Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposal To Permit the Exchange To Look Back Only to July 2020 To Correct Certain Billing Errors Which Were Discovered in October 2020, 13412-13414 [2021-04677]
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13412
Federal Register / Vol. 86, No. 43 / Monday, March 8, 2021 / Notices
information unless it displays a
currently valid OMB control number.
The public may view background
documentation for this information
collection at the following website:
www.reginfo.gov. Find this particular
information collection by selecting
‘‘Currently under 30-day Review—Open
for Public Comments’’ or by using the
search function. Written comments and
recommendations for the proposed
information collection should be sent
within 30 days of publication of this
notice to (i) www.reginfo.gov/public/do/
PRAMain and (ii) David Bottom,
Director/Chief Information Officer,
Securities and Exchange Commission, c/
o Cynthia Roscoe, 100 F Street, NE,
Washington, DC 20549, or by sending an
email to: PRA_Mailbox@sec.gov.
Dated: March 2, 2021.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–04656 Filed 3–5–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91239; File No. SR–
CboeBZX–2021–017]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposal To Permit the Exchange To
Look Back Only to July 2020 To
Correct Certain Billing Errors Which
Were Discovered in October 2020
jbell on DSKJLSW7X2PROD with NOTICES
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 February
18, 2021, 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 and II
below, which Items have been prepared
by the Exchange. The Exchange filed the
proposal as a ‘‘non-controversial’’
proposed rule change pursuant to
Section 19(b)(3)(A)(iii) of the Act 3 and
Rule 19b–4(f)(6) thereunder.4 The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
1. Purpose
The Exchange recently amended its
equities and options fees schedules to
adopt a provision relating to billing
errors and fee disputes.5 Specifically,
the Exchange adopted a provision that
provides that all fees and rebates
assessed prior to the three full calendar
months before the month in which the
Exchange becomes aware of a billing
error shall be considered final.
Particularly, the Exchange will resolve
an error by crediting or debiting
Members and Non-Members based on
the fees or rebates that should have been
applied in the three full calendar
months preceding the month in which
the Exchange became aware of the error,
including to all impacted transactions
that occurred during those months.6 The
5 See Securities Exchange Act Release No. 90897
(January 11, 2021), 86 FR 4161 (January 15, 2021)
(SR–CboeBZX–2020–094).
6 For example, if the Exchange becomes aware of
a transaction fee billing error on February 4, 2021,
the Exchange will resolve the error by crediting or
1 15
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(iii).
4 17 CFR 240.19b–4(f)(6).
19:05 Mar 05, 2021
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
March 2, 2021.
VerDate Sep<11>2014
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (‘‘BZX’’ or
the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(the ‘‘Commission’’) a proposal to
permit the Exchange to look back only
to July 2020 to correct certain billing
errors which were discovered in
October 2020. This rule change does not
provide for any modifications to the text
of the Exchange’s rules or fees schedule.
The text of the proposal 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.
Jkt 253001
PO 00000
Frm 00134
Fmt 4703
Sfmt 4703
Exchange will apply the three month
look back regardless of whether the
error was discovered by the Exchange or
by a Member or Non-Member that
submitted a fee dispute to the Exchange.
The Exchange’s fees schedules also
provide that all disputes concerning fees
and rebates assessed by the Exchange
would have to be submitted to the
Exchange in writing and accompanied
by supporting documentation. The
purpose of this policy is to provide both
the Exchange and Members and NonMembers subject to the Exchange’s fee
schedule finality and the ability to close
their books after a known period of
time. The Exchange further notes that
several other exchanges have adopted
similar provisions in their rules.7
The Exchange proposes to apply the
recently adopted billing policy to
transactions impacted by billing errors
that were discovered in October 2020.
Particularly, in October 2020, the
Exchange identified a billing error
relating to certain fee codes. As a result
of the discovery, the Exchange
conducted a review of additional fee
code configurations, which review was
only recently completed. The review
resulted in the discovery of additional
billing errors relating to Exchange fee
codes. These errors, along with the
original error discovered in October
2020, resulted in various Members being
over-rebated or under-billed, and to a
lesser extent over-billed, over the course
of several years. In the absence of
applying the recently adopted billing
policy to transactions impacted by the
October 2020 billing errors, the
Exchange would be required to credit or
debit Members based on the fees or
rebates that should have been applied to
all impacted transactions, regardless of
how far back the transactions occurred
(which as noted above, is several years).
If the Exchange were permitted to apply
the current rule language to the billing
errors discovered in October 2020
however, then the Exchange could limit
its look back in correcting those errors
to only those transactions that occurred
debiting Members based on the fees or rebates that
should have been applied to any impacted
transactions during November, 2020, December
2020 and January 2021. The Exchange notes that
because it bills in arrears, the Exchange would be
able to correct the error in advance of issuing the
February 2021 invoice and therefore, transactions
impacted through the date of discovery (in this
example, February 4, 2021) and thereafter, would be
billed correctly.
7 See e.g., Securities Exchange Act Release No.
87650 (December 3, 2019), 84 FR 67304 (December
9, 2019) (SR–NYSECHX–2019–024); Securities
Exchange Act Release No. 84430 (October 16, 2018),
83 FR 53347 (October 22, 2018) (SR–NYSENAT–
2018–23); and Securities Exchange Act Release No.
79060 (October 6, 2016), 81 FR 70716 (October 13,
2016) (SR–ISEGemini–2016–11).
E:\FR\FM\08MRN1.SGM
08MRN1
Federal Register / Vol. 86, No. 43 / Monday, March 8, 2021 / Notices
in the three months preceding the
discovery of the errors (i.e., July 2020
through September 2020).8 Moreover,
the benefit to the Exchange of limiting
the impact of these particular errors to
three months is much smaller as
compared to the benefit that Members
would receive. Specifically, the nature
of these particular billing errors is such
that in correcting the errors, more
money would be owed to the Exchange
by Members due to over-rebating or
under-billing than is owed to Members
by the Exchange due to overbilling.
Accordingly, the Exchange believes it’s
appropriate and equitable to apply the
three-month look back for corrective
billing to the errors that were discovered
in October 2020.
jbell on DSKJLSW7X2PROD with NOTICES
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.9 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 10 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the Section 6(b)(5) 11 requirement that
the rules of an exchange not be designed
to permit unfair discrimination between
customers, issuers, brokers, or dealers.
In adopting its currently policy, the
Exchange noted that it believed
providing that all fees are final after 3
months is reasonable as both the
Exchange and Members have an interest
in knowing when its fee assessments are
final and when reliance can be placed
on those assessments. Indeed, without
some deadline on fee disputes and
billing errors, the Exchange and market
participants would never be able to
close their books with any confidence.
8 The
Exchange corrected errors in advance of
issuing the October 2020 invoice and therefore,
transactions impacted through the date of discovery
and thereafter, were billed correctly.
9 15 U.S.C. 78f(b).
10 15 U.S.C. 78f(b)(5).
11 Id.
VerDate Sep<11>2014
19:05 Mar 05, 2021
Jkt 253001
Furthermore, as noted above, a number
of Exchanges similarly consider their
fees final after a similar period of time.12
As discussed above, in October 2020,
the Exchange became aware of certain
billings errors which resulted in various
Members being over-rebated or underbilled, and to a lesser extent over-billed
over the course of several years. The
Exchange believes it’s appropriate that
Members that were impacted by these
billing errors similarly be subject to the
recently adopted billing policy to not
resolve billing errors past three months
from the time a billing error was
discovered (in this case, not be invoiced
for impacted transactions that occurred
prior to July 2020).13 The Exchange does
not think it is appropriate or equitable
to have to correct billing errors for
transactions that occurred prior to July
2020. As discussed, the Exchange
believes it’s reasonable and important
for both Members and the Exchange to
rely on the finality of fees and rebates
assessed. Moreover, the proposed rule
change would apply to all Members
equally, in that the Exchange would be
precluded from invoicing any Member
for the correct amounts that should have
been applied to trades that were
otherwise billed incorrectly before July
2020. The Exchange also believes the
proposal would be consistent with the
protection of investors and the public
interest because it would allow
impacted market participants to benefit
from the same rule recently adopted by
the Exchange. Additionally, as
discussed, Members would receive a
greater benefit from the application of
the current billing errors policy as
compared to the Exchange with respect
to these particular billing errors.
Furthermore, the Exchange believes the
proposal to limit the time period it must
correct billing errors does not raise any
new or novel issues that have not been
already been considered by the
Commission. Particularly, the proposal
to limit how far back an exchange must
go to correct billing errors is comparable
to other policies and practices that have
long been established at other
exchanges.14
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change would impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. First, the
12 See
supra note 7.
the errors were discovered in October
2020, the three preceding months that would be
corrected are July, August, and September 2020.
14 See supra note 7.
13 Since
PO 00000
Frm 00135
Fmt 4703
Sfmt 4703
13413
Exchange notes the proposal is not
intended to address any competitive
issue, but rather provide finality to
Members with respect to billing errors
that were just recently discovered and
extend to them the applicability of a
recently adopted billing practice that
considers all fees final after three
months. Further, the Exchange does not
believe that the proposed rule change
will impose any burden on intramarket
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act because the
proposed changes apply equally to all
Members. 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 because the
proposed change only affects
transactions that occurred on the
Exchange. Additionally, other
exchanges have long established
policies in which fees shall be
considered final after a specified period
of time.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No comments were solicited or
received on the proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not (i) significantly affect
the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and; (iii)
become operative for 30 days from the
date on which it was filed, or such
shorter time as the Commission may
designate, it has become effective
pursuant to Section 19(b)(3)(A) of the
Act 15 and Rule 19b–4(f)(6) 16
thereunder.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
15 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires a self-regulatory organization to give
the Commission written notice of its intent to file
the proposed rule change at least five business days
prior to the date of filing of the proposed rule
change, or such shorter time as designated by the
Commission. The Exchange has satisfied this
requirement.
16 17
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13414
Federal Register / Vol. 86, No. 43 / Monday, March 8, 2021 / Notices
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
[FR Doc. 2021–04677 Filed 3–5–21; 8:45 am]
IV. Solicitation of Comments
BILLING CODE 8011–01–P
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 SRCboeBZX–2021–017 on the subject line.
Paper Comments
jbell on DSKJLSW7X2PROD with NOTICES
• 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-2021–017. 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,
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;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
CboeBZX–2021–017 and should be
submitted on or before March 29, 2021.
VerDate Sep<11>2014
19:05 Mar 05, 2021
Jkt 253001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Matthew DeLesDernier,
Assistant Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91236; File No. SR–
NYSEArca–2020–56]
Self-Regulatory Organizations; NYSE
Arca, Inc.; Order Disapproving a
Proposed Rule Change To Amend
NYSE Arca Rules 5.2–E(j)(3), 5.2–
E(j)(8), 5.5–E(g)(2), 8.600–E, and 8.900–
E
March 2, 2021.
I. Introduction
On June 18, 2020, NYSE Arca, Inc.
(‘‘Exchange’’ or ‘‘NYSE Arca’’) filed
with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 1 and Rule 19b–4 thereunder,2 a
proposed rule change to amend certain
listing requirements relating to
maintaining a minimum number of
beneficial holders and minimum
number of shares outstanding. The
proposed rule change was published for
comment in the Federal Register on July
7, 2020.3
On August 17, 2020, pursuant to
Section 19(b)(2) of the Exchange 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
On October 2, 2020, the Commission
instituted proceedings to determine
whether to approve or disapprove the
proposed rule change.6 On December
15, 2020, the Commission designated a
longer period for Commission action on
the proposed rule change.7 The
Commission received one comment
letter on the proposed rule change.8
17 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 See Securities Exchange Act Release No. 89197
(June 30, 2020), 85 FR 40720 (‘‘Notice’’).
4 15 U.S.C. 78s(b)(2).
5 See Securities Exchange Act Release No. 89584,
85 FR 51817 (Aug. 21, 2020).
6 See Securities Exchange Act Release No. 90075,
85 FR 63597 (Oct. 8, 2020) (‘‘OIP’’).
7 See Securities Exchange Act Release No. 90672,
85 FR 83135 (Dec. 21, 2020).
8 The comment on the proposed rule change can
be found on the Commission’s website at: https://
1 15
PO 00000
Frm 00136
Fmt 4703
Sfmt 4703
This order disapproves the proposed
rule change because, as discussed
below, NYSE Arca has not met its
burden under the Exchange Act and the
Commission’s Rules of Practice to
demonstrate that its proposal is
consistent with the requirements of
Exchange Act Section 6(b)(5), and, in
particular, the requirement that the
rules of a national securities exchange
be designed ‘‘to prevent fraudulent and
manipulative acts and practices’’ and
‘‘to protect investors and the public
interest.’’ 9
II. Description of the Proposal
As described in detail in the Notice
and OIP, the Exchange proposes to
amend the listing standards governing
the listing and trading of Investment
Company Units, Exchange-Traded Fund
Shares, Managed Fund Shares, and
Managed Portfolio Shares (collectively,
‘‘Fund Shares’’).10 Specifically, NYSE
Arca proposes to: (1) Remove the listing
requirement that, following the initial
twelve-month period after
commencement of trading of a series of
Fund Shares on the Exchange, such
series have at least 50 beneficial holders
(‘‘Beneficial Holders Rule’’); and (2)
replace the existing minimum number
of shares requirements (‘‘Minimum
Shares Outstanding Rules’’) 11 with a
requirement that a series of Fund Shares
have at least one creation unit
outstanding on an initial and continued
listing basis.12
The Exchange states that Beneficial
Holders Rule as it pertains to Fund
Shares listed on NYSE Arca is no longer
necessary. The Exchange contends that
the requirements of Rule 6c–11 under
the 1940 Act and, in particular, the
website disclosure requirements of Rule
www.sec.gov/comments/sr-nysearca-2020-56/
srnysearca202056-8163217-226939.pdf.
9 15 U.S.C. 78f(b)(5).
10 See NYSE Arca Rules 5.2–E(j)(3) and 5.5–
E(g)(2) (Investment Company Units); 5.2–E(j)(8)
(Exchange-Traded Fund Shares); 8.600–E (Managed
Fund Shares); and 8.900–E (Managed Portfolio
Shares).
11 See Commentary .01(d) to NYSE Arca Rule 5.2–
E(j)(3) (requiring a minimum of 100,000 shares of
a series of Investment Company Units to be
outstanding at commencement of trading); NYSE
Arca Rule 5.2–E(j)(8)(e)(1)(A) (requiring the
Exchange to establish a minimum number of
Exchange-Traded Fund Shares to be outstanding at
the time of commencement of trading); NYSE Arca
Rule 8.600–E(d)(1)(A) (requiring the Exchange to
establish a minimum number of Managed Fund
Shares to be outstanding at the time of
commencement of trading); and NYSE Arca Rule
8.900–E(d)(1)(A) (requiring the Exchange to
establish a minimum number of Managed Portfolio
Shares to be outstanding at the time of
commencement of trading).
12 The Exchange represents that the term
‘‘creation unit’’ would have the same meaning as
defined in Rule 6c–11(a)(1) under the Investment
Company Act of 1940 (‘‘1940 Act’’).
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]]>Agencies
[Federal Register Volume 86, Number 43 (Monday, March 8, 2021)]
[Notices]
[Pages 13412-13414]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-04677]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91239; File No. SR-CboeBZX-2021-017]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposal To Permit the Exchange
To Look Back Only to July 2020 To Correct Certain Billing Errors Which
Were Discovered in October 2020
March 2, 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 February 18, 2021, 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 and II
below, which Items have been prepared by the Exchange. The Exchange
filed the proposal as a ``non-controversial'' proposed rule change
pursuant to Section 19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-
4(f)(6) thereunder.\4\ 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(iii).
\4\ 17 CFR 240.19b-4(f)(6).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (the ``Commission'') a
proposal to permit the Exchange to look back only to July 2020 to
correct certain billing errors which were discovered in October 2020.
This rule change does not provide for any modifications to the text of
the Exchange's rules or fees schedule.
The text of the proposal 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 recently amended its equities and options fees
schedules to adopt a provision relating to billing errors and fee
disputes.\5\ Specifically, the Exchange adopted a provision that
provides that all fees and rebates assessed prior to the three full
calendar months before the month in which the Exchange becomes aware of
a billing error shall be considered final. Particularly, the Exchange
will resolve an error by crediting or debiting Members and Non-Members
based on the fees or rebates that should have been applied in the three
full calendar months preceding the month in which the Exchange became
aware of the error, including to all impacted transactions that
occurred during those months.\6\ The Exchange will apply the three
month look back regardless of whether the error was discovered by the
Exchange or by a Member or Non-Member that submitted a fee dispute to
the Exchange. The Exchange's fees schedules also provide that all
disputes concerning fees and rebates assessed by the Exchange would
have to be submitted to the Exchange in writing and accompanied by
supporting documentation. The purpose of this policy is to provide both
the Exchange and Members and Non-Members subject to the Exchange's fee
schedule finality and the ability to close their books after a known
period of time. The Exchange further notes that several other exchanges
have adopted similar provisions in their rules.\7\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 90897 (January 11,
2021), 86 FR 4161 (January 15, 2021) (SR-CboeBZX-2020-094).
\6\ For example, if the Exchange becomes aware of a transaction
fee billing error on February 4, 2021, the Exchange will resolve the
error by crediting or debiting Members based on the fees or rebates
that should have been applied to any impacted transactions during
November, 2020, December 2020 and January 2021. The Exchange notes
that because it bills in arrears, the Exchange would be able to
correct the error in advance of issuing the February 2021 invoice
and therefore, transactions impacted through the date of discovery
(in this example, February 4, 2021) and thereafter, would be billed
correctly.
\7\ See e.g., Securities Exchange Act Release No. 87650
(December 3, 2019), 84 FR 67304 (December 9, 2019) (SR-NYSECHX-2019-
024); Securities Exchange Act Release No. 84430 (October 16, 2018),
83 FR 53347 (October 22, 2018) (SR-NYSENAT-2018-23); and Securities
Exchange Act Release No. 79060 (October 6, 2016), 81 FR 70716
(October 13, 2016) (SR-ISEGemini-2016-11).
---------------------------------------------------------------------------
The Exchange proposes to apply the recently adopted billing policy
to transactions impacted by billing errors that were discovered in
October 2020. Particularly, in October 2020, the Exchange identified a
billing error relating to certain fee codes. As a result of the
discovery, the Exchange conducted a review of additional fee code
configurations, which review was only recently completed. The review
resulted in the discovery of additional billing errors relating to
Exchange fee codes. These errors, along with the original error
discovered in October 2020, resulted in various Members being over-
rebated or under-billed, and to a lesser extent over-billed, over the
course of several years. In the absence of applying the recently
adopted billing policy to transactions impacted by the October 2020
billing errors, the Exchange would be required to credit or debit
Members based on the fees or rebates that should have been applied to
all impacted transactions, regardless of how far back the transactions
occurred (which as noted above, is several years). If the Exchange were
permitted to apply the current rule language to the billing errors
discovered in October 2020 however, then the Exchange could limit its
look back in correcting those errors to only those transactions that
occurred
[[Page 13413]]
in the three months preceding the discovery of the errors (i.e., July
2020 through September 2020).\8\ Moreover, the benefit to the Exchange
of limiting the impact of these particular errors to three months is
much smaller as compared to the benefit that Members would receive.
Specifically, the nature of these particular billing errors is such
that in correcting the errors, more money would be owed to the Exchange
by Members due to over-rebating or under-billing than is owed to
Members by the Exchange due to overbilling. Accordingly, the Exchange
believes it's appropriate and equitable to apply the three-month look
back for corrective billing to the errors that were discovered in
October 2020.
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\8\ The Exchange corrected errors in advance of issuing the
October 2020 invoice and therefore, transactions impacted through
the date of discovery and thereafter, were billed correctly.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \11\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
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In adopting its currently policy, the Exchange noted that it
believed providing that all fees are final after 3 months is reasonable
as both the Exchange and Members have an interest in knowing when its
fee assessments are final and when reliance can be placed on those
assessments. Indeed, without some deadline on fee disputes and billing
errors, the Exchange and market participants would never be able to
close their books with any confidence. Furthermore, as noted above, a
number of Exchanges similarly consider their fees final after a similar
period of time.\12\ As discussed above, in October 2020, the Exchange
became aware of certain billings errors which resulted in various
Members being over-rebated or under-billed, and to a lesser extent
over-billed over the course of several years. The Exchange believes
it's appropriate that Members that were impacted by these billing
errors similarly be subject to the recently adopted billing policy to
not resolve billing errors past three months from the time a billing
error was discovered (in this case, not be invoiced for impacted
transactions that occurred prior to July 2020).\13\ The Exchange does
not think it is appropriate or equitable to have to correct billing
errors for transactions that occurred prior to July 2020. As discussed,
the Exchange believes it's reasonable and important for both Members
and the Exchange to rely on the finality of fees and rebates assessed.
Moreover, the proposed rule change would apply to all Members equally,
in that the Exchange would be precluded from invoicing any Member for
the correct amounts that should have been applied to trades that were
otherwise billed incorrectly before July 2020. The Exchange also
believes the proposal would be consistent with the protection of
investors and the public interest because it would allow impacted
market participants to benefit from the same rule recently adopted by
the Exchange. Additionally, as discussed, Members would receive a
greater benefit from the application of the current billing errors
policy as compared to the Exchange with respect to these particular
billing errors. Furthermore, the Exchange believes the proposal to
limit the time period it must correct billing errors does not raise any
new or novel issues that have not been already been considered by the
Commission. Particularly, the proposal to limit how far back an
exchange must go to correct billing errors is comparable to other
policies and practices that have long been established at other
exchanges.\14\
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\12\ See supra note 7.
\13\ Since the errors were discovered in October 2020, the three
preceding months that would be corrected are July, August, and
September 2020.
\14\ See supra note 7.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. First, the Exchange notes
the proposal is not intended to address any competitive issue, but
rather provide finality to Members with respect to billing errors that
were just recently discovered and extend to them the applicability of a
recently adopted billing practice that considers all fees final after
three months. Further, the Exchange does not believe that the proposed
rule change will impose any burden on intramarket competition that is
not necessary or appropriate in furtherance of the purposes of the Act
because the proposed changes apply equally to all Members. 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 because the proposed change only
affects transactions that occurred on the Exchange. Additionally, other
exchanges have long established policies in which fees shall be
considered final after a specified period of time.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No comments were solicited or received on the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule change does not (i)
significantly affect the protection of investors or the public
interest; (ii) impose any significant burden on competition; and; (iii)
become operative for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \15\ and Rule 19b-
4(f)(6) \16\ thereunder.
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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 17 CFR 240.19b-4(f)(6). In addition, Rule 19b-4(f)(6)
requires a self-regulatory organization to give the Commission
written notice of its intent to file the proposed rule change at
least five business days prior to the date of filing of the proposed
rule change, or such shorter time as designated by the Commission.
The Exchange has satisfied this requirement.
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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
[[Page 13414]]
Commission takes such action, the Commission will institute proceedings
to determine whether the proposed rule change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeBZX-2021-017 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeBZX-2021-017. 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, 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; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-CboeBZX-2021-017 and should
be submitted on or before March 29, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-04677 Filed 3-5-21; 8:45 am]
BILLING CODE 8011-01-P
