Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Eliminate Certain Routing Fee Codes, 7914-7917 [2021-02117]
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7914
Federal Register / Vol. 86, No. 20 / Tuesday, February 2, 2021 / Notices
Securities and Exchange Commission
(the ‘‘Commission’’) may recognize, as
generally accepted for purposes of the
securities laws, any accounting
principles established by a standardsetting body that meets certain criteria.
Section 109 of SOX provides that all of
the budget of such a standard-setting
body shall be payable from an annual
accounting support fee assessed and
collected against each issuer, as may be
necessary or appropriate to pay for the
budget and provide for the expenses of
the standard-setting body, and to
provide for an independent, stable
source of funding, subject to review by
the Commission. Under Section 109(f)
of the Act, the amount of fees collected
for a fiscal year shall not exceed the
‘‘recoverable budget expenses’’ of the
standard-setting body. Section 109(h) of
SOX amends Section 13(b)(2) of the
Securities Exchange Act of 1934 to
require issuers to pay the allocable share
of a reasonable annual accounting
support fee or fees, determined in
accordance with Section 109 of the Act.
On April 25, 2003, the Commission
issued a policy statement concluding
that the Financial Accounting Standards
Board (‘‘FASB’’) and its parent
organization, the Financial Accounting
Foundation (‘‘FAF’’), satisfied the
criteria for an accounting standardsetting body under the Act, and
recognizing the FASB’s financial
accounting and reporting standards as
‘‘generally accepted’’ under Section 108
of the Act.1 Accordingly, the
Commission undertook a review of the
FASB’s accounting support fee for
calendar year 2021.2 In connection with
its review, the Commission also
reviewed the budget for the FAF and the
FASB for calendar year 2021.
Section 109 of SOX provides that, in
addition to the accounting support fee,
the standard-setting body can have
additional sources of revenue for its
activities, such as earnings from sales of
publications, provided that each
additional source of revenue shall not
jeopardize, in the judgment of the
Commission, the actual or perceived
independence of the standard setter. In
this regard, the Commission also
considered the interrelation of the
operating budgets of the FAF, the FASB,
and the Governmental Accounting
Standards Board (‘‘GASB’’), the FASB’s
sister organization, which sets
accounting standards used by state and
local government entities. The
1 Financial
Reporting Release No. 70.
2 The Financial Accounting Foundation’s Board
of Trustees approved the FASB’s budget on
November 17, 2020. The FAF submitted the
approved budget to the Commission on November
23, 2020.
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Commission has been advised by the
FAF that neither the FAF, the FASB, nor
the GASB accept contributions from the
accounting profession.
The Commission understands that the
Office of Management and Budget
(‘‘OMB’’) has determined the FASB’s
spending of the 2021 accounting
support fee is sequestrable under the
Budget Control Act of 2011.3 So long as
sequestration is applicable, we
anticipate that the FAF will work with
the Commission and Commission staff
as appropriate regarding its
implementation of sequestration.
After its review, the Commission
determined that the 2021 annual
accounting support fee for the FASB is
consistent with Section 109 of the Act.
Accordingly,
It is ordered, pursuant to Section 109
of SOX, that the FASB may act in
accordance with this determination of
the Commission.
By the Commission.
Vanessa A. Countryman,
Secretary.
[FR Doc. 2021–02171 Filed 2–1–21; 8:45 am]
BILLING CODE P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90999; File No. SR–
CboeBYX–2021–003]
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BYX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) is filing with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
to amend the fee schedule applicable to
Members and non-Members of the
Exchange pursuant to BYX Rules 15.1(a)
and (c). Changes to the fee schedule
pursuant to this proposal are effective
upon filing. 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/byx/), 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
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those 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 parts of such
statements.
Self-Regulatory Organizations; Cboe
BYX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fee Schedule To Eliminate Certain
Routing Fee Codes
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
January 27, 2021.
The Exchange proposes to amend its
fee schedule by eliminating certain
routing 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
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 January
13, 2021, Cboe BYX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BYX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
3 See ‘‘OMB Report Pursuant to the Sequestration
Transparency Act of 2012’’ (Pub. L. 112–155), page
16 of 17 at: https://www.whitehouse.gov/wpcontent/uploads/2020/02/JC-sequestration_report_
FY21_2-10-20.pdf
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
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1. Purpose
3 The Exchange initially filed the proposed fee
changes January 4, 2021 (SR–CboeBYX–2021–001).
On January 13, 2021, the Exchange withdrew that
filing and submitted this proposal.
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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 believes that the evershifting 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 assesses fees in
connection with orders routed away to
various exchanges. As a result of
minimal use in the last months, the
Exchange proposes to eliminate the
following routing fee codes currently
under the Fee Codes and Associated
Fees section of the Fee Schedule:
• Fee code 8, which is appended to
Members’ orders routed to NYSE
American that adds liquidity and
assesses a charge of $0.00020 per
contract; and
• Fee code MX, which is appended to
Members’ orders routed to NYSE
American using the SLIM 5 routing
strategy and assesses a charge of
$0.00020 per contract.
The Exchange has observed a minimal
amount of volume in recent months in
orders yielding fee codes 8 or MX. In
particular, over the last six months the
Exchange observed that orders yielding
fee code MX accounted for
approximately only 0.12% of all routed
order volume, and no orders yielding
fee code 8 have been submitted since
2014. The Exchange believes that,
because so few Users elect to route their
orders with specifications to which fee
codes 8 or MX, the current demand does
not warrant the infrastructure and
ongoing Systems maintenance required
to support these separate fee codes.
Therefore, the Exchange now proposes
to delete fee codes 8 and MX in the Fee
Schedule.
4 See Cboe Global Markets, U.S. Equities Market
Volume Summary, Month-to-Date (December 29,
2020), available at https://markets.cboe.com/us/
equities/market_statistics/.
5 The SLIM routing strategy is a routing strategy
in which an order checks the System for available
shares if so instructed by the entering User and then
is sent to destinations on the applicable System
routing table. See Rule 11.13(b)(3)(G); see also Cboe
Routing Strategies, FIX/BOE Routing Tags and
Instructions, available at: https://cdn.cboe.com/
resources/features/Cboe_USE_
RoutingStrategies.pdf.
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In light of the proposed fee code
deletions, the Exchange also proposes to
update the description to which fee
code X is applicable. Currently, the
description for orders yielding fee code
X applies to Members’ orders routed to
a displayed market to remove liquidity
using Parallel D, Parallel 2D, ROUT,
ROUX or Post to Away routing strategy.
Fee code X assesses a charge of $0.0030
per contract. Essentially, fee code X is
designed to apply, and currently
applies, to all other routed orders that
are not otherwise specified under other
fee codes in the Fee Schedule. However,
as currently written, the description of
orders that yield fee code X would not
encompass those orders that currently
yield fee codes 8 and MX. Therefore, the
proposed rule change updates the
description of orders that yield fee code
X to ‘‘Routed.’’ The Exchange notes that
the corresponding fee will remain
unchanged and is the standard rate
routing fee assessed pursuant to the
Standard Rates section of the Fee
Schedule. As a result of the proposed
description, Members will continue to
be able to choose to route their orders
with the same specifications to which
fee codes 8 and MX currently apply—
such orders will simply be assessed the
fee currently in place for orders yielding
fee code X (i.e., routed orders not
otherwise specified under other fee
codes in the Fee Schedule). The
Exchange notes that the proposed
description for fee code X does not alter
any of the routed orders to which fee
code X currently applies. The Exchange
also notes that the proposed description
for fee code X is consistent with the
description associated with
corresponding fee code X on the
Exchange’s affiliated equities exchanges,
Cboe EDGX Exchange, Inc. (‘‘EDGX’’)
and Cboe EDGA Exchange Inc.
(‘‘EDGA’’).
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,6
in general, and furthers the objectives of
Section 6(b)(4),7 in particular, as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its Members and
issuers and other persons using its
facilities. The Exchange also believes
that the proposed rule change is
consistent with the objectives of Section
6(b)(5) 8 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
6 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
8 15 U.S.C. 78f.(b)(5).
7 15
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practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest, and,
particularly, is not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange believes the proposed
rule changes are reasonable, equitable
and not unfairly discriminatory. The
Exchange first notes that routing
through the Exchange is optional. The
Exchange believes the proposed rule
change to remove fee codes 8 and MX
is reasonable as the Exchange has
observed a minimal amount of volume
in orders yielding these fee codes and,
therefore, the continuation of these fee
codes does not warrant the
infrastructure and ongoing Systems
maintenance required to support
separate fee codes for specific routed
orders. As such, the Exchange also
believes that is reasonable and equitable
to assess routed orders which meet the
specifications to which fee codes 8 and
MX are currently applicable the slightly
higher standard routing fee currently in
place for all other routed orders that are
not otherwise specified under other fee
codes in the Fee Schedule—via fee code
X, as amended. The Exchange believes
it is reasonable to update the
description for orders that yield fee code
X in a manner that reflects the intent of
fee code X, which is to apply to routed
orders not otherwise specified under
other fees codes in the Fee Schedule,
and will thus apply to routed orders that
currently yield fee codes 8 and MX. The
Exchange believes that the proposed
updated description is reasonable
because it does not alter any of the
routed orders to which fee code X
currently applies and will allow
Members to continue to be able to
choose to route their orders with the
same specifications to which fee codes
8 and MX currently apply. The
Exchange again notes that the proposed
description for fee code X is consistent
with the description associated with
corresponding fee code X on the
Exchange’s affiliated equities exchanges.
The Exchange believes that the
proposed rule change is equitable and
not unfairly discriminatory because
Members will continue to have the
option to elect to route their orders in
the same manner (i.e., routed to NYSE
American that add liquidity and routed
to NYSE American using the SLIM
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routing strategy), which will be
automatically and uniformly be assessed
the applicable standard rates in place
for generally all other routed orders
under fee code X. Further, 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 optional, 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. The Exchange believes
that the updated description for orders
that yield fee code X is equitable and
not unfairly discriminatory because it
does not impact the routed orders that
currently yield fee code X; the same
orders will continue to yield fee code X
and will continue to be automatically
and uniformly assessed the
corresponding fee.
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. The
Exchange does not believe the proposed
rule change will impose any burden on
intramarket competition because all
Members orders that would yield
current fee codes 8 or MX, will
automatically and uniformly be assessed
the fees already in place for all other
routed orders generally under fee code
X. Fee code X, as amended, will
continue to apply to the same routed
orders as it currently does, which will
continue to be automatically and
uniformly assessed the corresponding
fee. Ultimately, all routed orders will
generally be assessed the same fee.
The Exchange does not believe that
the proposed rule change will impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
The Exchange again notes that orders
that meet the specifications to which fee
codes 8 or MX would currently apply,
will yield the same fee codes and be
assessed the same corresponding rates
that are already in place in the Fee
Schedule for routed orders generally, as
previously filed with the Commission.
Also, 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.
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Additionally, the Exchange represents a
small percentage of the overall market.
Based on publicly available information,
no single options exchange has more
than 16% of the market share.9
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 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.’’ 10 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’. . . .’’.11 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.
9 See
supra note 4.
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
11 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)).
10 See
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 12 of the Act and
subparagraph (f)(2) of Rule 19b–4 13
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
At any time within 60 days of the
filing of such 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 shall institute proceedings
under Section 19(b)(2)(B) 14 of the Act 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–
CboeBYX–2021–003 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–CboeBYX–2021–003. 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
12 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
14 15 U.S.C. 78s(b)(2)(B).
13 17
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Federal Register / Vol. 86, No. 20 / Tuesday, February 2, 2021 / Notices
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–CboeBYX–2021–003, and
should be submitted on or before
February 23, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.15
J. Matthew DeLesDernier
Assistant Secretary.
[FR Doc. 2021–02117 Filed 2–1–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–240, OMB Control No.
3235–0216]
Submission for OMB Review;
Comment Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736
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Extension:
Rule 19a–1
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501–3520), the Securities
and Exchange Commission (the
‘‘Commission’’) has submitted to the
Office of Management and Budget a
request for extension of the previously
approved collection of information
discussed below.
Section 19(a) (15 U.S.C. 80a–19(a)) of
the Investment Company Act of 1940
(the ‘‘Act’’) (15 U.S.C. 80a) makes it
unlawful for any registered investment
company to pay any dividend or similar
distribution from any source other than
the company’s net income, unless the
payment is accompanied by a written
statement to the company’s
15 17
CFR 200.30–3(a)(12).
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shareholders which adequately
discloses the sources of the payment.
Section 19(a) authorizes the
Commission to prescribe the form of
such statement by rule.
Rule 19a–1 (17 CFR 270.19a–1) under
the Act, entitled ‘‘Written Statement to
Accompany Dividend Payments by
Management Companies,’’ sets forth
specific requirements for the
information that must be included in
statements made pursuant to section
19(a) by or on behalf of management
companies.1 The rule requires that the
statement indicate what portions of
distribution payments are made from
net income, net profits from the sale of
a security or other property (‘‘capital
gains’’) and paid-in capital. When any
part of the payment is made from capital
gains, rule 19a–1 also requires that the
statement disclose certain other
information relating to the appreciation
or depreciation of portfolio securities. If
an estimated portion is subsequently
determined to be significantly
inaccurate, a correction must be made
on a statement made pursuant to section
19(a) or in the first report to
shareholders following the discovery of
the inaccuracy.
The purpose of rule 19a–1 is to afford
fund shareholders adequate disclosure
of the sources from which distribution
payments are made. The rule is
intended to prevent shareholders from
confusing income dividends with
distributions made from capital sources.
Absent rule 19a–1, shareholders might
receive a false impression of fund gains.
Based on a review of filings made
with the Commission, the staff estimates
that approximately 12,019 series of
registered investment companies that
are management companies may be
subject to rule 19a–1 each year,2 and
that each portfolio on average mails two
statements per year to meet the
requirements of the rule.3 The staff
further estimates that the time needed to
make the determinations required by the
rule and to prepare the statement
1 Section 4(3) of the Act (15 U.S.C. 80a–4(3))
defines ‘‘management company’’ as ‘‘any
investment company other than a face amount
certificate company or a unit investment trust.’’
2 This estimate is based on statistics compiled by
Commission staff as of September 21, 2020. The
number of management investment company
portfolios that make distributions for which
compliance with rule 19a–1 is required depends on
a wide range of factors and can vary greatly across
years. Therefore, the calculation of estimated
burden hours is based on the total number of
management investment company portfolios, each
of which may be subject to rule 19a–1.
3 A few portfolios make monthly distributions
from sources other than net income, so the rule
requires them to send out a statement 12 times a
year. Other portfolios never make such
distributions.
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7917
required under the rule is
approximately 1 hour per statement.
The total annual burden for all
portfolios therefore is estimated to be
approximately 24,038 burden hours.4
The staff estimates that approximately
one-third of the total annual burden
(8,013 hours) would be incurred by a
paralegal with an average hourly wage
rate of approximately $219 per hour,5
and approximately two-thirds of the
annual burden (16,026 hours) would be
incurred by a compliance clerk with an
average hourly wage rate of $71 per
hour.6 The staff therefore estimates that
the aggregate annual cost of complying
with the paperwork requirements of the
rule is approximately $2,892,693 ((8,013
hours × $219 = $1,754,847) + (16,026
hours × $71 = $1,137,846)).
To comply with state law, many
investment companies already must
distinguish the different sources from
which a shareholder distribution is paid
and disclose that information to
shareholders. Thus, many investment
companies would be required to
distinguish the sources of shareholder
dividends whether or not the
Commission required them to do so
under rule 19a–1.
The estimate of average burden hours
is made solely for the purposes of the
Paperwork Reduction Act, and is not
derived from a comprehensive or even
a representative survey or study of the
costs of Commission rules. Compliance
with the collection of information
required by rule 19a–1 is mandatory for
management companies that make
statements to shareholders pursuant to
section 19(a) of the Act. 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 control number.
The public may view the background
documentation for this information
collection at the following website,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
4 This estimate is based on the following
calculation: 12,019 management investment
company portfolios × 2 statements per year × 1 hour
per statement = 24,038 burden hours.
5 Hourly rates are derived from the Securities
Industry and Financial Markets Association
(‘‘SIFMA’’), Management and Professional Earnings
in the Securities Industry 2013, modified to account
for an 1,800-hour work-year and inflation, and
multiplied by 5.35 to account for bonuses, firm size,
employee benefits, and overhead.
6 Hourly rates are derived from SIFMA’s Office
Salaries in the Securities Industry 2013, modified
to account for an 1,800-hour work-year and
multiplied by 2.93 to account for bonuses, firm size,
employee benefits and overhead.
E:\FR\FM\02FEN1.SGM
02FEN1
]]>Agencies
[Federal Register Volume 86, Number 20 (Tuesday, February 2, 2021)]
[Notices]
[Pages 7914-7917]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-02117]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90999; File No. SR-CboeBYX-2021-003]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule To Eliminate Certain Routing Fee Codes
January 27, 2021.
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 January 13, 2021, Cboe BYX Exchange, Inc. (the ``Exchange'' or
``BYX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I and II
below, which Items have been prepared by the Exchange. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
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\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 BYX Exchange, Inc. (the ``Exchange'' or ``BYX'') is filing
with the Securities and Exchange Commission (``Commission'') a proposed
rule change to amend the fee schedule applicable to Members and non-
Members of the Exchange pursuant to BYX Rules 15.1(a) and (c). Changes
to the fee schedule pursuant to this proposal are effective upon
filing. 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/byx/), 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 self-regulatory organization
included statements concerning the purpose of, and basis for, the
proposed rule change and discussed any comments it received on the
proposed rule change. The text of those 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 parts 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 by eliminating
certain routing fee codes.\3\
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\3\ The Exchange initially filed the proposed fee changes
January 4, 2021 (SR-CboeBYX-2021-001). On January 13, 2021, the
Exchange withdrew that filing and submitted this proposal.
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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
[[Page 7915]]
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
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.
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\4\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (December 29, 2020), available at https://markets.cboe.com/us/equities/market_statistics/.
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The Exchange assesses fees in connection with orders routed away to
various exchanges. As a result of minimal use in the last months, the
Exchange proposes to eliminate the following routing fee codes
currently under the Fee Codes and Associated Fees section of the Fee
Schedule:
Fee code 8, which is appended to Members' orders routed to
NYSE American that adds liquidity and assesses a charge of $0.00020 per
contract; and
Fee code MX, which is appended to Members' orders routed
to NYSE American using the SLIM \5\ routing strategy and assesses a
charge of $0.00020 per contract.
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\5\ The SLIM routing strategy is a routing strategy in which an
order checks the System for available shares if so instructed by the
entering User and then is sent to destinations on the applicable
System routing table. See Rule 11.13(b)(3)(G); see also Cboe Routing
Strategies, FIX/BOE Routing Tags and Instructions, available at:
https://cdn.cboe.com/resources/features/Cboe_USE_RoutingStrategies.pdf.
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The Exchange has observed a minimal amount of volume in recent
months in orders yielding fee codes 8 or MX. In particular, over the
last six months the Exchange observed that orders yielding fee code MX
accounted for approximately only 0.12% of all routed order volume, and
no orders yielding fee code 8 have been submitted since 2014. The
Exchange believes that, because so few Users elect to route their
orders with specifications to which fee codes 8 or MX, the current
demand does not warrant the infrastructure and ongoing Systems
maintenance required to support these separate fee codes. Therefore,
the Exchange now proposes to delete fee codes 8 and MX in the Fee
Schedule.
In light of the proposed fee code deletions, the Exchange also
proposes to update the description to which fee code X is applicable.
Currently, the description for orders yielding fee code X applies to
Members' orders routed to a displayed market to remove liquidity using
Parallel D, Parallel 2D, ROUT, ROUX or Post to Away routing strategy.
Fee code X assesses a charge of $0.0030 per contract. Essentially, fee
code X is designed to apply, and currently applies, to all other routed
orders that are not otherwise specified under other fee codes in the
Fee Schedule. However, as currently written, the description of orders
that yield fee code X would not encompass those orders that currently
yield fee codes 8 and MX. Therefore, the proposed rule change updates
the description of orders that yield fee code X to ``Routed.'' The
Exchange notes that the corresponding fee will remain unchanged and is
the standard rate routing fee assessed pursuant to the Standard Rates
section of the Fee Schedule. As a result of the proposed description,
Members will continue to be able to choose to route their orders with
the same specifications to which fee codes 8 and MX currently apply--
such orders will simply be assessed the fee currently in place for
orders yielding fee code X (i.e., routed orders not otherwise specified
under other fee codes in the Fee Schedule). The Exchange notes that the
proposed description for fee code X does not alter any of the routed
orders to which fee code X currently applies. The Exchange also notes
that the proposed description for fee code X is consistent with the
description associated with corresponding fee code X on the Exchange's
affiliated equities exchanges, Cboe EDGX Exchange, Inc. (``EDGX'') and
Cboe EDGA Exchange Inc. (``EDGA'').
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\6\ in general, and
furthers the objectives of Section 6(b)(4),\7\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its Members and issuers and other persons
using its facilities. The Exchange also believes that the proposed rule
change is consistent with the objectives of Section 6(b)(5) \8\
requirements that the rules of an exchange be designed to prevent
fraudulent and manipulative acts and practices, to promote just and
equitable principles of trade, to foster cooperation and coordination
with persons engaged in regulating, clearing, settling, processing
information with respect to, and facilitating transactions in
securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest, and, particularly, is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(4).
\8\ 15 U.S.C. 78f.(b)(5).
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The Exchange believes the proposed rule changes are reasonable,
equitable and not unfairly discriminatory. The Exchange first notes
that routing through the Exchange is optional. The Exchange believes
the proposed rule change to remove fee codes 8 and MX is reasonable as
the Exchange has observed a minimal amount of volume in orders yielding
these fee codes and, therefore, the continuation of these fee codes
does not warrant the infrastructure and ongoing Systems maintenance
required to support separate fee codes for specific routed orders. As
such, the Exchange also believes that is reasonable and equitable to
assess routed orders which meet the specifications to which fee codes 8
and MX are currently applicable the slightly higher standard routing
fee currently in place for all other routed orders that are not
otherwise specified under other fee codes in the Fee Schedule--via fee
code X, as amended. The Exchange believes it is reasonable to update
the description for orders that yield fee code X in a manner that
reflects the intent of fee code X, which is to apply to routed orders
not otherwise specified under other fees codes in the Fee Schedule, and
will thus apply to routed orders that currently yield fee codes 8 and
MX. The Exchange believes that the proposed updated description is
reasonable because it does not alter any of the routed orders to which
fee code X currently applies and will allow Members to continue to be
able to choose to route their orders with the same specifications to
which fee codes 8 and MX currently apply. The Exchange again notes that
the proposed description for fee code X is consistent with the
description associated with corresponding fee code X on the Exchange's
affiliated equities exchanges.
The Exchange believes that the proposed rule change is equitable
and not unfairly discriminatory because Members will continue to have
the option to elect to route their orders in the same manner (i.e.,
routed to NYSE American that add liquidity and routed to NYSE American
using the SLIM
[[Page 7916]]
routing strategy), which will be automatically and uniformly be
assessed the applicable standard rates in place for generally all other
routed orders under fee code X. Further, 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 optional, 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.
The Exchange believes that the updated description for orders that
yield fee code X is equitable and not unfairly discriminatory because
it does not impact the routed orders that currently yield fee code X;
the same orders will continue to yield fee code X and will continue to
be automatically and uniformly assessed the corresponding fee.
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. The Exchange does not
believe the proposed rule change will impose any burden on intramarket
competition because all Members orders that would yield current fee
codes 8 or MX, will automatically and uniformly be assessed the fees
already in place for all other routed orders generally under fee code
X. Fee code X, as amended, will continue to apply to the same routed
orders as it currently does, which will continue to be automatically
and uniformly assessed the corresponding fee. Ultimately, all routed
orders will generally be assessed the same fee.
The Exchange does not believe that the proposed rule change will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
again notes that orders that meet the specifications to which fee codes
8 or MX would currently apply, will yield the same fee codes and be
assessed the same corresponding rates that are already in place in the
Fee Schedule for routed orders generally, as previously filed with the
Commission. Also, 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 16% of the market share.\9\ 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.'' \10\ 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'. . . .''.\11\ 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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\9\ See supra note 4.
\10\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\11\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \12\ of the Act and subparagraph (f)(2) of Rule
19b-4 \13\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\12\ 15 U.S.C. 78s(b)(3)(A).
\13\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such 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 shall institute proceedings under
Section 19(b)(2)(B) \14\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\14\ 15 U.S.C. 78s(b)(2)(B).
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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-CboeBYX-2021-003 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-CboeBYX-2021-003. 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
[[Page 7917]]
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-
CboeBYX-2021-003, and should be submitted on or before February 23,
2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\15\
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\15\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier
Assistant Secretary.
[FR Doc. 2021-02117 Filed 2-1-21; 8:45 am]
BILLING CODE 8011-01-P
