, 2020), available at https://markets.cboe.com/us/equities/market_statistics/.
---------------------------------------------------------------------------
Proposed Updates to the Add Volume Tiers
The Exchange currently offers six Add Volume Tiers under footnote 1
of the Fee Schedule. The Add Volume Tiers provide Members with
opportunities to receive incrementally increasing enhanced rebates for
their liquidity adding orders that yield fee codes ``B'' \5\, ``V''
\6\, and ``Y'' \7\, upon reaching incrementally more difficult criteria
under each tier. The Exchange proposes to amend Tier 1 and remove Tier
3 (and renumber the remaining tiers accordingly).
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\5\ Appended to displayed orders that adds liquidity to BZX
(Tape B) and is assessed a standard rebate of $0.0025.
\6\ Appended to displayed orders that adds liquidity to BZX
(Tape A) and is assessed a standard rebate of $0.0025.
\7\ Appended to displayed orders that adds liquidity to BZX
(Tape C) and is assessed a standard rebate of $0.0025.
---------------------------------------------------------------------------
Particularly Tier 1 offers an enhanced rebate of $0.0025 for
qualifying orders (i.e., yielding fee codes B, V or Y) where a Member
has an ADAV \8\ greater or equal to 1,000,000. The Exchange proposes to
increase the ADAV requirement to 3,000,000. The Exchange notes Tier 1,
as modified, continues to be available to all Members and provide
Members an opportunity to receive an enhanced rebate, albeit using a
more stringent criteria. Moreover, the proposed change is designed to
encourage Members to increase order flow on the Exchange in order to
receive the corresponding rebate, which further contributes to a
deeper, more liquid market and provides even more execution
opportunities for active market participants at improved prices.
---------------------------------------------------------------------------
\8\ ``ADAV'' means average daily added volume calculated as the
number of shares added per day. ADAV is calculated on a monthly
basis.
---------------------------------------------------------------------------
Tier 3 offers an enhanced rebate of $0.0028 for qualifying orders
where a Member has an ADAV as a percentage of TCV greater than or equal
to 0.20%. The Exchange proposes to eliminate the 3 Tier as it no longer
wishes to, nor is it required to, maintain such tier. More
specifically, the proposed rule change removes this tier as the
Exchange would rather redirect resources and funding into other
programs and tiers intended to incentivize increased order flow.
Remove Volume Tier
The Exchange also proposes to eliminate Remove Volume Tier, which
offers a reduced fee of $0.0029 for orders in securities at or above
$1.00 and 0.28% of total dollar value for orders in securities below
$1.00 yielding fee code ``N'', ``W'' and ``BB'' where a Member has an
ADAV greater than or equal to 0.20% TCV with displayed orders that
yield fee codes B, V or Y. The Exchange proposes to eliminate the
Remove Volume Tier as it no longer wishes to, nor is it required to,
maintain such tier. More specifically, the proposed rule change removes
this tier as the Exchange would rather redirect resources and funding
into other programs and tiers intended to incentivize increased order
flow.
Elimination of Certain Routing Fee Codes
The Exchange assesses fees in connection with orders routed away to
various exchanges. The Exchange proposes to eliminate several routing-
related fee codes that have been unused for several years.
Particularly, the Exchange proposes to eliminate the following fee
codes:
Fee Code 9, which is appended to orders routed to NYSE
Arca and adds liquidity (Tapes A or C) and provides a rebate of
$0.00210 per share for securities priced at or above $1.00 and are free
for securities priced below $1.00;
Fee Code NB, which is appended to orders routed to any
exchange not covered by Fee Code NA and adds non-displayed liquidity
and assesses a fee of $0.00300 per share for securities priced at or
above $1.00 and a fee of 0.30% of dollar value for securities priced
below $1.00;
[[Page 79550]]
Fee Code R, which is appended to orders re-routed by NYSE
and assesses a fee of 0.00300 per share;
Fee Code RA, which is appended to orders re-routed to EDGA
and adds liquidity and assess a fee of 0.00300 per share for securities
priced at or above $1.00 and are free for securities priced below
$1.00; and
Fee Code RB, which is appended to orders routed to BX and
adds liquidity and assess a fee of 0.00200 per share for securities
priced at or above $1.00 and are free for securities priced below
$1.00.
As noted, above the Exchange has observed no volume in recent years
in orders yielding fee codes 9, NB, R, RA and RB. The Exchange believes
that because no Members elect to route their orders that yield these
fee codes, the current demand (or lack thereof) does not warrant the
infrastructure and ongoing Systems maintenance required to support
separate fee codes specifically applicable to these types of
transactions. Therefore, the Exchange now proposes to delete fee codes
9, NB, R, RA and RB in the Fee Schedule. The Exchange notes that
Members will continue to be able to choose to route their orders to any
exchange covered by these fee codes and such orders will be
automatically and uniformly assessed the current fees (or rebates) in
place for routed orders, as applicable (e.g., the standard fees applied
to routed orders, which yields fee code X).
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\9\ in general, and
furthers the objectives of Section 6(b)(4),\10\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its Members, 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.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
In particular, the Exchange believes the proposed changes to Tier 1
is reasonable because Tier 1 as modified continues to be available to
all Members and provides Members an opportunity to receive an enhanced
rebate, albeit using more stringent criteria. The Exchange next 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. 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 to that of the
Exchange, including schedules of rebates and fees that apply based upon
members achieving certain volume thresholds.\11\ These competing
pricing schedules, moreover, are presently comparable to those that the
Exchange provides, including the pricing of comparable tiers.
---------------------------------------------------------------------------
\11\ See, e.g., Cboe EDGX Equities Fees Schedule, Footnote 1
which provides various Add Volume Tiers.
---------------------------------------------------------------------------
The Exchange also notes that the enhanced rebate available under
Tier 1 is not changing and further believes that the current enhanced
rebate continues to be commensurate with the required criteria, even as
amended. Furthermore, the Exchange believes the enhanced rebates under
each Add Volume Tier continue to reasonably reflect the difficulty in
achieving the corresponding criteria, even as amended.
The Exchange believes the proposed change is also a reasonable
means to incentivize Members to continue to provide liquidity adding,
displayed volume, which will benefit all market participants by
incentivizing continuous liquidity and thus, deeper more liquid markets
as well as increased execution opportunities. 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.
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 amended tier. The Exchange notes that most recently, eleven
Members satisfied Tier 1. While the Exchange has no way of predicting
with certainty how the proposed tier will impact Member activity, the
Exchange anticipates that approximately three Members will be able to
satisfy Tier 1 as amended. The Exchange also notes that the proposed
amended tier will not adversely impact any Member's ability to qualify
for other rebate tiers. Rather, should a Member not meet the criteria
for Tier 1, as amended, the Member will merely not receive the
corresponding proposed enhanced rebate. Furthermore, the proposed
rebate would uniformly apply to all Members that meet the required
criteria.
The Exchange also believes the proposal to remove Add Volume Tier 3
is reasonable because 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 displayed adding
liquidity orders, including via the existing add volume tiers. The
Exchange believes the proposal to eliminate this tier is also equitable
and not unfairly discriminatory because it applies to all Members
(i.e., the tier won't be available for any Member). The Exchange notes
that recently two
[[Page 79551]]
Members had satisfied the criteria of Add Volume Tier 3. The Exchange
also notes that the proposed change does not preclude any Member,
including the Members that were receiving the rebates under this tier,
from achieving the remaining add volume tiers to qualify for the
remaining enhanced rebates or other available enhanced rebates under
other incentive tiers.\12\ Additionally, those Members are still
entitled to a rebate for its displayed orders adding liquidity (i.e.,
the standard rebate), albeit a rebate that is lower than the amount
under Add Volume Tier 3. The Exchange also notes that the proposed rule
change to remove Add Volume Tier 3 merely results in Members not
receiving the enhanced rebate, which as noted above, the Exchange is
not required to offer or maintain.
---------------------------------------------------------------------------
\12\ See, e.g., Cboe BZX Equities Fee Schedule, Footnote 1,
which provides various Add/Remove Volume Tiers applicable to fee
codes B, V, and Y.
---------------------------------------------------------------------------
Similarly, the Exchange believes the proposal to eliminate the
Remove Volume Tier is reasonable because the Exchange is not required
to maintain this tier or provide Members an opportunity to receive
reduced fees. The Exchange believes the proposal to eliminate this tier
is also equitable and not unfairly discriminatory because it applies to
all Members (i.e., the tier won't be available for any Member). The
Exchange notes that recently seven Members had satisfied the criteria
of Remove Volume Tier. The Exchange also notes that the proposed rule
change to remove the Remove Volume Tier merely results in Members not
receiving a reduced fee, which as noted above, the Exchange is not
required to offer or maintain. Furthermore, the proposed rule change to
eliminate both the Add Volume Tier 3 and the Remove Volume Tier enables
the Exchange to redirect resources and funding into other programs and
tiers intended to incentivize increased order flow.
The Exchange also believes the proposed rule change to remove fee
codes 9, NB, R, RA and RB is reasonable as the Exchange has observed no
volume in orders yielding these fee codes and, therefore, the Exchange
believes the proposed change will have a de minimis impact.
Additionally, the Exchange believes that infrastructure and ongoing
Systems maintenance required to support separate fee codes specifically
applicable to these types of routed orders is not warranted or
necessary in light of the fact that it has not received any recent
volume yielding these fee codes. As noted above, to the extent volume
for transactions currently covered by these fee codes ever increases,
such orders will be automatically and uniformly assessed the current
fees (or rebates) in place for routed orders, as applicable (e.g., the
standard fees applied to routed orders, which yield fee code X).
Finally, the Exchange believes that the proposed elimination of the fee
codes is equitable and not unfairly discriminatory as it applies
equally to all members that use the Exchange to route orders. If
members do not favor the Exchange's pricing for routed orders, they can
send their routable orders directly to away markets instead of using
routing functionality provided by the Exchange. Routing through the
Exchange is voluntary, and the Exchange operates in a competitive
environment where market participants can readily direct order flow to
competing venues or providers of routing services if they deem fee
levels to be excessive.
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 to Add Volume 1 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.'' \13\
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\13\ Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
---------------------------------------------------------------------------
The Exchange believes the proposed rule change does not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the proposed
changes apply to all Members equally in that all Members will continue
to be eligible for Add Volume tier 1 and have a reasonable opportunity
to meet the tier's criteria and will all receive the corresponding
additional rebate if such criteria is met. Additionally, the proposed
tier change is 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. The
Exchange does not believe the proposed rule change to eliminate Add
Volume Tier 3, the Remove Volume Tier, and the unused routing fee codes
will impose any burden on intramarket competition because it applies to
all Members uniformly.
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 16% 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.'' \14\ 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
[[Page 79552]]
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'. . . .''.\15\
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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\14\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\15\ NetCoalition v. SEC, 615 F.3d 525, 539 (DC 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 \16\ and paragraph (f) of Rule 19b-4
thereunder.\17\ 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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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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-2020-088 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-2020-088. 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-2020-088 and should be submitted
on or before December 31, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
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\18\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27088 Filed 12-9-20; 8:45 am]
BILLING CODE 8011-01-P
