Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 46028-46033 [2021-17538]
Download as PDF
<![CDATA[
46028
Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices
name; Social Security Number or tax
identification number; business contact
information; contract number; and other
contract information; fingerprint cards
and experience and qualifications to
provide services including principals’
names and company descriptions.
2. Real property owner and tenant
information: Records related to
compensation claims by occupants of
property acquired by USPS, including
name and address of claimant, address
of vacated dwelling, and itemized
expenses.
3. Crowdsourcing Agreement
Participant Records: First name, last
name, email address, team name,
organization name, team official
representative or point of contact
designation status, and password
established during the registration
process, idea text and relevant feedback
responses to challenges regarding
selected problems and topics, drawings,
attachments, or documents associated
with submissions.
RECORD SOURCE CATEGORIES:
Contract employees or businesses;
previous dwelling owner or tenant
claimant; and USPS claims reviewers
and adjudicators; feedback and ideas
provided by participating teams or
individuals in USPS sponsored
challenges.
ROUTINE USES OF RECORDS MAINTAINED IN THE
SYSTEM, INCLUDING CATEGORIES OF USERS AND
THE PURPOSES OF SUCH USES:
Standard routine uses 1. through 9.
apply.
STORING, RETRIEVING, ACCESSING, RETAINING,
AND DISPOSING OF RECORDS IN THE SYSTEM:
POLICIES AND PRACTICES FOR STORAGE OF
RECORDS:
POLICIES AND PRACTICES FOR RETRIEVAL OF
RECORDS:
khammond on DSKJM1Z7X2PROD with NOTICES
Individual, business, lessor, or
claimant name; contract name or
number, Social Security Number, tax
identification number, business contact
information, or address of leased
facility; individuals participating in
challenges and teams or organizations
participating in challenges.
POLICIES AND PRACTICES FOR RETENTION AND
DISPOSAL OF RECORDS:
1. Unsuccessful proposals and
architect/engineering questionnaires are
retained 1 year beyond contract award.
Contract records are closed at the end of
the fiscal year in which they become
inactive and are retained 6 years
thereafter.
17:08 Aug 16, 2021
Jkt 253001
ADMINISTRATIVE, TECHNICAL, AND PHYSICAL
SAFEGUARDS:
Paper records, computers, and
computer storage media are located in
controlled-access areas under
supervision of program personnel.
Access to these areas is limited to
authorized personnel, who must be
identified with a badge. Access to
records is limited to individuals whose
official duties require such access.
Contractors and licensees are subject to
contract controls and unannounced onsite audits and inspections. Computers
are protected by mechanical locks, card
key systems, or other physical access
control methods. The use of computer
systems is regulated with installed
security software, computer logon
identifications, and operating system
controls including access controls,
terminal and transaction logging, and
file management software.
RECORD ACCESS PROCEDURES:
Automated database, computer
storage media, and paper.
VerDate Sep<11>2014
2. Contractor fingerprint records are
retained 2 years beyond contractor
termination date.
3. Leased property records are closed
at the end of the calendar year in which
the lease or rental agreement expires or
terminates and are retained 6 years and
3 months from that date.
4. Real property owner and tenant
records are retained 6 years unless
required longer for litigation purposes.
5. Participant registration information
for challenges and participant responses
to challenges are retained for 1 year after
conclusion of challenge.
Records existing on paper are
destroyed by burning, pulping, or
shredding. Records existing on
computer storage media are destroyed
according to the applicable USPS media
sanitization practice.
Requests for access must be made in
accordance with the Notification
Procedure above and USPS Privacy Act
regulations regarding access to records
and verification of identity under 39
CFR 266.5.
CONTESTING RECORD PROCEDURES:
See Notification Procedures and
Record Access Procedures above.
NOTIFICATION PROCEDURES:
Individuals wanting to know if
information about them is maintained in
this system of records must address
inquiries to the appropriate system
manager. Inquiries about highway
vehicle contracts must be made to the
applicable USPS area office. Real
property owner and tenant claimants
must address inquiries to the same
facility to which they submitted the
claim. Inquiries must contain full
PO 00000
Frm 00077
Fmt 4703
Sfmt 4703
individual or business name, Social
Security Number, tax identification
number, contract number, date of
contract, or other pertinent identifying
information.
EXEMPTIONS PROMULGATED FOR THE SYSTEM:
None.
HISTORY:
June 27, 2012, 77 FR 38342; April 29,
2005, 70 FR 22516.
*
*
*
*
*
Ruth B. Stevenson,
Chief Counsel, Ethics and Legal Compliance.
[FR Doc. 2021–17648 Filed 8–16–21; 8:45 am]
BILLING CODE 7710–12–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–92635; File No. SR–
CboeBZX–2021–055]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fee Schedule
August 11, 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 August 2,
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.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) proposes 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/)
[sic], at the Exchange’s Office of the
Secretary, and at the Commission’s
Public Reference Room.
1 15
2 17
E:\FR\FM\17AUN1.SGM
U.S.C. 78s(b)(1).
CFR 240.19b–4.
17AUN1
Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices
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.
khammond on DSKJM1Z7X2PROD with NOTICES
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 Customer Penny Add Volume
Tiers, Market Maker, Away Market
Maker, and Professional Penny Take
Volume Tiers, and Customer Non-Penny
Add Volume Tiers, effective August 2,
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 16% 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
3 See Cboe Global Markets U.S. Options Market
Month-to-Date Volume Summary (July 23, 2021),
available at https://markets.cboe.com/us/options/
market_statistics/.
VerDate Sep<11>2014
17:08 Aug 16, 2021
Jkt 253001
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 Program
Securities.
Additionally, in response to the
competitive environment, the Exchange
also offers tiered pricing which provides
Members with 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. Among other
volume tiers, the Exchange currently
offers Customer Penny Add Volume
Tiers, Market Maker, Away Market
Maker, and Professional Penny Take
Volume Tiers, and Customer Non-Penny
Add Volume Tiers, to which it proposes
to make the following changes.
Customer Penny Add Volume Tiers
The Exchange currently offers seven
Customer Penny Add Volume Tiers
under footnote 1 of the Fee Schedule
that provide enhanced rebates between
$0.35 and $0.53 per contract for
qualifying Customer orders (i.e., that
yield fee code PY or XY) 4 where a
Member meets certain liquidity
thresholds. The Exchange proposes to
update Tier 6, which currently offers an
enhanced rebate of $0.53 per contract
for qualifying orders (i.e., that yield fee
code PY or XY) where a Member has an
ADAV 5 in Customer orders greater than
or equal to 1.70% of average OCV.6
Specifically, the proposed rule change
updates the percentage of Customer
orders over average OCV from 1.70% to
2.00% and adds an additional prong of
criteria that a Member must achieve in
order to receive the current enhanced
rebate. The proposed second prong of
criteria requires a Member, in addition
to meeting the existing criteria (as
updated), to reach an ADAV in
Customer Non-Penny orders greater
4 Orders yielding fee code PY are Customer orders
that add liquidity in Penny Program Securities and
are offered a rebate of $0.25, and orders yielding fee
code XY are Customer orders in XSP options that
add liquidity and are offered a rebate of $0.25.
5 ‘‘ADAV’’ means average daily added volume
calculated as the number of contracts added. ADAV
is calculated on a monthly basis.
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.
PO 00000
Frm 00078
Fmt 4703
Sfmt 4703
46029
than or equal to 0.50% of average OCV.
The proposed rule change does not alter
the existing enhanced rebate amount
offered in Tier 6.
The proposed rule change also
eliminates Tier 5 7 and Tier 7. Tier 5
currently offers an enhanced rebate of
$0.53 per contract for qualifying orders
where a Member has (1) an ADAV in
Customer orders greater than or equal to
0.80% of average OCV, (2) an ADAV in
Market Maker orders greater than or
equal to 0.35% of average OCV, and (3)
on BZX Equities an ADAV greater than
or equal to 0.30% of average TCV. Tier
7 currently offers the same enhanced
rebate ($0.53) per contract for qualifying
orders where a Member has (1) an
ADAV in Customer orders greater than
or equal to 0.50% of average OCV, (2)
an ADAV in Market Maker orders
greater than or equal to 2.75% of
average OCV, and (3) an ADAV in Firm
Non-Penny orders greater than or equal
to 0.05% of average OCV.
The Exchange proposes to eliminate
Tiers 5 and 7 as no Members are
currently satisfying the criteria under
these tiers, nor have recently satisfied
such criteria. The Exchange no longer
wishes to, nor is it required to, maintain
such tiers. More specifically, the
proposed rule change removes these
tiers as the Exchange would like to
provide more consolidated, streamlined
Customer Penny Add Volume Tiers by
offering a single tier that provides an
enhanced rebate of $0.53 (current Tier
6/new Tier 5) and would also rather
redirect future resources and funding
into other programs and tiers intended
to incentivize increased order flow. The
Exchange believes that the proposed
updated criteria in current Tier 6 (new
Tier 5) is designed to provide a different
opportunity for Members to achieve the
tier to receive the same enhanced rebate.
Market Maker, Away Market Maker, and
Professional Penny Take Volume Tiers
The Exchange currently offers three
Market Maker, Away Market Maker, and
Professional Take Volume Tiers under
footnote 3 of the Fee Schedule that
provide a reduced fee between $0.45
and $0.47 per contract for qualifying
orders (i.e., that yield fee code PP) 8
where a Member meets certain liquidity
thresholds. The Exchange proposes to
update each of the three Market Maker,
Away Market Maker, and Professional
7 As a result of eliminating Tier 5, the proposed
rule change also amends current Tier 6 to be Tier
5.
8 Orders yielding fee code PP are Market Maker,
Away Market Maker, or Professional orders that
remove liquidity in Penny Program Securities and
are assessed a fee of $0.50.
E:\FR\FM\17AUN1.SGM
17AUN1
khammond on DSKJM1Z7X2PROD with NOTICES
46030
Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices
Take Volume Tiers. The three tiers
currently offer the following:
• Tier 1 currently offers a reduced fee
of $0.45 per contract for qualifying
orders (i.e., that yield fee code PP)
where a Member has (1) an ADAV in
Customer orders greater than or equal to
0.80% of average OCV, (2) an ADAV in
Market Maker orders greater than or
equal to 0.35% of average OCV, (3) on
BZX Equities an ADAV greater than or
equal to 1.00% of average TCV, and (4)
an ADAV in Customer Non-Penny
orders greater than or equal to 0.10% of
average OCV.
• Tier 2 currently offers a reduced fee
of $0.47 per contract for qualifying
orders where a Member has an ADAV in
Customer orders greater than or equal to
1.30% of average OCV.
• Tier 3 currently offers a reduced fee
of $0.45 per contract for qualifying
orders where a Member has (1) an
ADAV in Customer orders greater than
or equal to 2.00% of average OCV, and
(2) an ADAV in Customer Non-Penny
orders greater than or equal to 0.40% of
average OCV.
The proposed rule change updates the
three tiers to offer the following:
• As proposed, Tier 1 offers a new
reduced fee of $0.49 per contract for
qualifying orders where a Member has
(1) an ADAV in Customer orders greater
than or equal to 1.00% of average OCV,
and (2) Member has an ADRV 9 in
Market Maker/Away Market Maker
orders greater than or equal to 1.00% of
average OCV. The proposed rule change
eliminates the criteria in current prong
3 and 4.
• As proposed, Tier 2 offers a new
reduced fee of $0.48 per contract for
qualifying orders where a Member
achieves the existing criteria plus
proposed additional criteria in new
prong two—a Member also has an
ADRV in Market Maker/Away Market
Maker orders greater than or equal to
1.00% of average OCV.
• As proposed, Tier 3 offers a new
reduced fee of $0.47 per contract for
qualifying orders where a Member
achieves the existing criteria plus
proposed additional criteria in new
prong three—a Member also has an
ADRV in Market Maker/Away Market
Maker orders greater than or equal to
2.00% of average OCV.
The Exchange believes that the
proposed updates to the Market Maker,
Away Market Maker, and Professional
Penny Take Volume Tiers will provide
different and additional opportunities
for such Members to achieve the
9 ‘‘ADRV’’ means average daily removed volume
calculated as the number of contracts removed.
ADRV is calculated on a monthly basis.
VerDate Sep<11>2014
17:08 Aug 16, 2021
Jkt 253001
corresponding reduced fees,
encouraging these liquidity providing
market participants to increase their
overall order flow, both add (ADAV)
and remove (ADRV) volume, to the
Exchange. This, in turn, may facilitate
tighter spreads and more price
improvement opportunities, signaling
increased activity from other market
participants, and thus may ultimately
contribute to deeper and more liquid
markets and a more robust and wellbalanced market ecosystem on the
Exchange, to the benefit of all market
participants.
Customer Non-Penny Add Volume Tiers
The Exchange currently offers five
Customer Non-Penny Add Volume
Tiers 10 under footnote 12 of the Fee
Schedule, which provide enhanced
rebates between $0.92 and $1.06 per
contract for qualifying Customer orders
(i.e., that yield fee code NY) 11 where a
Member meets certain liquidity
thresholds. The Exchange proposes to
update Tier 1, Tier 4 and Tier 5. These
tiers currently offer the following:
• Tier 1 currently offers an enhanced
rebate of $0.92 per contract for
qualifying orders (i.e., that yield fee
code NY) where a Member has (1)
ADAV in Customer orders greater than
or equal to 0.50% of average OCV, and
(2) an ADAV in Market Maker orders
greater than or equal to 2.75% of
average OCV.
• Tier 4 currently offers an enhanced
rebate of $1.05 per contract for
qualifying orders where a Member has
an ADAV in Customer orders greater
than or equal to 2.10% of average OCV.
• Tier 5 currently offers an enhanced
rebate of $1.06 per contract for
qualifying orders where a Member has
(1) an ADAV in Customer orders greater
than or equal to 2.00% of average OCV,
and (2) an ADAV in Customer NonPenny orders greater than or equal to
1.00% of average OCV.
The proposed rule change updates
Tier 1, Tier 4 and Tier 5 as follows:
• As proposed, Tier 1 offers a new
enhanced rebate of $0.90 per contract
for qualifying orders where a Member
has an ADAV in Customer Non-Penny
orders greater than or equal to 0.25% of
average OCV. The proposed rule change
eliminates the second prong of criteria.
• As proposed, Tier 4 offers a new
enhanced rebate of $1.01 per contract
for qualifying orders where a Member
has an ADAV in Customer orders greater
10 The proposed rule change also makes a
nonsubstantive edit by making ‘‘Customer NonPenny Add Volume Tier’’ plural.
11 Orders yielding fee code NY are Customer
orders that add liquidity in Non-Penny Program
Securities and are offered a rebate of $0.85.
PO 00000
Frm 00079
Fmt 4703
Sfmt 4703
than or equal to 0.85% of average OCV
plus proposed additional criteria in new
prong two—where a Member also has an
ADAV in Customer Non-Penny orders
greater than or equal to 0.25% of
average OCV.
• As proposed, Tier 5 offers a new
enhanced rebate of $1.02 per contract
for qualifying orders where a Member
has (1) an ADAV in Customer orders
greater than or equal to 0.90% of
average OCV, and (2) an ADAV in
Customer Non-Penny orders greater
than or equal to 0.40% of average OCV.
The proposed rule change also adopts
new Tier 2,12 new Tier 6, new Tier 7
and new Tier 8, which, as proposed,
offer the following:
• As proposed, Tier 2 offers an
enhanced rebate of $0.95 per contract
for qualifying orders where a Member
has (1) an ADAV in Customer orders
greater than or equal to 0.50% of
average OCV, and (2) an ADAV in
Customer Non-Penny orders greater
than or equal to 0.25% of average OCV.
• As proposed, Tier 6 offers an
enhanced rebate of $1.03 per contract
for qualifying orders where a Member
has (1) has an ADAV in Customer orders
greater than or equal to 1.00% of
average OCV, and (2) an ADAV in
Customer Non-Penny orders greater
than or equal to 0.45% of average OCV.
• As proposed, Tier 7 offers an
enhanced rebate of $1.04 per contract
for qualifying orders where a Member
has (1) an ADAV in Customer orders
greater than or equal to 1.30% of
average OCV, and (2) an ADAV in
Customer Non-Penny orders greater
than or equal to 0.50% of average OCV.
• As proposed, Tier 8 offers an
enhanced rebate of $1.05 per contract
for qualifying orders where a Member
has (1) an ADAV in Customer orders
greater than or equal to 1.30% of
average OCV, and (2) an ADAV in
Customer Non-Penny orders greater
than or equal to 0.60% of average OCV.
Finally, the proposed rule change
eliminates Tier 3, which currently offers
an enhanced rebate of $1.02 per contract
for qualifying orders where a Member
has (1) an ADAV in Customer orders
greater than or equal to 0.50% of
average OCV, (2) an ADAV in Market
Maker orders greater than or equal to
2.75% of average OCV, and (3) an
ADAV in Firm Non-Penny orders
greater than or equal to 0.05% of
average OCV.
The proposed updates to and addition
of tiers under the Customer Non-Penny
Add Volume Tiers are designed to
encourage increased Customer order
12 As a result of new Tier 2, the proposed rule
change also amends current Tier 2 to be Tier 3.
E:\FR\FM\17AUN1.SGM
17AUN1
Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
flow by providing different and
additional opportunities to receive an
enhanced rebate. The Exchange believes
that an increase in Customer order flow
may attract an additional corresponding
increase in order flow from other market
participants, also contributing overall
towards a robust and well-balanced
market ecosystem, to the benefit of all
market participants. Also, like the
proposed elimination of certain
Customer Penny Add Volume Tiers
above, the Exchange proposes to
eliminate Customer Non-Penny Add
Volume Tier 3 as no Members are
currently satisfying the criteria under
this tier, nor have recently satisfied such
criteria. The Exchange no longer wishes
to, nor is it required to, maintain this
tier, and would rather redirect future
resources and funding into other
programs and tiers intended to
incentivize increased order flow.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,13
in general, and furthers the objectives of
Section 6(b)(4),14 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) 15 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.
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,
13 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
15 15 U.S.C. 78f.(b)(5).
14 15
VerDate Sep<11>2014
17:08 Aug 16, 2021
Jkt 253001
which the Exchange believes would
enhance market quality to the benefit of
all Members. The Exchange notes that
volume-based incentives and discounts
have been widely adopted by
exchanges,16 including the Exchange,17
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. Additionally, as noted above,
the Exchange operates in a highly
competitive market. The Exchange is
only one of several options venues to
which market participants may direct
their order flow, and it represents a
small percentage of the overall market.
Competing options exchanges offer
similar tiered pricing structures to that
of the Exchange, including schedules of
rebates and fees that apply based upon
Members achieving certain volume and/
or growth thresholds.
Overall, the Exchange believes that
the proposed rule changes to the
Customer Penny Add Volume, Market
Maker, Away Market Maker, and
Professional Take Volume, and
Customer Non-Penny Add Volume Tiers
are reasonable in that they are
reasonably designed to incentivize
Members to submit both add (ADAV)
and remove (ADRV) order flow to the
Exchange, thereby contributing to a
deeper and more liquid market. More
specifically, incentivizing an increase in
both liquidity adding volume and in
liquidity removing volume, through
additional criteria and enhanced rebate
opportunities, encourages liquidity
adding Members on the Exchange to
contribute to a deeper, more liquid
market, and to increase transactions and
take execution opportunities provided
by such increased liquidity, together
providing for overall enhanced price
discovery and price improvement
opportunities on the Exchange.
Additionally, the Exchange believes that
it is reasonable and equitable to
incentivize Market Maker (including
16 See, e.g., NYSE Arca Options Fee Schedule,
Trade-Related charges for Standard Options, which
similarly provide various ranges of credits and
discounts for volume-based tiers geared toward
different market participants in penny or nonpenny classes, such as Customer Penny Posting
Credit Tiers, Firm and Broker-Dealer Penny Posting
Tiers, and Customer Posting Credit Tiers in NonPenny Issues; and Cboe EDGX U.S. Options
Exchange Fee Schedule, Footnotes, which provide
for similar Customer Volume Tiers and Market
Maker Volume Tiers.
17 See generally BZX Options Fee Schedule,
Footnotes.
PO 00000
Frm 00080
Fmt 4703
Sfmt 4703
46031
Away Market Maker), Professional and
Customer order flow, as these market
participants provide key liquidity to the
Exchange. For instance, Market Maker
(including Away Market Maker) activity
facilitates tighter spreads and signals
additional corresponding increase in
order flow from other market
participants. Increased overall order
flow benefits all investors by deepening
the Exchange’s liquidity pool,
potentially providing even greater
execution incentives and opportunities.
Professionals generally provide a greater
competitive stream of order flow (by
definition, more than 390 orders in
listed options per day on average during
a calendar month), thus, providing
increased competitive execution and
improved pricing opportunities for all
market participants. Customer order
flow attracts additional liquidity to the
Exchange, particularly in Non-Penny
classes, as proposed. Such additional
liquidity provides more trading
opportunities and signals an increase in
Market-Maker activity, which facilitates
tighter spreads. This may cause an
additional corresponding increase in
order flow from other market
participants, contributing overall
towards a robust and well-balanced
market ecosystem.
In particular, the Exchange believes
that it is reasonable and equitable to
eliminate Customer Penny Add Volume
Tiers 5 and 7, as well as Customer NonPenny Add Volume Tier 3, because the
Exchange is not required to maintain
this tier or provide Members an
opportunity to receive reduced fees or
enhanced rebates. As stated, no
Members are currently satisfying the
criteria under these tiers, nor have
recently satisfied such criteria.
Moreover, the Exchange believes it is
reasonable to provide more
consolidated, streamlined Customer
Penny Add Volume Tiers by offering a
single tier that provides an enhanced
rebate of $0.53 (current Tier 6/new Tier
5), and believes that the proposed
updated criteria in this single tier
(current Tier 6/new Tier 5) is reasonably
designed to provide a different
opportunity for Members to achieve the
tier to receive the same enhanced rebate.
Regarding the proposed rule change to
the Market Maker, Away Market Maker,
and Professional Penny Take Volume
Tiers, the Exchange believes that it is
reasonable and equitable to
incrementally increase the difficulty in
meeting the tiers’ criteria, by marginally
increasing the volume threshold over
average OCV and by adding additional
prongs of criteria, as it is reasonably
designed to incentivize Members to
submit additional requisite liquidity to
E:\FR\FM\17AUN1.SGM
17AUN1
khammond on DSKJM1Z7X2PROD with NOTICES
46032
Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices
meet the updated criteria. The Exchange
also believes that the marginally
increased reduced fees, as proposed,
offered under each of the Market Maker,
Away Market Maker, and Professional
Penny Take Volume Tiers continue to
be a reasonable distribution of reduced
fees, commensurate with the
corresponding proposed criteria. The
Exchange notes that it offers similar
reduced rates for criteria of comparable
difficulty in other volume-based tier
programs. For example, Tier 2 of the
Non-Customer Non-Penny Take Volume
Tiers in Footnote 13 of the Fee Schedule
offers a higher reduced fee ($1.07) than
the proposed reduced fees ($0.49, $0.48
and $0.47) where a Member must meet
three different prongs of criteria.
The Exchange also believes that it is
reasonable and equitable to update the
Customer Non-Penny Add Volume Tiers
to provide different criteria (which the
Exchange does not believe is necessarily
more or less difficult than the existing
criteria) and to also provide new criteria
via new tiers because these
modifications and additions are
reasonably designed to provide
Members with increased supplementary
opportunities to receive corresponding
enhanced rebates. The Exchange also
believes that the marginally decreased
enhanced rebates, as proposed, continue
to be a reasonable distribution of
enhanced rebates, commensurate with
the corresponding proposed criteria, as
the Customer Non-Penny Add Volume
Tiers continue to offer a range of
enhanced rebates ($0.90 to $1.05, as
proposed) within a comparable range as
offered today ($0.92 to $1.06). The
proposed rule change just provides
additional opportunities within the
proposed comparable range of enhanced
rebates for Members to meet criteria and
receive an enhanced rebate.
The Exchange believes that the
proposed updated and new tiers
represent an equitable allocation of fees
and are not unfairly discriminatory
because the Customer Penny Add
Volume, Market Maker, Away Market
Maker, and Professional Penny Take
Volume, and Customer Non-Penny Add
Volume Tiers Add Penny Tiers, as
proposed, will continue to apply
uniformly to all qualifying Members, in
that all Members that submit the
requisite order flow per each tier
program have the opportunity to
compete for and achieve the proposed
tiers. The proposed changes to and
additions of criteria in the Customer
Penny Add Volume, Market Maker,
Away Market Maker, and Professional
Penny Take Volume, and Customer
Non-Penny Add Volume Tiers are
designed as an incentive to any and all
VerDate Sep<11>2014
17:08 Aug 16, 2021
Jkt 253001
Members interested in meeting modified
and new tier criteria to submit
additional, requisite order flow directly
to the Exchange’s Book. Without having
a view of activity on other markets and
off-exchange venues, the Exchange has
no way of knowing whether this
proposed rule change will definitely
result in any Members qualifying for the
proposed tiers. While the Exchange has
no way of predicting with certainty how
the proposed tiers will impact Member
activity, the Exchange anticipates that:
Between five and six Members will be
able to compete for and potentially
achieve the proposed criteria in
Customer Penny Add Volume Tier 5
(current Tier 6); at least two Members
will be able to compete for and
potentially achieve the proposed criteria
in each of the updated Market Maker,
Away Market Maker, and Professional
Penny Take [sic] Tiers 1, 2 and 3; and
at least four Members will be able to
compete for and potentially achieve the
proposed criteria in across the updated
Customer Non-Penny Add Volume Tiers
1, 4 and 5, and new Tiers 6, 7 and 8.
The Exchange also notes that the
proposed tiers will not adversely impact
any Member’s pricing or their ability to
qualify for other rebate tiers. Rather,
should a Member not meet the proposed
criteria for a tier, the Member will
merely not receive the corresponding
enhanced rebate or reduced fee, as
applicable. Finally, the Exchange
believes the proposal to eliminate
certain tiers is equitable and not
unfairly discriminatory because it
applies to all Members, in that, such
tiers will not be available for any
Member.
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
PO 00000
Frm 00081
Fmt 4703
Sfmt 4703
individual stocks for all types of orders,
large and small.’’ 18
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 tiers apply to all Members
equally, in that, all Members that submit
the requisite order flow per each tier
program are eligible to achieve the tiers’
proposed criteria, have a reasonable
opportunity to meet the tiers’ proposed
criteria and will all receive the
corresponding reduced fees or enhanced
rebates (as existing and proposed) if
such criteria is met. Overall, the
proposed rule change is designed to
attract additional overall Customer and
liquidity provider order flow to the
Exchange, which, as described above,
brings different, yet key, liquidity and
trading activity to the Exchange,
resulting in overall tighter spreads, more
execution opportunities at improved
prices, and/or deeper levels of liquidity,
which ultimately improves price
transparency, provides continuous
trading opportunities and enhances
market quality on the Exchange, and
generally continues to encourage
Members to send orders to the
Exchange, thereby contributing towards
a robust and well-balanced market
ecosystem to the benefit of all market
participants.
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 16% of the
market share.19 Therefore, no exchange
possesses significant pricing power in
the execution of option order flow.
Indeed, participants can readily choose
to send their orders to other exchange
and off-exchange venues if they deem
fee levels at those other venues to be
more favorable. Moreover, the
Commission has repeatedly expressed
its preference for competition over
regulatory intervention in determining
prices, products, and services in the
18 Securities Exchange Act Release No. 51808, 70
FR 37495, 37498–99 (June 29, 2005) (S7–10–04)
(Final Rule).
19 See supra note 3.
E:\FR\FM\17AUN1.SGM
17AUN1
Federal Register / Vol. 86, No. 156 / Tuesday, August 17, 2021 / Notices
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.’’ 20 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’. . . .’’.21 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.
khammond on DSKJM1Z7X2PROD 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 22 and paragraph (f) of Rule
19b–4 23 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
20 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
21 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)).
22 15 U.S.C. 78s(b)(3)(A).
23 17 CFR 240.19b–4(f).
VerDate Sep<11>2014
17:08 Aug 16, 2021
Jkt 253001
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
• 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–2021–055 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–2021–055. 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–2021–055 and
should be submitted on or before
September 7, 2021.
Frm 00082
Fmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021–17538 Filed 8–16–21; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–560; OMB Control No.
3235–0622]
Electronic Comments
PO 00000
46033
Sfmt 4703
Proposed Collection; Comment
Request
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
100 F Street NE, Washington, DC
20549–2736.
Extension:
Interagency Statement on Sound Practices
Notice is hereby given that pursuant
to the Paperwork Reduction Act of 1995
(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the
Securities and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the existing collection of information
provided for in the proposed
Interagency Statement on Sound
Practices Concerning Elevated Risk
Complex Structured Finance
Transactions (‘‘Statement’’) under the
Securities Exchange Act of 1934 (15
U.S.C. 78a et seq.) (‘‘Exchange Act’’) and
the Investment Advisers Act of 1940 (15
U.S.C. 80b et seq.) (‘‘Advisers Act’’). The
Commission plans to submit this
existing collection of information to the
Office of Management and Budget
(‘‘OMB’’) for extension and approval.
The Statement was issued by the
Commission, together with the Office of
the Comptroller of the Currency, the
Board of Governors of the Federal
Reserve System, the Federal Deposit
Insurance Corporation, and the Office of
Thrift Supervision (together, the
‘‘Agencies’’), in May 2006. The
Statement describes the types of internal
controls and risk management
procedures that the Agencies believe are
particularly effective in assisting
financial institutions to identify and
address the reputational, legal, and
other risks associated with elevated risk
complex structured finance
transactions.
The primary purpose of the Statement
is to ensure that these transactions
receive enhanced scrutiny by the
institution and to ensure that the
institution does not participate in illegal
or inappropriate transactions.
24 17
E:\FR\FM\17AUN1.SGM
CFR 200.30–3(a)(12).
17AUN1
]]>Agencies
[Federal Register Volume 86, Number 156 (Tuesday, August 17, 2021)]
[Notices]
[Pages 46028-46033]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-17538]
=======================================================================
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92635; File No. SR-CboeBZX-2021-055]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule
August 11, 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 August 2, 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.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes 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/) [sic], at the Exchange's Office of the Secretary,
and at the Commission's Public Reference Room.
[[Page 46029]]
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 Customer
Penny Add Volume Tiers, Market Maker, Away Market Maker, and
Professional Penny Take Volume Tiers, and Customer Non-Penny Add Volume
Tiers, effective August 2, 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 16% 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 Program Securities.
---------------------------------------------------------------------------
\3\ See Cboe Global Markets U.S. Options Market Month-to-Date
Volume Summary (July 23, 2021), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------
Additionally, in response to the competitive environment, the
Exchange also offers tiered pricing which provides Members with
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. Among other volume tiers, the
Exchange currently offers Customer Penny Add Volume Tiers, Market
Maker, Away Market Maker, and Professional Penny Take Volume Tiers, and
Customer Non-Penny Add Volume Tiers, to which it proposes to make the
following changes.
Customer Penny Add Volume Tiers
The Exchange currently offers seven Customer Penny Add Volume Tiers
under footnote 1 of the Fee Schedule that provide enhanced rebates
between $0.35 and $0.53 per contract for qualifying Customer orders
(i.e., that yield fee code PY or XY) \4\ where a Member meets certain
liquidity thresholds. The Exchange proposes to update Tier 6, which
currently offers an enhanced rebate of $0.53 per contract for
qualifying orders (i.e., that yield fee code PY or XY) where a Member
has an ADAV \5\ in Customer orders greater than or equal to 1.70% of
average OCV.\6\ Specifically, the proposed rule change updates the
percentage of Customer orders over average OCV from 1.70% to 2.00% and
adds an additional prong of criteria that a Member must achieve in
order to receive the current enhanced rebate. The proposed second prong
of criteria requires a Member, in addition to meeting the existing
criteria (as updated), to reach an ADAV in Customer Non-Penny orders
greater than or equal to 0.50% of average OCV. The proposed rule change
does not alter the existing enhanced rebate amount offered in Tier 6.
---------------------------------------------------------------------------
\4\ Orders yielding fee code PY are Customer orders that add
liquidity in Penny Program Securities and are offered a rebate of
$0.25, and orders yielding fee code XY are Customer orders in XSP
options that add liquidity and are offered a rebate of $0.25.
\5\ ``ADAV'' means average daily added volume calculated as the
number of contracts added. ADAV is calculated on a monthly basis.
\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.
---------------------------------------------------------------------------
The proposed rule change also eliminates Tier 5 \7\ and Tier 7.
Tier 5 currently offers an enhanced rebate of $0.53 per contract for
qualifying orders where a Member has (1) an ADAV in Customer orders
greater than or equal to 0.80% of average OCV, (2) an ADAV in Market
Maker orders greater than or equal to 0.35% of average OCV, and (3) on
BZX Equities an ADAV greater than or equal to 0.30% of average TCV.
Tier 7 currently offers the same enhanced rebate ($0.53) per contract
for qualifying orders where a Member has (1) an ADAV in Customer orders
greater than or equal to 0.50% of average OCV, (2) an ADAV in Market
Maker orders greater than or equal to 2.75% of average OCV, and (3) an
ADAV in Firm Non-Penny orders greater than or equal to 0.05% of average
OCV.
---------------------------------------------------------------------------
\7\ As a result of eliminating Tier 5, the proposed rule change
also amends current Tier 6 to be Tier 5.
---------------------------------------------------------------------------
The Exchange proposes to eliminate Tiers 5 and 7 as no Members are
currently satisfying the criteria under these tiers, nor have recently
satisfied such criteria. The Exchange no longer wishes to, nor is it
required to, maintain such tiers. More specifically, the proposed rule
change removes these tiers as the Exchange would like to provide more
consolidated, streamlined Customer Penny Add Volume Tiers by offering a
single tier that provides an enhanced rebate of $0.53 (current Tier 6/
new Tier 5) and would also rather redirect future resources and funding
into other programs and tiers intended to incentivize increased order
flow. The Exchange believes that the proposed updated criteria in
current Tier 6 (new Tier 5) is designed to provide a different
opportunity for Members to achieve the tier to receive the same
enhanced rebate.
Market Maker, Away Market Maker, and Professional Penny Take Volume
Tiers
The Exchange currently offers three Market Maker, Away Market
Maker, and Professional Take Volume Tiers under footnote 3 of the Fee
Schedule that provide a reduced fee between $0.45 and $0.47 per
contract for qualifying orders (i.e., that yield fee code PP) \8\ where
a Member meets certain liquidity thresholds. The Exchange proposes to
update each of the three Market Maker, Away Market Maker, and
Professional
[[Page 46030]]
Take Volume Tiers. The three tiers currently offer the following:
---------------------------------------------------------------------------
\8\ Orders yielding fee code PP are Market Maker, Away Market
Maker, or Professional orders that remove liquidity in Penny Program
Securities and are assessed a fee of $0.50.
---------------------------------------------------------------------------
Tier 1 currently offers a reduced fee of $0.45 per
contract for qualifying orders (i.e., that yield fee code PP) where a
Member has (1) an ADAV in Customer orders greater than or equal to
0.80% of average OCV, (2) an ADAV in Market Maker orders greater than
or equal to 0.35% of average OCV, (3) on BZX Equities an ADAV greater
than or equal to 1.00% of average TCV, and (4) an ADAV in Customer Non-
Penny orders greater than or equal to 0.10% of average OCV.
Tier 2 currently offers a reduced fee of $0.47 per
contract for qualifying orders where a Member has an ADAV in Customer
orders greater than or equal to 1.30% of average OCV.
Tier 3 currently offers a reduced fee of $0.45 per
contract for qualifying orders where a Member has (1) an ADAV in
Customer orders greater than or equal to 2.00% of average OCV, and (2)
an ADAV in Customer Non-Penny orders greater than or equal to 0.40% of
average OCV.
The proposed rule change updates the three tiers to offer the
following:
As proposed, Tier 1 offers a new reduced fee of $0.49 per
contract for qualifying orders where a Member has (1) an ADAV in
Customer orders greater than or equal to 1.00% of average OCV, and (2)
Member has an ADRV \9\ in Market Maker/Away Market Maker orders greater
than or equal to 1.00% of average OCV. The proposed rule change
eliminates the criteria in current prong 3 and 4.
---------------------------------------------------------------------------
\9\ ``ADRV'' means average daily removed volume calculated as
the number of contracts removed. ADRV is calculated on a monthly
basis.
---------------------------------------------------------------------------
As proposed, Tier 2 offers a new reduced fee of $0.48 per
contract for qualifying orders where a Member achieves the existing
criteria plus proposed additional criteria in new prong two--a Member
also has an ADRV in Market Maker/Away Market Maker orders greater than
or equal to 1.00% of average OCV.
As proposed, Tier 3 offers a new reduced fee of $0.47 per
contract for qualifying orders where a Member achieves the existing
criteria plus proposed additional criteria in new prong three--a Member
also has an ADRV in Market Maker/Away Market Maker orders greater than
or equal to 2.00% of average OCV.
The Exchange believes that the proposed updates to the Market
Maker, Away Market Maker, and Professional Penny Take Volume Tiers will
provide different and additional opportunities for such Members to
achieve the corresponding reduced fees, encouraging these liquidity
providing market participants to increase their overall order flow,
both add (ADAV) and remove (ADRV) volume, to the Exchange. This, in
turn, may facilitate tighter spreads and more price improvement
opportunities, signaling increased activity from other market
participants, and thus may ultimately contribute to deeper and more
liquid markets and a more robust and well-balanced market ecosystem on
the Exchange, to the benefit of all market participants.
Customer Non-Penny Add Volume Tiers
The Exchange currently offers five Customer Non-Penny Add Volume
Tiers \10\ under footnote 12 of the Fee Schedule, which provide
enhanced rebates between $0.92 and $1.06 per contract for qualifying
Customer orders (i.e., that yield fee code NY) \11\ where a Member
meets certain liquidity thresholds. The Exchange proposes to update
Tier 1, Tier 4 and Tier 5. These tiers currently offer the following:
---------------------------------------------------------------------------
\10\ The proposed rule change also makes a nonsubstantive edit
by making ``Customer Non-Penny Add Volume Tier'' plural.
\11\ Orders yielding fee code NY are Customer orders that add
liquidity in Non-Penny Program Securities and are offered a rebate
of $0.85.
---------------------------------------------------------------------------
Tier 1 currently offers an enhanced rebate of $0.92 per
contract for qualifying orders (i.e., that yield fee code NY) where a
Member has (1) ADAV in Customer orders greater than or equal to 0.50%
of average OCV, and (2) an ADAV in Market Maker orders greater than or
equal to 2.75% of average OCV.
Tier 4 currently offers an enhanced rebate of $1.05 per
contract for qualifying orders where a Member has an ADAV in Customer
orders greater than or equal to 2.10% of average OCV.
Tier 5 currently offers an enhanced rebate of $1.06 per
contract for qualifying orders where a Member has (1) an ADAV in
Customer orders greater than or equal to 2.00% of average OCV, and (2)
an ADAV in Customer Non-Penny orders greater than or equal to 1.00% of
average OCV.
The proposed rule change updates Tier 1, Tier 4 and Tier 5 as
follows:
As proposed, Tier 1 offers a new enhanced rebate of $0.90
per contract for qualifying orders where a Member has an ADAV in
Customer Non-Penny orders greater than or equal to 0.25% of average
OCV. The proposed rule change eliminates the second prong of criteria.
As proposed, Tier 4 offers a new enhanced rebate of $1.01
per contract for qualifying orders where a Member has an ADAV in
Customer orders greater than or equal to 0.85% of average OCV plus
proposed additional criteria in new prong two--where a Member also has
an ADAV in Customer Non-Penny orders greater than or equal to 0.25% of
average OCV.
As proposed, Tier 5 offers a new enhanced rebate of $1.02
per contract for qualifying orders where a Member has (1) an ADAV in
Customer orders greater than or equal to 0.90% of average OCV, and (2)
an ADAV in Customer Non-Penny orders greater than or equal to 0.40% of
average OCV.
The proposed rule change also adopts new Tier 2,\12\ new Tier 6,
new Tier 7 and new Tier 8, which, as proposed, offer the following:
---------------------------------------------------------------------------
\12\ As a result of new Tier 2, the proposed rule change also
amends current Tier 2 to be Tier 3.
---------------------------------------------------------------------------
As proposed, Tier 2 offers an enhanced rebate of $0.95 per
contract for qualifying orders where a Member has (1) an ADAV in
Customer orders greater than or equal to 0.50% of average OCV, and (2)
an ADAV in Customer Non-Penny orders greater than or equal to 0.25% of
average OCV.
As proposed, Tier 6 offers an enhanced rebate of $1.03 per
contract for qualifying orders where a Member has (1) has an ADAV in
Customer orders greater than or equal to 1.00% of average OCV, and (2)
an ADAV in Customer Non-Penny orders greater than or equal to 0.45% of
average OCV.
As proposed, Tier 7 offers an enhanced rebate of $1.04 per
contract for qualifying orders where a Member has (1) an ADAV in
Customer orders greater than or equal to 1.30% of average OCV, and (2)
an ADAV in Customer Non-Penny orders greater than or equal to 0.50% of
average OCV.
As proposed, Tier 8 offers an enhanced rebate of $1.05 per
contract for qualifying orders where a Member has (1) an ADAV in
Customer orders greater than or equal to 1.30% of average OCV, and (2)
an ADAV in Customer Non-Penny orders greater than or equal to 0.60% of
average OCV.
Finally, the proposed rule change eliminates Tier 3, which
currently offers an enhanced rebate of $1.02 per contract for
qualifying orders where a Member has (1) an ADAV in Customer orders
greater than or equal to 0.50% of average OCV, (2) an ADAV in Market
Maker orders greater than or equal to 2.75% of average OCV, and (3) an
ADAV in Firm Non-Penny orders greater than or equal to 0.05% of average
OCV.
The proposed updates to and addition of tiers under the Customer
Non-Penny Add Volume Tiers are designed to encourage increased Customer
order
[[Page 46031]]
flow by providing different and additional opportunities to receive an
enhanced rebate. The Exchange believes that an increase in Customer
order flow may attract an additional corresponding increase in order
flow from other market participants, also contributing overall towards
a robust and well-balanced market ecosystem, to the benefit of all
market participants. Also, like the proposed elimination of certain
Customer Penny Add Volume Tiers above, the Exchange proposes to
eliminate Customer Non-Penny Add Volume Tier 3 as no Members are
currently satisfying the criteria under this tier, nor have recently
satisfied such criteria. The Exchange no longer wishes to, nor is it
required to, maintain this tier, and would rather redirect future
resources and funding into other programs and tiers intended to
incentivize increased order flow.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\13\ in general, and
furthers the objectives of Section 6(b)(4),\14\ 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) \15\
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.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f.
\14\ 15 U.S.C. 78f(b)(4).
\15\ 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. The Exchange notes that volume-based incentives and discounts
have been widely adopted by exchanges,\16\ including the Exchange,\17\
and are reasonable, equitable and non-discriminatory because they are
open to all Members on an equal basis and provide additional benefits
or discounts that are reasonably related to (i) the value to an
exchange's market quality and (ii) associated higher levels of market
activity, such as higher levels of liquidity provision and/or growth
patterns. Additionally, as noted above, the Exchange operates in a
highly competitive market. The Exchange is only one of several options
venues to which market participants may direct their order flow, and it
represents a small percentage of the overall market. Competing options
exchanges offer similar tiered pricing structures to that of the
Exchange, including schedules of rebates and fees that apply based upon
Members achieving certain volume and/or growth thresholds.
---------------------------------------------------------------------------
\16\ See, e.g., NYSE Arca Options Fee Schedule, Trade-Related
charges for Standard Options, which similarly provide various ranges
of credits and discounts for volume-based tiers geared toward
different market participants in penny or non-penny classes, such as
Customer Penny Posting Credit Tiers, Firm and Broker-Dealer Penny
Posting Tiers, and Customer Posting Credit Tiers in Non-Penny
Issues; and Cboe EDGX U.S. Options Exchange Fee Schedule, Footnotes,
which provide for similar Customer Volume Tiers and Market Maker
Volume Tiers.
\17\ See generally BZX Options Fee Schedule, Footnotes.
---------------------------------------------------------------------------
Overall, the Exchange believes that the proposed rule changes to
the Customer Penny Add Volume, Market Maker, Away Market Maker, and
Professional Take Volume, and Customer Non-Penny Add Volume Tiers are
reasonable in that they are reasonably designed to incentivize Members
to submit both add (ADAV) and remove (ADRV) order flow to the Exchange,
thereby contributing to a deeper and more liquid market. More
specifically, incentivizing an increase in both liquidity adding volume
and in liquidity removing volume, through additional criteria and
enhanced rebate opportunities, encourages liquidity adding Members on
the Exchange to contribute to a deeper, more liquid market, and to
increase transactions and take execution opportunities provided by such
increased liquidity, together providing for overall enhanced price
discovery and price improvement opportunities on the Exchange.
Additionally, the Exchange believes that it is reasonable and equitable
to incentivize Market Maker (including Away Market Maker), Professional
and Customer order flow, as these market participants provide key
liquidity to the Exchange. For instance, Market Maker (including Away
Market Maker) activity facilitates tighter spreads and signals
additional corresponding increase in order flow from other market
participants. Increased overall order flow benefits all investors by
deepening the Exchange's liquidity pool, potentially providing even
greater execution incentives and opportunities. Professionals generally
provide a greater competitive stream of order flow (by definition, more
than 390 orders in listed options per day on average during a calendar
month), thus, providing increased competitive execution and improved
pricing opportunities for all market participants. Customer order flow
attracts additional liquidity to the Exchange, particularly in Non-
Penny classes, as proposed. Such additional liquidity provides more
trading opportunities and signals an increase in Market-Maker activity,
which facilitates tighter spreads. This may cause an additional
corresponding increase in order flow from other market participants,
contributing overall towards a robust and well-balanced market
ecosystem.
In particular, the Exchange believes that it is reasonable and
equitable to eliminate Customer Penny Add Volume Tiers 5 and 7, as well
as Customer Non-Penny Add Volume Tier 3, because the Exchange is not
required to maintain this tier or provide Members an opportunity to
receive reduced fees or enhanced rebates. As stated, no Members are
currently satisfying the criteria under these tiers, nor have recently
satisfied such criteria. Moreover, the Exchange believes it is
reasonable to provide more consolidated, streamlined Customer Penny Add
Volume Tiers by offering a single tier that provides an enhanced rebate
of $0.53 (current Tier 6/new Tier 5), and believes that the proposed
updated criteria in this single tier (current Tier 6/new Tier 5) is
reasonably designed to provide a different opportunity for Members to
achieve the tier to receive the same enhanced rebate.
Regarding the proposed rule change to the Market Maker, Away Market
Maker, and Professional Penny Take Volume Tiers, the Exchange believes
that it is reasonable and equitable to incrementally increase the
difficulty in meeting the tiers' criteria, by marginally increasing the
volume threshold over average OCV and by adding additional prongs of
criteria, as it is reasonably designed to incentivize Members to submit
additional requisite liquidity to
[[Page 46032]]
meet the updated criteria. The Exchange also believes that the
marginally increased reduced fees, as proposed, offered under each of
the Market Maker, Away Market Maker, and Professional Penny Take Volume
Tiers continue to be a reasonable distribution of reduced fees,
commensurate with the corresponding proposed criteria. The Exchange
notes that it offers similar reduced rates for criteria of comparable
difficulty in other volume-based tier programs. For example, Tier 2 of
the Non-Customer Non-Penny Take Volume Tiers in Footnote 13 of the Fee
Schedule offers a higher reduced fee ($1.07) than the proposed reduced
fees ($0.49, $0.48 and $0.47) where a Member must meet three different
prongs of criteria.
The Exchange also believes that it is reasonable and equitable to
update the Customer Non-Penny Add Volume Tiers to provide different
criteria (which the Exchange does not believe is necessarily more or
less difficult than the existing criteria) and to also provide new
criteria via new tiers because these modifications and additions are
reasonably designed to provide Members with increased supplementary
opportunities to receive corresponding enhanced rebates. The Exchange
also believes that the marginally decreased enhanced rebates, as
proposed, continue to be a reasonable distribution of enhanced rebates,
commensurate with the corresponding proposed criteria, as the Customer
Non-Penny Add Volume Tiers continue to offer a range of enhanced
rebates ($0.90 to $1.05, as proposed) within a comparable range as
offered today ($0.92 to $1.06). The proposed rule change just provides
additional opportunities within the proposed comparable range of
enhanced rebates for Members to meet criteria and receive an enhanced
rebate.
The Exchange believes that the proposed updated and new tiers
represent an equitable allocation of fees and are not unfairly
discriminatory because the Customer Penny Add Volume, Market Maker,
Away Market Maker, and Professional Penny Take Volume, and Customer
Non-Penny Add Volume Tiers Add Penny Tiers, as proposed, will continue
to apply uniformly to all qualifying Members, in that all Members that
submit the requisite order flow per each tier program have the
opportunity to compete for and achieve the proposed tiers. The proposed
changes to and additions of criteria in the Customer Penny Add Volume,
Market Maker, Away Market Maker, and Professional Penny Take Volume,
and Customer Non-Penny Add Volume Tiers are designed as an incentive to
any and all Members interested in meeting modified and new tier
criteria to submit additional, requisite order flow directly to the
Exchange's Book. Without having a view of activity on other markets and
off-exchange venues, the Exchange has no way of knowing whether this
proposed rule change will definitely result in any Members qualifying
for the proposed tiers. While the Exchange has no way of predicting
with certainty how the proposed tiers will impact Member activity, the
Exchange anticipates that: Between five and six Members will be able to
compete for and potentially achieve the proposed criteria in Customer
Penny Add Volume Tier 5 (current Tier 6); at least two Members will be
able to compete for and potentially achieve the proposed criteria in
each of the updated Market Maker, Away Market Maker, and Professional
Penny Take [sic] Tiers 1, 2 and 3; and at least four Members will be
able to compete for and potentially achieve the proposed criteria in
across the updated Customer Non-Penny Add Volume Tiers 1, 4 and 5, and
new Tiers 6, 7 and 8. The Exchange also notes that the proposed tiers
will not adversely impact any Member's pricing or their ability to
qualify for other rebate tiers. Rather, should a Member not meet the
proposed criteria for a tier, the Member will merely not receive the
corresponding enhanced rebate or reduced fee, as applicable. Finally,
the Exchange believes the proposal to eliminate certain tiers is
equitable and not unfairly discriminatory because it applies to all
Members, in that, such tiers will not be available for any Member.
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.'' \18\
---------------------------------------------------------------------------
\18\ 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
tiers apply to all Members equally, in that, all Members that submit
the requisite order flow per each tier program are eligible to achieve
the tiers' proposed criteria, have a reasonable opportunity to meet the
tiers' proposed criteria and will all receive the corresponding reduced
fees or enhanced rebates (as existing and proposed) if such criteria is
met. Overall, the proposed rule change is designed to attract
additional overall Customer and liquidity provider order flow to the
Exchange, which, as described above, brings different, yet key,
liquidity and trading activity to the Exchange, resulting in overall
tighter spreads, more execution opportunities at improved prices, and/
or deeper levels of liquidity, which ultimately improves price
transparency, provides continuous trading opportunities and enhances
market quality on the Exchange, and generally continues to encourage
Members to send orders to the Exchange, thereby contributing towards a
robust and well-balanced market ecosystem to the benefit of all market
participants.
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 16% of the market
share.\19\ Therefore, no exchange possesses significant pricing power
in the execution of option order flow. Indeed, participants can readily
choose to send their orders to other exchange and off-exchange venues
if they deem fee levels at those other venues to be more favorable.
Moreover, the Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the
[[Page 46033]]
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.'' \20\ 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'. . . .''.\21\ 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.
---------------------------------------------------------------------------
\19\ See supra note 3.
\20\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\21\ 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)).
---------------------------------------------------------------------------
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 \22\ and paragraph (f) of Rule 19b-4 \23\
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.
---------------------------------------------------------------------------
\22\ 15 U.S.C. 78s(b)(3)(A).
\23\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------
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-2021-055 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-2021-055. 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-2021-055 and should be submitted
on or before September 7, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
---------------------------------------------------------------------------
\24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-17538 Filed 8-16-21; 8:45 am]
BILLING CODE 8011-01-P
