Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule To Expand the Existing Financial Product Distribution Program To Provide for a Derived Data Platform Service, 15519-15524 [2021-05914]

Agencies

• SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 86, Number 54 (Tuesday, March 23, 2021)]
[Notices]
[Pages 15519-15524]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05914]



[[Page 15519]]

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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91340; File No. SR-CboeBZX-2021-021]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Fee Schedule To Expand the Existing Financial Product Distribution 
Program To Provide for a Derived Data Platform Service

March 17, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on March 4, 2021, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'') 
filed with the Securities and Exchange Commission (``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.
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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 BZX Exchange, Inc. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (the ``Commission'') a 
proposed rule change to amend the Fee Schedule to expand the existing 
Financial Product Distribution Program (the ``Program'') to provide for 
a Derived Data Platform Service. Additionally, the proposal seeks to 
enhance the Program to provide for the distribution of data derived 
from the Cboe Aggregated Market (``Cboe One'') \3\ Summary Feed. The 
text of the proposed rule change is provided in Exhibit 5.
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    \3\ See Exchange Rule 11.22(j)
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    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 purpose of the proposed rule change is to implement a pricing 
structure that would reduce fees charged to Distributors of ``Derived 
Data'', as defined below, through a Derived Data Platform Service. 
Additionally, the proposal seeks to enhance the Program to permit the 
distribution of data derived from Cboe One Summary through the existing 
White Label Service, Application Programming Interface (``API'') 
Service, and the proposed Platform Service.\4\
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    \4\ The Exchange initially filed the proposed fee changes 
January 4, 2021 (SR-CboeBZX-2021-003). On March 4, 2021, the 
Exchange withdrew that filing and submitted this proposal.
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Background
    Under the current Program, a Distributor may subscribe to one of 
two Derived Data Service options, White Label Service or API Service. 
As discussed in further detail below, the Exchange proposes to 
introduce a third Derived Data Service option called the Platform 
Service. Furthermore, the Exchange seeks to offer Cboe One Summary \5\ 
data under the White Label Service, API Service, and the proposed 
Platform Service. BZX Top \6\ data is currently the only Exchange data 
offered under the White Label and API Service options. Under the 
Program, regardless of the Service option selected by a Distributor, 
the Distributors receive the same real-time Exchange data (e.g., BZX 
Top) as all other subscribers of such Exchange data. From the Exchange 
data, a Distributor may create ``Derived Data'', which is pricing data 
or other data that (i) is created in whole or in part from Exchange 
data, (ii) is not an index or financial product, and (iii) cannot be 
readily reverse[hyphen]engineered to recreate Exchange data or used to 
create other data that is a reasonable facsimile or substitute for 
Exchange data. Derived Data may be created by Distributors for a number 
of different purposes, as determined by the Distributor. Possible uses 
include the display of information or data, or the creation of 
derivative instruments, such as swaps,\7\ swaptions,\8\ or contracts 
for difference.\9\ The specific use of Exchange data is determined by 
the Distributor, as applicable fees do not depend on the purpose for 
placing the Derived Data under the Program. However, the Distributor 
must select the appropriate Service option under the Program applicable 
to its distribution of the Derived Data.
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    \5\ Cboe One Summary is a proprietary data product that provides 
the top of book quotations and execution information for all listed 
equity securities traded across the Exchange and its affiliated U.S. 
equities exchanges (the ``Cboe equity exchanges'').
    \6\ BZX Top is an uncompressed data feed that offers top of book 
quotations and execution information based on equity orders entered 
into the System.
    \7\ A swap is a derivative contract in which two parties agree 
to exchange financial instruments.
    \8\ A swaption, or swap option, is an option to enter into a 
swap at a specified time.
    \9\ A contract for difference is an agreement to exchange the 
difference between the current value of an asset and its future 
value. If the price increases, the seller pays the buyer the amount 
of the increase. If the price decreases, the buyer pays the seller 
the amount of the decrease.
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    Generally, the recipient of an Exchange data product that 
distributes that data outside of its own firm is subject to External 
Distribution \10\ fees. Such External Distribution fees vary based on 
the type of Exchange data product the recipient is subscribed to (e.g., 
BZX Top, Cboe One Summary, etc.).\11\ Specifically, the External 
Distribution Fees payable by the recipient of BZX Top are as follows: 
Distribution Fee $2,500/month; Professional User Fee $4.00/month; and 
Non-Professional User Fee $0.10/month.\12\ The External Distribution 
Fees payable the recipient of Cboe One Summary are as follows: 
Distribution Fee ($5,000/month), Professional User Fee ($10/month), and 
Non-Professional User Fee ($0.25/month). Additionally, subscribers of 
Cboe One Summary are subject to the Data Consolidation Fee.\13\
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    \10\ External Distribution occurs when a Distributor that 
receives an Exchange Market Data product distributes that data to a 
third-party or one or more users outside the Distributor's own 
entity.
    \11\ External Distribution fees are listed in the Exchange's Fee 
Schedule by Exchange Market Data product. For example, the External 
Distribution Fees payable by the recipient of BZX Top are as 
follows: Distribution Fee $2,500/month; Professional User Fee $4.00/
month; and Non-Professional User Fee $0.10/month. As an alternative 
to User fees, a Distributor may purchase a monthly Enterprise 
license or Digital Media Enterprise license in addition to the 
Distribution and User Fees.
    \12\ As an alternative to User fees, a Distributor may purchase 
a monthly Enterprise license or Digital Media Enterprise license in 
addition to the Distribution and User Fees.
    \13\ The Data Consolidation Fee is generally $1,000/month. An 
External Distributor that meets the criteria for the Small Retail 
Broker Distribution Program is charged a fee of $350/month instead 
of the normal $1,000/month Data Consolidation Fee.

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[[Page 15520]]

    The Exchange currently offers a White Label Service and an API 
Service that allow Distributors to benefit from certain discounted 
External Distribution Fees and User Fees for BZX Top data. Instead of 
the regular fee for External Distribution of Exchange data, 
Distributors of Derived Data under both the White Label Service and API 
Service are charged a tiered External Subscriber Fee based on the 
number of External Subscribers that receive Derived Data from the 
Distributor.\14\ Additionally, Distributors are charged a Professional 
User \15\ Fee based on the number of Professional Users of the Derived 
Data, which is the same as the Professional User Fee for BZX Top data 
provided under the External Distribution Fees. Non-Professional Users 
of Derived Data are not subject to a fee under either the White Label 
Service or the API Service.
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    \14\ The tiered External Subscriber Fee for BZX Top Derived Data 
White Label Service ranges from $200 to $300 per month and per 
External Subscriber; thus, the External Subscriber fee is 
significantly less than the $2,500/month Distribution. The tiered 
External Subscriber Fee for BZX Top Derived Data API Service ranges 
from $1,500 up to $2,500 per month and per External Subscriber; 
thus, the External Subscriber fee may be less than the $2,500/month 
Distribution Fee.
    \15\ A ``Professional User'' of an Exchange Market Data product 
is any User other than a Non-Professional User. A ``Non-Professional 
User'' of an Exchange Market Data product is a natural person or 
qualifying trust that uses Data only for personal purposes and not 
for any commercial purpose and, for a natural person who works in 
the United States, is not: (i) Registered or qualified in any 
capacity with the Securities and Exchange Commission, the 
Commodities Futures Trading Commission, any state securities agency, 
any securities exchange or association, or any commodities or 
futures contract market or association; (ii) engaged as an 
``investment adviser'' as that term is defined in Section 202(a)(11) 
of the Investment Advisors Act of 1940 (whether or not registered or 
qualified under that Act); or (iii) employed by a bank or other 
organization exempt from registration under federal or state 
securities laws to perform functions that would require registration 
or qualification if such functions were performed for an 
organization not so exempt; or, for a natural person who works 
outside of the United States, does not perform the same functions as 
would disqualify such person as a Non-Professional User if he or she 
worked in the United States.
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    The White Label Service is a type of hosted display solution in 
which a Distributor hosts, maintains, and controls a website or 
platform on behalf of a third-party entity. The service allows 
Distributors to make Derived Data available on a platform that is 
branded with a third-party brand, or co-branded with a third-party and 
a Distributor, while the Distributor maintains control of the 
applications data, entitlements and display. Alternatively, the API 
Service is a type of data feed distribution in which a Distributor 
delivers an API or similar distribution mechanism to a third-party 
entity for use within one or more platforms. The API Service allows 
Distributors to provide Derived Data to a third-party entity for use 
within one or more downstream platforms that are operated and 
maintained by the third-party entity. The Distributor maintains control 
of the entitlements, but does not maintain technical control of the 
usage or the display.
Derived Data Platform Service
    Now, the Exchange is proposing to implement a third service under 
the Program, the Platform Service. Under the Platform Service, a 
Distributor could receive either BZX Top, or as discussed in further 
detail below, Cboe One Summary data. The Exchange data provided to 
Distributors under the Platform Service would be identical to Exchange 
data provided to Distributors under both the White Label and API 
Services. In contrast to the White Label and API Services, the Platform 
Service would allow a Distributor to provide derivative products 
directly to users that are hosted within their infrastructure rather 
than to third-party entities who in turn provide derivative products to 
their end users. The Platform Service would be strictly limited to 
derivative products based in whole or in part on Exchange data where 
only user remote access is permitted.
    As discussed above, distributors of BZX Top may normally be subject 
to External Distribution and User Fees. Under the proposed Platform 
Service, Distributors would be liable for the normally applicable 
External Distribution and User Fees listed above except for the Non-
Professional User fee.\16\ The Non-Professional User Fee would be 
eliminated when participating in the Platform Service, thereby reducing 
costs for Distributors that provide access to such data directly to 
retail investors. The External Subscriber and User fees associated with 
the White Label Service and API Service are charged solely to the 
Distributor. At the Distributor's discretion, it may pass through the 
External Subscriber and User Fees to External Subscribers who provide 
Derived Data to their end users. If External Subscriber and User Fees 
and fee reductions are passed through to an External Subscriber by the 
Distributor, the External Subscriber can benefit from the External 
Distribution Fee once a Distributor reaches a higher scale, and also 
from the waiver of the Non-Professional User Fees. Therefore, the White 
Label Service and API Service may provide benefits to both External 
Subscribers as well as Distributors as Distributors increase their 
distribution scale. The Platform Service extends the Non-Professional 
User Fee waiver to Distributors of Derived Data who offer a Platform 
Service to their own end users, allowing Distributors to benefit 
consistently across services.
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    \16\ The Non-Professional User Fee for external distribution of 
BZX Top is $0.10/month.
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    Like the existing White Label Service and API Service, the proposed 
Platform Service would be entirely optional, in that it would only 
apply to Distributors that opt to use Derived Data to create a Platform 
Service, as described herein. It would not impact or raise the cost of 
any other Exchange product, nor would it affect the cost of Exchange 
data, except in instances where Derived Data is made available on a 
Platform Service. A Distributor that provides a Platform Service for 
Exchange data that is not Derived Data or distributes Derived Data 
through a platform other than a White Label Service, API Service, or 
Platform Service would be liable for the fees normally applicable for 
the distribution of Exchange data.
Cboe One Summary
    In addition to the above, the Exchange is proposing to adopt fees 
for the distribution of data derived from Cboe One Summary under the 
existing White Label Service and API Service, as well as the proposed 
Platform Service. Specifically, the Exchange is now proposing a fee 
amendment to allow Distributors that participate in the Program to 
create Derived Data from Cboe One Summary in addition to BZX Top. 
Therefore, Distributors of Derived Data created from Cboe One Summary 
could display information or data or create derivative instruments 
based on top of book information across the four Cboe equity exchanges 
rather than just BZX. The Exchange believes that the proposal will 
enhance the Program as the inclusion of Cboe One Summary will allow 
Distributors to create Derived Data that is based on a more 
comprehensive view of the U.S. equities market.
    As noted above, Distributors of Cboe One Summary data may be 
subject to the normal External Distribution Fees, User Fees, and the 
Data Consolidation Fee. As proposed, a Distributor that provides 
Derived Data from Cboe One Summary externally would be liable for the 
proposed fees discussed below instead of the fees normally applicable 
for the External Distribution of Cboe One Summary. Existing fees for 
BZX Top Derived Data within a White Label Service or API Service are 
comprised of a tiered fee based on the number of External Subscribers, 
a monthly fee for each Professional User, and include no fee for Non-
Professional Users.

[[Page 15521]]

Alternatively, the proposed fees for the Platform Service are comprised 
of the normal External Distribution and Professional User Fees 
applicable for the distribution of BZX Top except that they would not 
be subject to the Non-Professional Users fees normally applicable. The 
Exchange proposes to adopt a similar fee structure for Cboe One Summary 
Derived Data for the White Label Service, the API Service, and the 
Platform Service discussed above with the addition of the Data 
Consolidation Fee that would be applicable to each Service option.
    As proposed, Distributors would be charged the following fees for a 
White Label Service for Cboe One Summary Derived Data: (1) $1,000 per 
month for each External Subscriber if the Distributor makes Derived 
Data available to 1-5 External Subscribers; (2) $750 per month for each 
External Subscriber if the Distributor makes Derived Data available to 
6-10 External Subscribers; and (3) $500 per month for each External 
Subscriber if the Distributor makes Derived Data available to 11 or 
more External Subscribers. For example, a Distributor providing White 
Label Derived Data based on Cboe One Summary to six External 
Subscribers would be charged a monthly fee of $4,500 (i.e., 6 External 
Subscribers x $750 each). Additionally, the Exchange would continue to 
charge a monthly Professional User fee of $10 per month for each 
Professional User, and would charge the Data Consolidation Fee. The 
Exchange proposes no Non-Professional User fee for the distribution of 
Cboe One Summary Derived Data under the White Label Service, which is 
consistent with the fee structure for the distribution of BZX Top 
Derived Data under the White Label Service.
    Alternatively, Distributors would be charged the following fees for 
an API Service for Cboe One Summary Derived Data: (1) $5,000 per month 
for each External Subscriber if the Distributor makes Derived Data 
available to 1-5 External Subscribers; (2) $4,000 per month for each 
External Subscriber if the Distributor makes Derived Data available to 
6-20 External Subscribers; and (3) $3,000 per month for each External 
Subscriber if the Distributor makes Derived Data available to 11 or 
more External Subscribers. For example, a Distributor providing API 
Service Derived Data based on Cboe One Summary to six External 
Subscribers would be charged a monthly fee of $24,000 (i.e., 6 External 
Subscribers x $4,000 each). Additionally, the Exchange would continue 
to charge a monthly Professional User fee of $10 per month for each 
Professional User, and would charge the Data Consolidation Fee. The 
Exchange proposes no Non-Professional User fee for the distribution of 
Cboe One Summary Derived Data under the API Service, which is 
consistent with the fee structure for the distribution of BZX Top 
Derived Data under the API Service.
    Lastly, the Exchange proposes to adopt fees for the proposed 
Platform Service for Cboe One Summary data in addition to the proposed 
fees for BZX Top discussed above. Like the proposed fee for BZX Top 
Derived Data, Distributors of Cboe One Summary Derived Data would be 
liable for the fees normally applicable for the external distribution 
of Cboe One Summary, except for the Non-Professional User fee, and the 
Data Consolidation Fee. Therefore, under the Platform Service, 
Distributors of Cboe One Summary Derived Data would be liable for the 
External Distribution Fee ($5,000/month) and Professional User Fee 
($10/month) and the Data Consolidation Fee.
Corresponding Amendments to Fee Schedule
    Based on the proposed amendments discussed above, the Exchange 
proposes several clarifying modifications to the Fee Schedule. First, 
the Exchange proposes to add a definition of ``Platform Service'' to 
the Market Data Fees definitions section of the Fee Schedule. The 
definition would provide that ``a Platform Service is a type of hosted 
display solution in which a Distributor provides derivative products to 
Platform Service Data Users within their infrastructure. The service 
allows Distributors to make Derived Data available as part of a 
platform, providing users remote access to derivative products based in 
whole or in part on Exchange data.''
    The Exchange also proposes to amend explanatory asterisks provided 
under the Program in the Fee Schedule. Specifically, the Exchange 
proposes to amend the paragraph following the first asterisk to 
reference the proposed Platform Service in addition to the existing 
references to the White Label Service and API Service. Additionally, 
the Exchange proposes to add references to Cboe One Summary after all 
references to BZX Top in the paragraph following the first asterisk. 
The Exchange also proposes to add additional examples to asterisks two 
and three so as to explain the application of fees for Derived Data 
from Cboe One Summary. Lastly, the Exchange proposes to add an 
additional asterisk to state that Cboe One Summary data would be 
subject to the Data Consolidation fee set forth in the Fee Schedule. 
These proposed changes would provide clarity in the Fee Schedule based 
on the addition of the Platform Service and Cboe One Summary proposed 
herein.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\17\ in general, and 
furthers the objectives of Section 6(b)(4),\18\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its members and other recipients of 
Exchange data.
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    \17\ 15 U.S.C. 78f.
    \18\ 15 U.S.C. 78f(b)(4).
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    The Exchange also believes that the proposed rule change is 
consistent with Section 11(A) of the Act.\19\ Specifically, the 
proposed rule change supports (i) fair competition among brokers and 
dealers, among exchange markets, and between exchange markets and 
markets other than exchange markets, and (ii) the availability to 
brokers, dealers, and investors of information with respect to 
quotations for and transactions in securities. In addition, the 
proposed rule change is consistent with Rule 603 of Regulation NMS,\20\ 
which provides that any national securities exchange that distributes 
information with respect to quotations for or transactions in an NMS 
stock do so on terms that are not unreasonably discriminatory.
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    \19\ 15 U.S.C. 78k-1.
    \20\ See 17 CFR 242.603.
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    In adopting Regulation NMS, the Commission granted SROs and broker-
dealers increased authority and flexibility to offer new and unique 
market data to the public. It was believed that this authority would 
expand the amount of data available to consumers, and also spur 
innovation and competition for the provision of market data. The 
Exchange believes that the proposed fee change would further broaden 
the availability of U.S. equity market data to investors, consistent 
with the principles of Regulation NMS.
    The Exchange operates in a highly competitive environment. Indeed, 
there are 16 registered national securities exchanges that trade U.S. 
equities and have the capability to offer associated top of book market 
data products to their customers. 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

[[Page 15522]]

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.'' \21\ The proposed fee 
change is a result of the competitive environment, as the Exchange 
seeks to amend its fees to attract additional subscribers for its 
proprietary top of book data offerings through the introduction of a 
Derived Data Platform Service and the expansion of top of book data 
offerings to include Cboe One Summary under the Program.
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    \21\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    As discussed above, the proposed Platform Service would eliminate 
the Non-Professional User Fee to Distributors that is normally applied 
for the External Distribution of Exchange data. The Exchange believes 
that it is reasonable to introduce reduced fees for the use of Derived 
Data on Platform Services as the proposed fee reduction would 
facilitate cost effective access to market information that is used 
primarily to create and display certain derivative instruments rather 
than to display the underlying U.S. equity securities. The proposed 
Platform Service fees are constrained by competition, and it is this 
competition that is driving the proposed fee change. Indeed, the 
Program is designed to allow the Exchange to compete more effectively 
for market data distributors that purchase market information to offer 
Derived Data to investors.
    Similarly, the Exchange believes that it is reasonable to enhance 
the Program by expanding Exchange data offered under the Program to 
include Cboe One Summary as doing so will allow Distributors to create 
Derived Data that is based on a more comprehensive view of the U.S. 
equities market. Because Exchange data in this context is primarily 
purchased for the creation of Derived Data encompassing certain 
derivative instruments, Distributors do not require a consolidated view 
of the market across multiple exchanges, and will generally purchase 
such data from a single or select few exchange(s) for their purposes. 
As noted above, Cboe One Summary includes top of book quotation and 
transaction data across all four Cboe equity exchanges, which would 
allow Distributors to create more meaningful Derived Data than that 
available from a single exchange's market data at a potentially reduced 
price.
    The existence of alternatives to the Program ensures that the 
Exchange cannot set unreasonable or unfairly discriminatory fees, as 
subscribers are free to elect such alternatives. That is, the Exchange 
competes with other exchanges that provide similar top of book and/or 
consolidated top of book products and pricing programs for Derived 
Data.\22\ Expanding the availability of diverse competitive products 
actually promotes additional competition as it ensures that alternative 
products from different sources are readily available to Distributors 
and the broader market. The Exchange therefore believes that the 
introduction of pricing programs and the expansion of Exchange data are 
not only constrained by competition but also ensure continued 
competition that acts as a constraint on the pricing of services 
provided by other national securities exchanges. If a competing 
exchange were to charge less for a similar product than the Exchange 
charges under the proposed fee structure, prospective subscribers may 
choose not subscribe to, or cease subscribing to, the Program. The 
Exchange believes that lowering the cost of accessing Derived Data may 
make the Exchange's market information more attractive, and encourage 
additional Distributors to subscribe to Exchange market data instead of 
competitor products. The Exchange anticipates up to 10 Distributors to 
participate in the proposed Platform Service, and up to three 
Distributors to create Derived Data from Cboe One Summary. Distributors 
can discontinue use at any time and for any reason, including due to an 
assessment of the reasonableness of fees charged. Further, firms have a 
wide variety of alternative market data products from which to choose, 
such as similar proprietary data products offered by other national 
securities exchanges,\23\ including those that choose to offer 
discounted fees for the distribution of Derived Data in an effort to 
compete for this business.
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    \22\ See generally, the Nasdaq Basic fees at https://www.nasdaqtrader.com/TraderB.aspx?id=MDDPricingALLN.
    \23\ Id.
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    The proposed rule change would provide an optional fee structure 
for Distributors to use Exchange data to make Derived Data available to 
Non-Professional Users via a Platform Service at a reduced fee. As 
proposed, if a Distributor uses a Platform Service to distribute 
Derived Data, the Distributor would be charged the normal applicable 
External Distribution Fees and User Fees excluding the Non-Professional 
User Fee. The Exchange believes that it is equitable and not unfairly 
discriminatory to charge a fee for Professional Users but no fee for 
Non-Professional Users. Non-Professional Users are already subject to a 
heavily discounted fee for BZX Top market data relative to Professional 
Users. Differential fees for Professional and Non-Professional Users 
are widely used by the Exchange and other exchanges for their 
proprietary market data as this reduces costs for retail investors and 
makes market data more broadly available. The Exchange believes that 
eliminating fees for Non-Professional Users that access Derived Data 
from Distributors pursuant to the Program is consistent with 
longstanding precedent indicating that it is consistent with the Act to 
provide reasonable incentives to retail investors that rely on the 
public markets for their investment needs.\24\ Further, the proposed 
fee would only apply to Distributors that elect to participate in the 
Program by distributing Derived Data through a Platform Service. 
Exchange market data is distributed and purchased on a voluntary basis, 
in that neither the Exchange nor market data distributors are required 
by any rule or regulation to make this data available. Distributors of 
Exchange data are not required to participate in the proposed Program, 
which is merely an alternative option being proposed by the Exchange to 
potentially lower costs for market data that is Derived Data. As 
previously explained, the Exchange currently offers discounted fees for 
Distributors that distribute Derived Data on a White Label Service or 
an API Service through both a tiered External Distribution Fee and 
eliminated Non-Professional User Fee. Distributors of Exchange data 
that do not participate in either the White Label Service or API 
Service are subject to the normal External Distribution Fees, which 
include a Distribution Fee, Professional User Fee, and Non-Professional 
User Fee. Expanding the universe of customers that can benefit from 
discounted fees for distributing Derived Data would serve to further 
increase the accessibility of the Exchange's market data products. 
Although the proposed pricing for the Platform Service differs from the 
pricing

[[Page 15523]]

currently in place for the White Label and API Service Programs, it 
mirrors the normal External Distribution Fee for BZX Top and Cboe One 
Summary except that there would be no fee for Non-Professional Users. 
The White Label Service provides a fully controlled solution to display 
Derived Data as it is ultimately designed and managed by the 
Distributor, but made available to end users on behalf of an External 
Subscriber. Alternatively, the API Service offers External Subscribers 
the use of Derived Data in one or more of their own customized and 
managed applications which are then made available to their end users 
as needed. The Exchange believes that the proposed pricing reflects the 
relative benefits provided to Distributors that offer their own 
Platform Service that allows Users remote access to derivative products 
via a hosted display solution directly within the Distributors fully 
managed infrastructure rather than through an External Subscriber.
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    \24\ As discussed previously, the Exchange does not fees to Non-
Professional Users pursuant to the White Label Service and API 
Service. See Securities Exchange Act No. 84002 (August 30, 2018) 83 
FR 45149 (September 5, 2018) (SR-CboeBZX-2018-065) (Proposed fee 
amendment for White Label Service). See also Securities Exchange Act 
No. 87306 (October 15, 2019) 84 FR 56258 (October 21, 2019) (SR-
CboeBZX-2019-087) (Proposed fee amendment for API Service).
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    The proposed rule change would also provide Distributors the option 
to create Derived Data from Cboe One Summary, and benefit from reduced 
fees for that product under the Financial Product Distribution Program, 
in addition to the currently available BZX Top. The proposed fees would 
only apply to Distributors that elect to create Derived Data from Cboe 
One Summary. Similar to the fee structure for BZX Top under the 
Program, no fee would be assessed for Non-Professional Users of Derived 
Data from Cboe One Summary. For the same reasons discussed above, the 
Exchange believes it is equitable and not unfairly discriminatory to 
charge a fee for Professional Users but no fee for Non-Professional 
Users. Further, the proposed fee would only apply to Distributors that 
elect to participate in the Program by distributing Derived Data from 
Cboe One Summary. Exchange market data is distributed and purchased on 
a voluntary basis, in that neither the Exchange nor market data 
distributors are required by any rule or regulation to make this data 
available. Although the proposed pricing for Cboe One Summary differs 
from the pricing currently in place for BZX Top, the Exchange also 
believes that its pricing reflects the relative benefits provided to 
Distributors that provide Derived Data based on market information from 
all four Cboe equities exchanges. For example, the proposed fee for one 
to five External Subscribers of Derived Data based on Cboe One Summary 
using the API Service is equal to the aggregate standard External 
Distribution Fee across the Cboe equities exchange Top feeds, and is 
also equal to the standard External Distribution Fee for Cboe One 
Summary (i.e., $5,000 per External Subscriber) on the Exchange. The 
proposed fee under the White Label Service is less than the proposed 
fee for API Service as the Derived Data is used by External Subscribers 
on a fully controlled and managed basis, and thus reflects the relative 
benefits for use of the Derived Data. Further, the proposed fee for 
Cboe One Summary under the proposed Platform Service is identical to 
the standard External Distribution fee for Cboe One Summary with the 
exception that there would be no fee associated with Non-Professional 
Users.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
operates in a highly competitive environment, and its ability to price 
these data products is constrained by competition among exchanges that 
offer similar data products, and pricing options, to their customers. 
Top of book data is broadly disseminated by competing U.S. equities 
exchanges. There are therefore a number of alternative products 
available to market participants and investors. In this competitive 
environment potential subscribers are free to choose which competing 
product to purchase to satisfy their need for market information. 
Often, the choice comes down to price, as broker-dealers or vendors 
look to purchase the lowest priced top of book data product, or 
quality, as market participants seek to purchase data that represents 
significant market liquidity. In order to better compete for this 
segment of the market, the Exchange is proposing to reduce fees charged 
to Distributors that distribute Derived Data through an Exchange 
approved Platform and enhance the existing program to offer 
Distributors the option to create Derived Data based on Cboe One 
Summary. The Exchange believes that this would facilitate greater 
access to Exchange data, ultimately benefiting investors that are 
provided access to such data.
    The Exchange believes that the proposed fees do not put any market 
participants at a relative disadvantage compared to other market 
participants. The proposed fees would apply equally to external 
distributors of BZX Top or Cboe One Summary that make Derived Data 
available through one of the three Service options offered by the 
Exchange under the Program. The continued difference in fees under the 
Program as compared to the normal External Distribution fees for both 
BZX Top and Cboe One Summary are appropriate given that External 
Subscribers and Users receive Derived Data, which by definition cannot 
be readily reverse[hyphen]engineered to recreate BZX Top or Cboe One 
Summary data or used to create other data that is a reasonable 
facsimile or substitute for BZX Top or Cboe One Summary. The Exchange 
therefore believes that the proposed fees neither favor nor penalize 
one or more categories of market participants in a manner that would 
impose an undue burden on competition. The proposed Platform Service 
fees would apply to data derived from BZX Top and Cboe One Summary, 
which are subject to competition from exchanges that offer similar 
products, including but not limited to those that choose to provide 
similar pricing options for Derived Data. A number of national 
securities exchanges, including the Exchange, its affiliated Cboe U.S. 
equities exchanges, and the Nasdaq Stock Market, LLC (``Nasdaq'') offer 
pricing discounts for Derived Data today. These pricing programs reduce 
the cost of accessing top of book market information that is used, 
among other things, to create derivative instruments rather than to 
trade U.S. equity securities. Specifically, the Nasdaq Derived Data 
Enterprise license covers the Distributor of the Derived Data to their 
own users, while the Exchange's current Derived Data programs currently 
do not cover the Distributor of the Derived Data. In order to better 
compete for this segment of the market, the Exchange is proposing to 
expand the Program to include a Derived Data Platform Service, which 
would allow the Distributors of Derived Data to benefit from discounted 
pricing when providing the Derived Data to their own end users. 
Additionally, the Exchange is proposing to enhance the Program by 
providing a fee structure for Cboe One Summary, which would allow 
Distributors to create Derived Data that is based on a more 
comprehensive view of the U.S. equities market. The Exchange does not 
believe that the proposal would cause any unnecessary or inappropriate 
burden on intermarket competition as other exchanges and data vendors 
are free to lower their prices to better compete with the Exchange's 
offering. The Exchange believes that the proposed rule change is pro-
competitive as it seeks to offer pricing incentives to customers to 
better position the Exchange as it competes to attract additional 
market data subscribers.

[[Page 15524]]

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 \25\ and paragraph (f) of Rule 19b-4 \26\ 
thereunder. At any time within 60 days of the filing of the proposed 
rule change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission will institute proceedings to 
determine whether the proposed rule change should be approved or 
disapproved.
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    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 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-2021-021 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-2021-021. 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-2021-021 and should 
be submitted on or before April 13, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
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    \27\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05914 Filed 3-22-21; 8:45 am]
BILLING CODE 8011-01-P