Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 20218-20222 [2021-07787]
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20218
Federal Register / Vol. 86, No. 72 / Friday, April 16, 2021 / Notices
the Fee Schedules to rebrand references
to ‘‘MIAX PEARL’’ to now be ‘‘MIAX
Pearl.’’ The proposed rebrand consists
of non-substantive changes to the
Rulebook and the Fee Schedules of the
Exchange so that the term ‘‘MIAX Pearl’’
is consistent with its affiliate, MIAX
Emerald, as part of a broader marketing
effort by the Exchange and its affiliates,
MIAX and MIAX Emerald. Therefore,
the Exchange believes that the rebrand
will protect investors and the public
interest by eliminating confusion that
may exist because of differences in the
other naming conventions of the
Exchange. No changes to the ownership
or structure of the Exchange have taken
place. The Exchange notes that the term
‘‘MIAX Pearl’’ will represent the same
entity as ‘‘MIAX PEARL.’’ The Exchange
notes that its affiliates, MIAX and MIAX
Emerald, will file similar proposals to
amend their Rulebooks and Fee
Schedules to rebrand references to
‘‘MIAX PEARL’’ to now be to ‘‘MIAX
Pearl,’’ to provide uniformity among the
Exchange, MIAX and MIAX Emerald, to
avoid potential confusion by market
participants.
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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 proposal
will impose any burden on intra-market
competition because the proposed rule
change is not a competitive filing but
rather is designed to effectuate the
Exchange’s rebranding of references to
‘‘MIAX PEARL’’ to now be ‘‘MIAX
Pearl,’’ as part of a corporate rebranding
and marketing strategy. The proposed
changes to the Exchange’s Rulebook and
Fee Schedules will help provide clarity
and uniformity to avoid potential
confusion on the part of market
participants because the rebrand of
‘‘MIAX Pearl’’ is part of a broader
rebranding and marketing effort by the
Exchange and its affiliates, MIAX and
MIAX Emerald. In addition, the
Exchange does not believe the proposal
will impose any burden on inter-market
competition as the proposal does not
address any competitive issues and is
intended to protect investors by
providing further transparency
regarding the Exchange’s Rulebook and
Fee Schedules.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
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 17 and Rule 19b–4(f)(3) 18
thereunder, in that the proposed rule
change is concerned solely with the
administration of the self-regulatory
organization.
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 shall institute proceedings
to determine whether the proposed rule
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 SRPEARL–2021–08 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–PEARL–2021–08. 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
U.S.C. 78s(b)(3)(A).
18 17 CFR 240.19b–4(f)(3).
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For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–07788 Filed 4–15–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–91530; File No. SR–
CboeBZX–2021–025]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fee Schedule
April 12, 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 April 1,
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, 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.
19 17
17 15
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change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–PEARL–2021–08 and
should be submitted on or before May
7, 2021.
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CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 86, No. 72 / Friday, April 16, 2021 / Notices
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) is filing with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
to amend its Fee Schedule. The text of
the proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/bzx/), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend its
fee schedule for its equity options
platform (‘‘BZX Options’’) in connection
with its Market Maker Penny Add
Volume Tiers, effective April 1, 2021.
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
16 options venues to which market
participants may direct their order flow.
Based on publicly available information,
no single options exchange has more
than 15% of the market share and
currently the Exchange represents only
approximately 8% of the market share.3
Thus, in such a low-concentrated and
highly competitive market, no single
options exchange, including the
Exchange, possesses significant pricing
3 See Cboe Global Markets U.S. Options Market
Month-to-Date Volume Summary (March 25, 2021),
available at https://markets.cboe.com/us/options/
market_statistics/.
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power in the execution of option order
flow. The Exchange believes that the
ever-shifting market share among the
exchanges from month to month
demonstrates that market participants
can shift order flow or discontinue to
reduce use of certain categories of
products, in response to fee changes.
Accordingly, competitive forces
constrain the Exchange’s transaction
fees, and market participants can readily
trade on competing venues if they deem
pricing levels at those other venues to
be more favorable. The Exchange’s fee
schedule sets forth standard rebates and
rates applied per contract, which varies
depending on the Member’s Capacity
(Customer, Firm, Market Maker, etc.),
whether the order adds or removes
liquidity, and whether the order is in
Penny or Non-Penny Pilot Securities.
Additionally, in response to the
competitive environment, the Exchange
also offers tiered pricing which provides
Members opportunities to qualify for
higher rebates or reduced fees where
certain volume criteria and thresholds
are met. Tiered pricing provides an
incremental incentive for Members to
strive for higher tier levels, which
provides increasingly higher benefits or
discounts for satisfying increasingly
more stringent criteria.
For example, the Exchange currently
offers 13 Market Maker Penny Add
Volume Tiers under footnote 6 of the
Fee Schedule which provide additional
rebates between $0.33 and $0.46 per
contract for qualifying Market Maker
orders (i.e., that yield fee code PM or
XM) 4 where a Member meets certain
liquidity thresholds. For example,
current Tier 12 offers an enhanced
rebate of $0.44 per contract for
qualifying orders where a Member has
a Step-Up ADAV 5 in Market Maker
orders from December 2020 greater or
equal to 0.05% of OCV 6 and is an LMM
in at least 85 LMM Securities on BZX
Equities.7 The Exchange now proposes
4 Orders yielding fee code PM are Market Maker
orders that add liquidity in Penny Program
Securities and are offered a rebate of $0.29, and
orders yielding fee code XM are Market Maker
orders in XSP options that add liquidity and are
offered a rebate of $0.29.
5 ‘‘ADAV’’ means average daily added volume
calculated as the number of contracts added, per
day.
6 ‘‘OCC Customer Volume’’ or ‘‘OCV’’ means the
total equity and ETF options volume that clears in
the Customer range at the Options Clearing
Corporation (‘‘OCC’’) for the month for which the
fees apply, excluding volume on any day that the
Exchange experiences an Exchange System
Disruption and on any day with a scheduled early
market close.
7 Pursuant to BZX Equities Rules, the term
‘‘LMM’’ means a Market Maker registered with the
Exchange for a particular LMM Security that has
committed to maintain Minimum Performance
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to amend Market Maker Penny Add
Volume Tiers by adding a new Tier 7 8
and by updating the current criteria in
Tier 12.
The proposed rule change adopts new
Tier 7, which offers an enhanced rebate
of $0.42 per contract for qualifying
Market Maker orders (i.e., that yield fee
code PM or XM) where a Member has
a Step-Up ADAV in Market Maker
orders from March 2021 greater than or
equal to 0.15% in average SPY/IWM/
QQQ OCV, and is an LMM in at least
85 LMM Securities on BZX Equities.9
The proposed rule change amends the
criteria in Tier 12 (Tier 13, as proposed)
so that a Member must have a Step-Up
ADAV in Market Maker orders from
March 2021 that is greater than or equal
to 0.25% of average SPY, IWM, and
QQQ OCV in order to meet the first
prong of Tier 12 criteria. The proposed
rule change does not alter the second
prong of criteria nor the enhanced
rebate offered in Tier 12 (new Tier 13).
As amended, Tier 12 (new Tier 13) will
provide an additional opportunity for a
Member to receive the same enhanced
rebate of $0.44 per contract for
qualifying orders.
The proposed new Tier 7 and the
proposed changes to the criteria in Tier
12 (Tier 13, as proposed) are designed
to continue to provide an incremental
incentive for Members to strive for the
highest tier levels, which provide
increasingly higher rebates for such
transactions. Also, the Exchange notes
that the proposed criteria in Tier 7 and
Tier 12 (new Tier 13) are similar to
many of the existing Market Maker
Penny Add Volume Tiers that currently
provide criteria in which a Member
must ‘‘step up’’ a percentage of ADAV
or ADV 10 from a certain point in time
over OCV or TCV,11 and criteria which
Standards in the LMM Security, and the term
‘‘LMM Security’’ means a Listed Security that has
an LMM. See Cboe BZX Exchange, Inc. Rule
11.8(e)(1)(B) and (C).
8 As a result of propose new Tier 7, the proposed
rule change also updated the subsequent tier
numbering in current Tiers 8 through 13. The
proposed rule change does not alter any of the
current criteria or rebates in the subsequent tiers.
9 Pursuant to BZX Equities Rules, the term
‘‘LMM’’ means a Market Maker registered with the
Exchange for a particular LMM Security that has
committed to maintain Minimum Performance
Standards in the LMM Security, and the term
‘‘LMM Security’’ means a Listed Security that has
an LMM. See Cboe BZX Exchange, Inc. Rule
11.8(e)(1)(C) and (D).
10 ‘‘ADV’’ means average daily volume calculated
as the number of contracts added or removed,
combined, per day.
11 ‘‘TCV’’ means total consolidated volume
calculated as the volume reported by all exchanges
to the consolidated transaction reporting plan for
the month for which the fees apply, excluding
volume on any day that the Exchange experiences
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measures a Member’s participation on
the Exchange’s equities platform.
Particularly, the proposed changes are
designed to incentivize Market Makers
to ‘‘step-up’’ their order flow in SPY,
IWM, and QQQ from a recent point in
time (March 2021). The Exchange
believes that attracting increased Market
Maker (including LMMs) order flow to
multiply-listed options on the Exchange
will facilitate tighter spreads, signaling
increased activity from other market
participants, and thus ultimately
contributing to deeper and more liquid
markets and providing greater execution
opportunities in these classes on the
Exchange to the benefit of all market
participants. Additionally, the proposed
criteria regarding LMMs on the
Exchange’s equities platform (the same
prong of criteria currently in Tier 12)
encourages Members to enroll as LMMs
in LMM Securities on the Exchange’s
equities platform, which enhances
market quality in securities listed on the
Exchange’s equity platform. The
Exchange notes that LMMs serve a
crucial role in providing quotes and
trading opportunities for all market
participants, which can lead to
increased volume, enhanced price
discovery and transparency, and more
robust markets overall.
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,12
in general, and furthers the objectives of
Section 6(b)(4),13 in particular, as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its 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) 14 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
an Exchange System Disruption and on any day
with a scheduled early market close.
12 15 U.S.C. 78f.
13 15 U.S.C. 78f(b)(4).
14 15 U.S.C. 78f.(b)(5).
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unfair discrimination between
customers, issuers, brokers, or dealers.
As described above, the Exchange
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. The
proposed rule change reflects a
competitive pricing structure designed
to incentivize market participants to
direct their order flow to the Exchange,
which the Exchange believes would
enhance market quality to the benefit of
all Members. In particular, the proposed
changes to the Market Maker Penny
Volume Tiers are intended to attract
order flow in multiply-listed options to
the Exchange, as well as order flow to
its equities platform, by continuing to
offer competitive pricing while creating
additional incentives for Market Makers
to provide increased liquidity in such
options and to BZX Equities, which the
Exchange believes would enhance
market quality across both its options
and equities markets to the benefit of all
market participants.
In particular, the Exchange believes
the proposed tiers are reasonable
because they provides an additional
opportunity and amends an existing
opportunity for Members to receive an
enhanced rebate on qualifying orders in
a manner that incentivizes increased
Market Maker order flow in certain
multiply-listed options on the Exchange
and increased LMM participation on the
Exchange’s equities platform. The
Exchange notes that volume-based
incentives and discounts have been
widely adopted by exchanges,15
including the Exchange,16 and are
reasonable, equitable and nondiscriminatory because they are open to
all Members on an equal basis and
provide additional benefits or discounts
that are reasonably related to (i) the
value to an exchange’s market quality
and (ii) associated higher levels of
market activity, such as higher levels of
liquidity provision and/or growth
patterns.
The Exchange believes the proposed
additional Market Maker Penny Add
15 See e.g., NYSE Arca Options Fee Schedule,
Market Maker Penny and SPY Posting Credit Tiers.
NYSE Arca also provides various discounts for its
LMMs throughout its fee schedule; see also Nasdaq
ISE Pricing Schedule, Section 3, Footnote 5, which
provides for tiered rebates for market-maker SPY
orders that add liquidity between $0.05–$0.26 per
contract, tiered rebates for market maker IWM and
QCC orders that add liquidity between $0.05 and
$0.26 per contract, and tiered rebates for market
maker orders in similar, single-name options
(AMZN, FB, and NVDA) between $0.15 and $0.22.
16 See e.g., BZX Options Fee Schedule, Footnote
6, Market Maker Penny Add Volume Tiers.
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Volume Tier 7 and amendment to
criteria in current Tier 12 (new Tier 13)
are reasonable means to encourage
Market Makers to increase their order
flow to specific multiply-listed options
on the Exchange, as well as their
participation in securities on the
Exchange’s equities platform. More
specifically, the Exchange believes that
adopting a new tier and amending an
existing tier offers alternative criteria to
the existing Market Maker Penny Add
Volume Tiers that may encourage those
Members who could not previously
achieve the criteria under existing
Market Maker Volume Tiers 7 and 8
(which offer the same enhanced rebate
of $0.42 per contract as proposed Tier
7) or the existing criteria under current
Tier 10, 11, or 12 (all of which continue
to offer the same enhanced rebate of
$0.44 per contract) to increase their
order flow to multiply-listed options on
the Exchange and to BZX Equities. For
example, the proposed criteria in new
Tier 7 and Tier 12 (new Tier 13) provide
additional rebate opportunities for
Market Makers who increase their
ADAV in Market Makers orders in
certain products (SPY, IWM, and QQQ)
over OCV by at least 0.15% or 0.25%,
respectively, from March 2021 and
participate as an LMM in at least 85
LMM Securities on BZX Equities (as
proposed in new Tier 7 and as is
currently the case in Tier 12), but do not
meet any of the different, yet
comparable, prongs of criteria under
current Tier 7 or 8, or under current Tier
10, 11, or 12. Overall, the proposed tiers
provide alternative opportunities for
Members to receive enhanced rebates, as
are thereby reasonably designed to
incentivize Market Makers to grow their
volume in specific multiply-listed
options while also increasing their
participation on BZX Equities. The
Exchange notes that increased Market
Maker activity (including LMMs),
particularly, facilitates tighter spreads
and an increase in overall liquidity
provider activity, both of which signal
additional corresponding increase in
order flow from other market
participants, contributing towards a
robust, well-balanced market ecosystem,
particularly in multiply-listed options
on the Exchange and on the Exchange’s
equities platform. Indeed, increased
overall order flow benefits investors
across both the Exchange’s options and
equities platforms by continuing to
deepen the Exchange’s liquidity pool,
potentially providing even greater
execution incentives and opportunities,
offering additional flexibility for all
investors to enjoy cost savings,
supporting the quality of price
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Federal Register / Vol. 86, No. 72 / Friday, April 16, 2021 / Notices
discovery, promoting market
transparency and improving investor
protection.
The Exchange also believes that
proposed enhanced rebate offered under
new Tier 7 is reasonably based on the
difficulty of satisfying the proposed
tier’s criteria and ensures the proposed
rebate and thresholds appropriately
reflect the incremental difficulty in
achieving the existing Market Maker
Penny Add Volume Tiers. The Exchange
believes that the proposed enhanced
rebate is in line with the enhanced
rebates currently offered under the
Exchange’s existing Market Maker
Penny Add Volume Tiers. Indeed, the
proposed enhanced rebate amount
offered under new Tier 7 ($0.42) is the
same amount offered by surrounding
Tier 7 (new Tier 8) and Tier 8 (new Tier
9), which offer different criteria that the
Exchange believes in comparable in
difficulty, and is incrementally higher
than Tier 6 ($0.41), which offers slightly
less stringent criteria than proposed Tier
7. The Exchange again notes that the
proposed changes to Tier 12 (new Tier
13) do not alter the current enhanced
rebate amount offered under the tier.
The Exchange also believes it is
reasonable, equitable and not unfairly
discriminatory to adopt pricing specific
to certain orders in SPY, IWM and QQQ
as the Exchange already offers productspecific pricing for certain orders in
other products, such as RUT and XSP.17
Additionally, and as noted above, other
exchanges similarly provide for
product-specific tiered pricing.18
The Exchange believes that the
proposal represents an equitable
allocation of fees and is not unfairly
discriminatory because it applies
uniformly to all Market Makers, in that
all Market Makers have the opportunity
to compete for and achieve the proposed
tiers. The enhanced rebates (proposed
and existing) will apply automatically
and uniformly to all Market Makers that
achieve the proposed corresponding
criteria. While the Exchange has no way
of knowing whether this proposed rule
change would definitively result in any
particular Market Maker qualifying for
the proposed tiers, the Exchange
believes that at least two Market Makers
will reasonably be able to compete for
and achieve the proposed criteria in
each of proposed Tier 7 and Tier 12.
The Exchange notes, however, that the
proposed tiers are open to any MarketMaker that satisfies the tiers’ criteria. As
stated, proposed Tier 7 and amended
Tier 12 are designed to provide an
17 See
Cboe BZX Options Exchange Fees
Schedule, Fee Codes and Associated Fees.
18 See supra note 15.
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incentive for Members to submit
additional liquidity on both BZX
Options and Equities to qualify for the
corresponding additional enhanced
rebate. To the extent a Member
participates on the Exchange but not on
BZX Equities, the Exchange believes
that the proposal is still reasonable,
equitably allocated and nondiscriminatory with respect to such
Member based on the overall benefit to
the Exchange resulting from the success
of BZX Equities. Particularly, the
Exchange believes such success allows
the Exchange to continue to provide and
potentially expand its existing incentive
programs to the benefit of all
participants on the Exchange, whether
they participate on BZX Equities or not.
The proposed pricing program is also
fair and equitable in that membership in
BZX Equities and enrollment as an
LMM is available to all market
participants, which would provide them
with access to the benefits on BZX
Equities provided by the proposed
change, even where a member of BZX
Equities is not necessarily eligible for
the proposed enhanced rebates on the
Exchange.
The Exchange lastly notes that it does
not believe the proposed tiers will
adversely impact any Member’s pricing
or ability to qualify for other tiers.
Rather, should a Member not meet the
proposed criteria, the Member will
merely not receive the enhanced rebate
corresponding to Tier 7 or Tier 12 (new
Tier 13), as applicable. A Member has
12 alternative choices to aim to achieve
under the Market Maker Penny Add
Volume Tiers.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on intramarket or
intermarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Rather, as
discussed above, the Exchange believes
that the proposed change would
encourage the submission of additional
liquidity to a public exchange, thereby
promoting market depth, price
discovery and transparency and
enhancing order execution
opportunities for all Members. As a
result, the Exchange believes that the
proposed change furthers the
Commission’s goal in adopting
Regulation NMS of fostering
competition among orders, which
promotes ‘‘more efficient pricing of
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20221
individual stocks for all types of orders,
large and small.’’ 19
The Exchange believes the proposed
rule change does not impose any burden
on intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Particularly,
the proposed change applies uniformly
to all Market Makers (including LMMs
on BZX Equities). As described above,
the Exchange believes that Market
Makers (including LMMs) provide key
liquidity to certain multiply-listed
options on the Exchange and to the
Exchange’s equities platforms,
facilitating tighter spreads, signaling
additional corresponding increase in
order flow from other market
participants, and ultimately
contributing towards a robust, wellbalanced market ecosystem across the
Exchange’s options and equities
platforms. To the extent a Member
participates on the Exchange but not on
BZX Equities, the Exchange notes that
the proposed change can provide an
overall benefit to the Exchange resulting
from the success of BZX Equities. Such
success enables the Exchange to
continue to provide and potentially
expand its existing incentive programs
to the benefit of all participants on the
Exchange, whether they participate on
BZX Equities or not. The proposed
pricing program is also fair and
equitable in that membership in BZX
Equities is available to all market
participants and registration as an LMM
is available equally to all BZX Equities
members.
Next, the Exchange believes the
proposed rule change does not impose
any burden on intermarket competition
that is not necessary or appropriate in
furtherance of the purposes of the Act.
As previously discussed, the Exchange
operates in a highly competitive market.
Members have numerous alternative
venues that they may participate on and
director their order flow, including 15
other options exchanges and offexchange venues. Additionally, the
Exchange represents a small percentage
of the overall market. Based on publicly
available information, no single options
exchange has more than 15% of the
market share.20 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
19 Securities Exchange Act Release No. 51808, 70
FR 37495, 37498–99 (June 29, 2005) (S7–10–04)
(Final Rule).
20 See supra note 3.
E:\FR\FM\16APN1.SGM
16APN1
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Federal Register / Vol. 86, No. 72 / Friday, April 16, 2021 / Notices
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.’’ 21 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’ . . . .’’.22 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.
jbell on DSKJLSW7X2PROD with NOTICES
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 23 and paragraph (f) of Rule
19b–4 24 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
21 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
22 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)).
23 15 U.S.C. 78s(b)(3)(A).
24 17 CFR 240.19b–4(f).
VerDate Sep<11>2014
19:57 Apr 15, 2021
Jkt 253001
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
J. Matthew DeLesDernier,
Assistant Secretary.
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:
[FR Doc. 2021–07787 Filed 4–15–21; 8:45 am]
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBZX–2021–025 on the subject line.
SharesPost 100 Fund and Liberty
Street Advisors, Inc.
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–2021–025. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–CboeBZX–2021–025 and
should be submitted on or before May
7, 2021.
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
34240; 812–15185]
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice.
AGENCY:
The following is a summary
of the application from SharesPost 100
Fund (the ‘‘Initial Fund’’) and Liberty
Street Advisors, Inc. (the ‘‘Adviser’’ and
together with the Initial Fund, the
‘‘Applicants’’).
SUMMARY:
The application was filed on
December 14, 2020, and amended on
March 2, 2021.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. Applicants:
c/o Andrew Nowack, by email to
anowack@libertystreetfunds.com.
FOR FURTHER INFORMATION CONTACT: Jill
Ehrlich, Senior Counsel, at (202) 551–
6819; Lisa Reid Ragen, Branch Chief, at
(202) 551–6825 (Division of Investment
Management, Chief Counsel’s Office).
SUPPLEMENTARY INFORMATION: Notice of
an application under section 6(c) of the
Investment Company Act of 1940 (the
‘‘Act’’) for an exemption from sections
18(a)(2), 18(c) and 18(i) of the Act,
under sections 6(c) and 23(c) of the Act
for an exemption from rule 23c–3 under
the Act, and for an order pursuant to
section 17(d) of the Act and rule 17d–
1 under the Act.
Summary of Application: Applicants
request an order to permit certain
registered closed-end management
investment companies to issue multiple
classes of shares and to impose early
withdrawal charges and asset-based
distribution fees and/or service fees
with respect to certain classes.
Applicants: SharesPost 100 Fund (the
‘‘Initial Fund’’) and Liberty Street
Advisors, Inc. (the ‘‘Adviser’’ and
together with the Initial Fund, the
‘‘Applicants’’).
Hearing or Notification of Hearing: An
order granting the requested relief will
be issued unless the Commission orders
a hearing. Interested persons may
DATES:
25 17
E:\FR\FM\16APN1.SGM
CFR 200.30–3(a)(12).
16APN1
]]>Agencies
[Federal Register Volume 86, Number 72 (Friday, April 16, 2021)]
[Notices]
[Pages 20218-20222]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-07787]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-91530; File No. SR-CboeBZX-2021-025]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule
April 12, 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 April 1, 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, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
[[Page 20219]]
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') is filing
with the Securities and Exchange Commission (``Commission'') a proposed
rule change to amend its Fee Schedule. The text of the proposed rule
change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its fee schedule for its equity
options platform (``BZX Options'') in connection with its Market Maker
Penny Add Volume Tiers, effective April 1, 2021.
The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 options venues to which market participants
may direct their order flow. Based on publicly available information,
no single options exchange has more than 15% of the market share and
currently the Exchange represents only approximately 8% of the market
share.\3\ Thus, in such a low-concentrated and highly competitive
market, no single options exchange, including the Exchange, possesses
significant pricing power in the execution of option order flow. The
Exchange believes that the ever-shifting market share among the
exchanges from month to month demonstrates that market participants can
shift order flow or discontinue to reduce use of certain categories of
products, in response to fee changes. Accordingly, competitive forces
constrain the Exchange's transaction fees, and market participants can
readily trade on competing venues if they deem pricing levels at those
other venues to be more favorable. The Exchange's fee schedule sets
forth standard rebates and rates applied per contract, which varies
depending on the Member's Capacity (Customer, Firm, Market Maker,
etc.), whether the order adds or removes liquidity, and whether the
order is in Penny or Non-Penny Pilot Securities. Additionally, in
response to the competitive environment, the Exchange also offers
tiered pricing which provides Members opportunities to qualify for
higher rebates or reduced fees where certain volume criteria and
thresholds are met. Tiered pricing provides an incremental incentive
for Members to strive for higher tier levels, which provides
increasingly higher benefits or discounts for satisfying increasingly
more stringent criteria.
---------------------------------------------------------------------------
\3\ See Cboe Global Markets U.S. Options Market Month-to-Date
Volume Summary (March 25, 2021), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------
For example, the Exchange currently offers 13 Market Maker Penny
Add Volume Tiers under footnote 6 of the Fee Schedule which provide
additional rebates between $0.33 and $0.46 per contract for qualifying
Market Maker orders (i.e., that yield fee code PM or XM) \4\ where a
Member meets certain liquidity thresholds. For example, current Tier 12
offers an enhanced rebate of $0.44 per contract for qualifying orders
where a Member has a Step-Up ADAV \5\ in Market Maker orders from
December 2020 greater or equal to 0.05% of OCV \6\ and is an LMM in at
least 85 LMM Securities on BZX Equities.\7\ The Exchange now proposes
to amend Market Maker Penny Add Volume Tiers by adding a new Tier 7 \8\
and by updating the current criteria in Tier 12.
---------------------------------------------------------------------------
\4\ Orders yielding fee code PM are Market Maker orders that add
liquidity in Penny Program Securities and are offered a rebate of
$0.29, and orders yielding fee code XM are Market Maker orders in
XSP options that add liquidity and are offered a rebate of $0.29.
\5\ ``ADAV'' means average daily added volume calculated as the
number of contracts added, per day.
\6\ ``OCC Customer Volume'' or ``OCV'' means the total equity
and ETF options volume that clears in the Customer range at the
Options Clearing Corporation (``OCC'') for the month for which the
fees apply, excluding volume on any day that the Exchange
experiences an Exchange System Disruption and on any day with a
scheduled early market close.
\7\ Pursuant to BZX Equities Rules, the term ``LMM'' means a
Market Maker registered with the Exchange for a particular LMM
Security that has committed to maintain Minimum Performance
Standards in the LMM Security, and the term ``LMM Security'' means a
Listed Security that has an LMM. See Cboe BZX Exchange, Inc. Rule
11.8(e)(1)(B) and (C).
\8\ As a result of propose new Tier 7, the proposed rule change
also updated the subsequent tier numbering in current Tiers 8
through 13. The proposed rule change does not alter any of the
current criteria or rebates in the subsequent tiers.
---------------------------------------------------------------------------
The proposed rule change adopts new Tier 7, which offers an
enhanced rebate of $0.42 per contract for qualifying Market Maker
orders (i.e., that yield fee code PM or XM) where a Member has a Step-
Up ADAV in Market Maker orders from March 2021 greater than or equal to
0.15% in average SPY/IWM/QQQ OCV, and is an LMM in at least 85 LMM
Securities on BZX Equities.\9\
---------------------------------------------------------------------------
\9\ Pursuant to BZX Equities Rules, the term ``LMM'' means a
Market Maker registered with the Exchange for a particular LMM
Security that has committed to maintain Minimum Performance
Standards in the LMM Security, and the term ``LMM Security'' means a
Listed Security that has an LMM. See Cboe BZX Exchange, Inc. Rule
11.8(e)(1)(C) and (D).
---------------------------------------------------------------------------
The proposed rule change amends the criteria in Tier 12 (Tier 13,
as proposed) so that a Member must have a Step-Up ADAV in Market Maker
orders from March 2021 that is greater than or equal to 0.25% of
average SPY, IWM, and QQQ OCV in order to meet the first prong of Tier
12 criteria. The proposed rule change does not alter the second prong
of criteria nor the enhanced rebate offered in Tier 12 (new Tier 13).
As amended, Tier 12 (new Tier 13) will provide an additional
opportunity for a Member to receive the same enhanced rebate of $0.44
per contract for qualifying orders.
The proposed new Tier 7 and the proposed changes to the criteria in
Tier 12 (Tier 13, as proposed) are designed to continue to provide an
incremental incentive for Members to strive for the highest tier
levels, which provide increasingly higher rebates for such
transactions. Also, the Exchange notes that the proposed criteria in
Tier 7 and Tier 12 (new Tier 13) are similar to many of the existing
Market Maker Penny Add Volume Tiers that currently provide criteria in
which a Member must ``step up'' a percentage of ADAV or ADV \10\ from a
certain point in time over OCV or TCV,\11\ and criteria which
[[Page 20220]]
measures a Member's participation on the Exchange's equities platform.
Particularly, the proposed changes are designed to incentivize Market
Makers to ``step-up'' their order flow in SPY, IWM, and QQQ from a
recent point in time (March 2021). The Exchange believes that
attracting increased Market Maker (including LMMs) order flow to
multiply-listed options on the Exchange will facilitate tighter
spreads, signaling increased activity from other market participants,
and thus ultimately contributing to deeper and more liquid markets and
providing greater execution opportunities in these classes on the
Exchange to the benefit of all market participants. Additionally, the
proposed criteria regarding LMMs on the Exchange's equities platform
(the same prong of criteria currently in Tier 12) encourages Members to
enroll as LMMs in LMM Securities on the Exchange's equities platform,
which enhances market quality in securities listed on the Exchange's
equity platform. The Exchange notes that LMMs serve a crucial role in
providing quotes and trading opportunities for all market participants,
which can lead to increased volume, enhanced price discovery and
transparency, and more robust markets overall.
---------------------------------------------------------------------------
\10\ ``ADV'' means average daily volume calculated as the number
of contracts added or removed, combined, per day.
\11\ ``TCV'' means total consolidated volume calculated as the
volume reported by all exchanges to the consolidated transaction
reporting plan for the month for which the fees apply, excluding
volume on any day that the Exchange experiences an Exchange System
Disruption and on any day with a scheduled early market close.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\12\ in general, and
furthers the objectives of Section 6(b)(4),\13\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its 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) \14\
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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f.
\13\ 15 U.S.C. 78f(b)(4).
\14\ 15 U.S.C. 78f.(b)(5).
---------------------------------------------------------------------------
As described above, the Exchange operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. The proposed rule change
reflects a competitive pricing structure designed to incentivize market
participants to direct their order flow to the Exchange, which the
Exchange believes would enhance market quality to the benefit of all
Members. In particular, the proposed changes to the Market Maker Penny
Volume Tiers are intended to attract order flow in multiply-listed
options to the Exchange, as well as order flow to its equities
platform, by continuing to offer competitive pricing while creating
additional incentives for Market Makers to provide increased liquidity
in such options and to BZX Equities, which the Exchange believes would
enhance market quality across both its options and equities markets to
the benefit of all market participants.
In particular, the Exchange believes the proposed tiers are
reasonable because they provides an additional opportunity and amends
an existing opportunity for Members to receive an enhanced rebate on
qualifying orders in a manner that incentivizes increased Market Maker
order flow in certain multiply-listed options on the Exchange and
increased LMM participation on the Exchange's equities platform. The
Exchange notes that volume-based incentives and discounts have been
widely adopted by exchanges,\15\ including the Exchange,\16\ and are
reasonable, equitable and non-discriminatory because they are open to
all Members on an equal basis and provide additional benefits or
discounts that are reasonably related to (i) the value to an exchange's
market quality and (ii) associated higher levels of market activity,
such as higher levels of liquidity provision and/or growth patterns.
---------------------------------------------------------------------------
\15\ See e.g., NYSE Arca Options Fee Schedule, Market Maker
Penny and SPY Posting Credit Tiers. NYSE Arca also provides various
discounts for its LMMs throughout its fee schedule; see also Nasdaq
ISE Pricing Schedule, Section 3, Footnote 5, which provides for
tiered rebates for market-maker SPY orders that add liquidity
between $0.05-$0.26 per contract, tiered rebates for market maker
IWM and QCC orders that add liquidity between $0.05 and $0.26 per
contract, and tiered rebates for market maker orders in similar,
single-name options (AMZN, FB, and NVDA) between $0.15 and $0.22.
\16\ See e.g., BZX Options Fee Schedule, Footnote 6, Market
Maker Penny Add Volume Tiers.
---------------------------------------------------------------------------
The Exchange believes the proposed additional Market Maker Penny
Add Volume Tier 7 and amendment to criteria in current Tier 12 (new
Tier 13) are reasonable means to encourage Market Makers to increase
their order flow to specific multiply-listed options on the Exchange,
as well as their participation in securities on the Exchange's equities
platform. More specifically, the Exchange believes that adopting a new
tier and amending an existing tier offers alternative criteria to the
existing Market Maker Penny Add Volume Tiers that may encourage those
Members who could not previously achieve the criteria under existing
Market Maker Volume Tiers 7 and 8 (which offer the same enhanced rebate
of $0.42 per contract as proposed Tier 7) or the existing criteria
under current Tier 10, 11, or 12 (all of which continue to offer the
same enhanced rebate of $0.44 per contract) to increase their order
flow to multiply-listed options on the Exchange and to BZX Equities.
For example, the proposed criteria in new Tier 7 and Tier 12 (new Tier
13) provide additional rebate opportunities for Market Makers who
increase their ADAV in Market Makers orders in certain products (SPY,
IWM, and QQQ) over OCV by at least 0.15% or 0.25%, respectively, from
March 2021 and participate as an LMM in at least 85 LMM Securities on
BZX Equities (as proposed in new Tier 7 and as is currently the case in
Tier 12), but do not meet any of the different, yet comparable, prongs
of criteria under current Tier 7 or 8, or under current Tier 10, 11, or
12. Overall, the proposed tiers provide alternative opportunities for
Members to receive enhanced rebates, as are thereby reasonably designed
to incentivize Market Makers to grow their volume in specific multiply-
listed options while also increasing their participation on BZX
Equities. The Exchange notes that increased Market Maker activity
(including LMMs), particularly, facilitates tighter spreads and an
increase in overall liquidity provider activity, both of which signal
additional corresponding increase in order flow from other market
participants, contributing towards a robust, well-balanced market
ecosystem, particularly in multiply-listed options on the Exchange and
on the Exchange's equities platform. Indeed, increased overall order
flow benefits investors across both the Exchange's options and equities
platforms by continuing to deepen the Exchange's liquidity pool,
potentially providing even greater execution incentives and
opportunities, offering additional flexibility for all investors to
enjoy cost savings, supporting the quality of price
[[Page 20221]]
discovery, promoting market transparency and improving investor
protection.
The Exchange also believes that proposed enhanced rebate offered
under new Tier 7 is reasonably based on the difficulty of satisfying
the proposed tier's criteria and ensures the proposed rebate and
thresholds appropriately reflect the incremental difficulty in
achieving the existing Market Maker Penny Add Volume Tiers. The
Exchange believes that the proposed enhanced rebate is in line with the
enhanced rebates currently offered under the Exchange's existing Market
Maker Penny Add Volume Tiers. Indeed, the proposed enhanced rebate
amount offered under new Tier 7 ($0.42) is the same amount offered by
surrounding Tier 7 (new Tier 8) and Tier 8 (new Tier 9), which offer
different criteria that the Exchange believes in comparable in
difficulty, and is incrementally higher than Tier 6 ($0.41), which
offers slightly less stringent criteria than proposed Tier 7. The
Exchange again notes that the proposed changes to Tier 12 (new Tier 13)
do not alter the current enhanced rebate amount offered under the tier.
The Exchange also believes it is reasonable, equitable and not
unfairly discriminatory to adopt pricing specific to certain orders in
SPY, IWM and QQQ as the Exchange already offers product-specific
pricing for certain orders in other products, such as RUT and XSP.\17\
Additionally, and as noted above, other exchanges similarly provide for
product-specific tiered pricing.\18\
---------------------------------------------------------------------------
\17\ See Cboe BZX Options Exchange Fees Schedule, Fee Codes and
Associated Fees.
\18\ See supra note 15.
---------------------------------------------------------------------------
The Exchange believes that the proposal represents an equitable
allocation of fees and is not unfairly discriminatory because it
applies uniformly to all Market Makers, in that all Market Makers have
the opportunity to compete for and achieve the proposed tiers. The
enhanced rebates (proposed and existing) will apply automatically and
uniformly to all Market Makers that achieve the proposed corresponding
criteria. While the Exchange has no way of knowing whether this
proposed rule change would definitively result in any particular Market
Maker qualifying for the proposed tiers, the Exchange believes that at
least two Market Makers will reasonably be able to compete for and
achieve the proposed criteria in each of proposed Tier 7 and Tier 12.
The Exchange notes, however, that the proposed tiers are open to any
Market-Maker that satisfies the tiers' criteria. As stated, proposed
Tier 7 and amended Tier 12 are designed to provide an incentive for
Members to submit additional liquidity on both BZX Options and Equities
to qualify for the corresponding additional enhanced rebate. To the
extent a Member participates on the Exchange but not on BZX Equities,
the Exchange believes that the proposal is still reasonable, equitably
allocated and non-discriminatory with respect to such Member based on
the overall benefit to the Exchange resulting from the success of BZX
Equities. Particularly, the Exchange believes such success allows the
Exchange to continue to provide and potentially expand its existing
incentive programs to the benefit of all participants on the Exchange,
whether they participate on BZX Equities or not. The proposed pricing
program is also fair and equitable in that membership in BZX Equities
and enrollment as an LMM is available to all market participants, which
would provide them with access to the benefits on BZX Equities provided
by the proposed change, even where a member of BZX Equities is not
necessarily eligible for the proposed enhanced rebates on the Exchange.
The Exchange lastly notes that it does not believe the proposed
tiers will adversely impact any Member's pricing or ability to qualify
for other tiers. Rather, should a Member not meet the proposed
criteria, the Member will merely not receive the enhanced rebate
corresponding to Tier 7 or Tier 12 (new Tier 13), as applicable. A
Member has 12 alternative choices to aim to achieve under the Market
Maker Penny Add Volume Tiers.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on intramarket or intermarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
Rather, as discussed above, the Exchange believes that the proposed
change would encourage the submission of additional liquidity to a
public exchange, thereby promoting market depth, price discovery and
transparency and enhancing order execution opportunities for all
Members. As a result, the Exchange believes that the proposed change
furthers the Commission's goal in adopting Regulation NMS of fostering
competition among orders, which promotes ``more efficient pricing of
individual stocks for all types of orders, large and small.'' \19\
---------------------------------------------------------------------------
\19\ Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
---------------------------------------------------------------------------
The Exchange believes the proposed rule change does not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the proposed
change applies uniformly to all Market Makers (including LMMs on BZX
Equities). As described above, the Exchange believes that Market Makers
(including LMMs) provide key liquidity to certain multiply-listed
options on the Exchange and to the Exchange's equities platforms,
facilitating tighter spreads, signaling additional corresponding
increase in order flow from other market participants, and ultimately
contributing towards a robust, well-balanced market ecosystem across
the Exchange's options and equities platforms. To the extent a Member
participates on the Exchange but not on BZX Equities, the Exchange
notes that the proposed change can provide an overall benefit to the
Exchange resulting from the success of BZX Equities. Such success
enables the Exchange to continue to provide and potentially expand its
existing incentive programs to the benefit of all participants on the
Exchange, whether they participate on BZX Equities or not. The proposed
pricing program is also fair and equitable in that membership in BZX
Equities is available to all market participants and registration as an
LMM is available equally to all BZX Equities members.
Next, the Exchange believes the proposed rule change does not
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As previously
discussed, the Exchange operates in a highly competitive market.
Members have numerous alternative venues that they may participate on
and director their order flow, including 15 other options exchanges and
off-exchange venues. Additionally, the Exchange represents a small
percentage of the overall market. Based on publicly available
information, no single options exchange has more than 15% of the market
share.\20\ 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
[[Page 20222]]
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.'' \21\ 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' . . . .''.\22\ 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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\20\ See supra note 3.
\21\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\22\ 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 has become effective pursuant to Section
19(b)(3)(A) of the Act \23\ and paragraph (f) of Rule 19b-4 \24\
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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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 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-2021-025 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-2021-025. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeBZX-2021-025 and should be submitted
on or before May 7, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-07787 Filed 4-15-21; 8:45 am]
BILLING CODE 8011-01-P
