Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fees Applicable to Various Market Data Products, 3599-3604 [2022-01227]
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Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices
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–CboeEDGA–2022–001 and
should be submitted on or before
February 14, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–01226 Filed 1–21–22; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–93996; File No. SR–
CboeBYX–2022–001]
Self-Regulatory Organizations; Cboe
BYX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend the
Fees Applicable to Various Market
Data Products
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January 18, 2022.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January 4,
2022, Cboe BYX Exchange, Inc.
(‘‘Exchange’’ or ‘‘BYX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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
SECURITIES AND EXCHANGE
COMMISSION
14 17
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BYX Exchange, Inc. (‘‘BYX’’ or
the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(the ‘‘Commission’’) a proposed rule
change to amend the fees applicable to
various market data products. The text
of the proposed rule change is provided
in Exhibit 5.
The text of the proposed rule change
is also available on the Exchange’s
website (https://markets.cboe.com/us/
equities/regulation/rule_filings/byx/), at
the Exchange’s Office of the Secretary,
and at the Commission’s Public
Reference Room.
1. Purpose
The Exchange proposes to amend the
Market Data section applicable to its
equities trading platform (‘‘BYX
Equities’’). Particularly, the Exchange
proposes to (i) decrease the External
Distribution fee applicable to BYX Top,
(ii) adopt a New External Distributor
Credit applicable to Cboe One Premium,
and (iii) extend the New External
Distributor Credit applicable to BYX
Summary Depth Feed from one (1)
month to three (3) months.
Market Background
The Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets. 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
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3599
investors and listed companies.’’ 3 As
the Commission itself recognized, the
market for trading services in NMS
stocks has become ‘‘more fragmented
and competitive.’’ 4
Equity trading is currently dispersed
across sixteen exchanges, more than 50
alternative trading systems,5 and
numerous broker-dealer internalizers
and wholesalers, all competing fiercely
for order flow. Based on publiclyavailable information, no single U.S.
equities exchange has more than 17%
market share.6 In turn, the market for
top-of-book quotation and transaction
data is highly competitive as national
securities exchanges compete vigorously
with each other to provide efficient,
reliable, and low-cost data to a wide
range of investors and market
participants. In fact, there are twelve
competing products offered by other
national securities exchanges today,7
not counting products offered by the
Exchange’s affiliates, and each of the
Exchange’s affiliated U.S. equities
exchanges also offers similar top-ofbook data. Each of those exchanges offer
top-of-book quotation and last sale
information based on their own
quotation and trading activity that is
substantially similar to the information
provided by the Exchange through the
BYX Top Feed.8 Exchange top-of-book
3 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37495, 37499 (June 29, 2005)
(S7–10–04) (Final Rule) (‘‘Regulation NMS
Adopting Release’’).
4 See Securities Exchange Act Release No. 84875,
84 FR 5202, 5253 (February 20, 2019) (File No. S7–
05–18) (Transaction Fee Pilot for NMS Stocks Final
Rule) (‘‘Transaction Fee Pilot’’).
5 See FINRA ATS Transparency Data, available at
https://otctransparency.finra.org/otctransparency/
AtsData. A list of alternative trading systems
registered with the Commission is available at
https://www.sec.gov/foia/docs/atslist.htm.
6 See Cboe Global Markets, U.S. Equities Market
Volume Summary, Month-to-Date (December 10,
2021) available at https://markets.cboe.com/us/
equities/market_share/.
7 Competing top-of-book products include,
Nasdaq Basic, BX Basic, PSX Basic, NYSE BQT,
NYSE BBO/Trades, NYSE Arca BQT, NYSE Arca
BBO/Trades, NYSE American BBO/Trades, NYSE
Chicago BBO/Trades, IEX TOPS, MIAX PEARL
Equities Top of Market Feed, and MEMX MEMOIR
Top.
8 For example, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’) offers ‘‘Nasdaq Basic’’ which is a realtime market data product that offers best bid and
offer and last sale information for all U.S. exchangelisted securities based on liquidity within the
Nasdaq market center and trades reported to the
FINRA/Nasdaq Trade Reporting Facility (‘‘Nasdaq
TRF’’). See Nasdaq Equity Rules, Equity 7, Pricing
Schedule, Section 147(a). The type of information
contained on the BYX Top Feed is substantially
similar to that offered through Nasdaq Basic, except
that the Exchange disseminates information about
quotes and trades on BYX, whereas Nasdaq Basic
provides information about quotes and trades on
Nasdaq and the Nasdaq TRF. Other national
securities with competing top-of-book products also
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Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices
Credit applicable to BYX Summary
Depth Feed from one (1) month to three
(3) months. By way of background, Cboe
Fees for External Distribution of BYX
One Premium is a data feed that
Top
disseminates, on a real-time basis, the
The Exchange first proposes to
aggregate best bid and offer (‘‘BBO’’) of
decrease the external distribution fee
all displayed orders for securities traded
applicable to BYX Top,9 which is an
on BYX and its affiliated exchanges (i.e.,
uncompressed data feed that offers topEDGX, Cboe EDGA Exchange, Inc.
of-book quotations and execution
(‘‘EDGA’’), and Cboe BZX Exchange,
information based on equity orders
Inc. (‘‘BZX’’)) and contains optional
entered into the System.10 Currently, the functionality which enables recipients
Exchange charges an external
to receive aggregated two-sided
distribution fee (i.e., distribution
quotations from BYX and its affiliated
outside the distributor’s own firm) of
equities exchanges for up to five (5)
$1,000 per month to External
price levels.15 Currently, the Exchange
Distributors 11 of BYX Top. The
charges an external distribution fee of
Exchange also charges a professional
$12,500 per month to External
user fee of $1.00 per month, a nonDistributors of Cboe One Premium. The
Exchange now proposes to adopt a New
professional user fee of $0.025 per
External Distributor Credit which
month, an enterprise fee of $10,000 per
provide that new External Distributors
month, and a digital media enterprise
of the Cboe One Premium Feed will not
fee of $2,500 per month that is
be charged an External Distributor Fee
applicable to External Distributors. The
for their first three (3) months in order
external distribution fees have been in
to allow them to enlist new Users to
place, without change, since June 1,
receive the Cboe One Summary[sic]
2016.12 Nonetheless, the Exchange
proposes to decrease the monthly charge Feed. The Exchange believes the
proposal will incentivize External
for external distribution of BYX Top
Distributors to enlist new users to
from $1,000 to $250 per month (i.e., a
receive Cboe One Premium. To ensure
decrease of $750 per month),13 which
consistency across the Cboe Equity
would continue to be cheaper than
Exchanges, BZX, EDGX, and EDGA will
similar products offered by certain of
be filing companion proposals to reflect
the Exchange’s competitors.14 The
this proposal in their respective fee
Exchange proposes no changes to the
schedules.
professional, non-professional,
The Exchange notes that it offers
enterprise and digital media enterprise
similar credits for other market data
fees associated with external
products. For example, the Exchange
distribution.
currently offers a one (1) month New
Cboe One Premium and BYX Top Depth External Distributor Credit applicable to
New External Distributor Credit
Cboe One Summary,16 which is a data
feed that disseminates, on a real-time
The Exchange next proposes to adopt
basis, the aggregate BBO of all displayed
a New External Distributor Credit
orders for securities traded on BYX and
applicable to Cboe One Premium and
its affiliated equities exchanges and also
extend the New External Distributor
contains individual last sale information
for the BYX and its affiliated equities
offer substantially similar types of information
through those top-of-book products.
exchanges.17 It also offers a New
9 See Exchange Rule 11.22(d).
External Distributor Credit of one (1)
data is therefore widely available today
from a number of different sources.
10 See
Exchange Rule 1.5(aa).
External Distributor of an Exchange Market
Data product is a Distributor that receives the
Exchange Market Data product and then distributes
that data to a third party or one or more Users
outside the Distributor’s own entity.
12 See Securities Exchange Act Release No. 77886
(May 23, 2016) 81 FR 33722 (May 27, 2016) (SR–
BatsBYX–2016–08).
13 The Exchange notes that the fee for Cboe One
Summary is equivalent to the aggregate BYX Top,
BZX, Top, EDGX Top, and EDGA Top fees. The
Exchange is not proposing to change the current
Cboe One Summary external distribution fee.
Instead, the Cboe EDGX Exchange, Inc. (‘‘EDGX’’)
has simultaneously with this proposal proposed to
increase its fee for EDGX Top by $750 in order to
ensure the proposed fee will continue to not cause
the combined cost of subscribing to BYX, EDGA,
EDGX, and BZX individual Top and Last Sale feeds
to be greater than those currently charged to
subscribe to the Cboe One Summary fee.
14 See infra notes 28, 29, 31, and 32.
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15 The Cboe Aggregated Market (‘‘Cboe One’’)
Feed is a data feed that contains the aggregate best
bid and offer of all displayed orders for securities
traded on the Exchange and its affiliated exchanges
(i.e., EDGX, EDGA, and BZX). See Exchange Rule
11.22(i). The Cboe One Feed contains optional
functionality which enables recipients to receive
aggregated two-sided quotations from the Cboe
Equities Exchanges for up to five (5) price levels
(‘‘Cboe One Premium Feed’’). The Cboe One
Premium external distribution fee is equal to the
aggregate BYX Summary Depth, BYX Summary
Depth, EDGA Summary Depth, and BZX Summary
Depth external distribution fees.
16 See Exchange Rule 11.22(i).
17 The Exchange notes that when it first adopted
the New External Distributor Credit for Cboe One
Summary, it similarly applied for a new External
Distributor’s first three (3) months. See Securities
Exchange Act Release No. 74284 (February 18,
2015), 80 FR 9792 (February 24, 2015) (SR–BYX–
2015–09).
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month for subscribers of BYX Summary
Depth, which is a data feed that offers
aggregated two-sided quotations for all
displayed orders entered into the
System for up to five (5) price levels.
BYX Summary Depth also contains the
individual last sale information, Market
Status, Trading Status, and Trade Break
messages.18 The External Distribution
fees for Cboe One Premium is
equivalent to the aggregate BYX
Summary Depth, BZX Summary Depth,
EDGX Summary Depth, and EDGA
Summary Depth External Distribution
fees. In order to alleviate any
competitive issues that may arise with
a vendor seeking to offer a product
similar to the Cboe One Premium Feed
based on the underlying data feeds, the
Exchange proposes to also extend the
current New External Distributor Credit
for BYX Summary Depth from one (1)
month to three (3) months and the
Exchange’s affiliates EDGX, BZX and
EDGA are also submitting similar
proposals to increase the length of their
respective Summary Depth New
External Distributor Credits from one (1)
month to three (3) months. The
respective proposals to extend these
credits to three months ensures the
proposed New External Distributor
Credit for Cboe One Premium will
continue to not cause the combined cost
of subscribing to BYX, EDGA, EDGX,
and BZX Summary Depth feeds for new
External Distributors to be greater than
those currently charged to subscribe to
the Cboe One Premium feed.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,19
in general, and furthers the objectives of
Section 6(b)(4),20 in particular, as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its members and
other recipients of Exchange data. In
addition, the Exchange believes that the
proposed rule change is consistent with
Section 11(A) of the Act as it supports
(i) fair competition among brokers and
dealers, among exchange markets, and
between exchange markets and markets
other than exchange markets, and (ii)
the availability to brokers, dealers, and
investors of information with respect to
quotations for and transactions in
securities.21 Finally, the proposed rule
change is also consistent with Rule 603
of Regulation NMS,22 which provides
18 See
Exchange Rule 11.22(k)
U.S.C. 78f.
20 15 U.S.C. 78f(b)(4).
21 15 U.S.C. 78k–1.
22 See 17 CFR 242.603.
19 15
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Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices
that any national securities exchange
that distributes information with respect
to quotations for or transactions in an
NMS stock do so on terms that are not
unreasonably discriminatory.
The Exchange operates in a highly
competitive environment. Indeed, there
are now sixteen registered U.S equities
exchanges, and with the exception of
Long-Term Stock Exchange, Inc.
(‘‘LTSE’’), which has determined to not
offer any proprietary market data feeds,
each of these exchanges offer associated
market data products to their customers,
either with or without a fee. It is in this
robust and competitive market in which
the Exchange is proposing to increase its
fees, while still providing its data at a
significantly lower price than competing
products offered by other national
securities exchanges with similar data
quality.
The Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets.
Further, with respect to market data, the
decision of the United States Court of
Appeals for the District of Columbia
Circuit in NetCoalition v. SEC upheld
the Commission’s reliance on the
existence of competitive market
mechanisms to evaluate the
reasonableness and fairness of fees for
proprietary market data: ‘‘In fact, the
legislative history indicates that the
Congress intended that the market
system ‘evolve through the interplay of
competitive forces as unnecessary
regulatory restrictions are removed’ and
that the SEC wield its regulatory power
‘in those situations where competition
may not be sufficient,’ such as in the
creation of a ‘consolidated transactional
reporting system.’ ’’ 23 The court agreed
with the Commission’s conclusion that
‘‘Congress intended that ‘competitive
forces should dictate the services and
practices that constitute the U.S.
national market system for trading
equity securities.’ ’’ 24 As discussed in
this filing, significant competitive forces
constrain the ability of the Exchange to
charge supra-competitive fees.
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BYX Top
i. The BYX Top Feed Is an Optional
Market Data Product, and the Exchange
Is Constrained in its Pricing by
Significant Competitive Forces
Subscribing to BYX Top is entirely
optional. The Exchange is not required
23 NetCoalition v. SEC, 615 F.3d 525, 535 (D.C.
Cir. 2010) (‘‘NetCoalition I’’) (quoting H.R. Rep. No.
94–229 at 92 (1975), as reprinted in 1975
U.S.C.C.A.N. 323).
24 Id. at 535.
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to make BYX Top available to any
customers, nor is any customer required
to purchase BYX Top.25 A customer’s
decision as to whether to purchase BYX
Top is therefore entirely discretionary
and is based on that firms individual
business needs. Generally, firms that
choose to subscribe to BYX Top do so
because they believe that it is a costeffective source for top-of-book data that
provides valuable information about the
market for national market system
(‘‘NMS’’) stocks traded on the Exchange,
where a consolidated display covering
all U.S. equities exchanges is not
required. Such firms are able to
determine for themselves whether BYX
Top helps them to achieve their
business goals, and if so, whether or not
it is attractively priced compared to
other similar top-of-book products
offered by competing exchanges.
Indeed, if BYX Top does not provide
sufficient value to firms based on the
uses those firms may have for it, such
firms may simply choose to conduct
their business operations in ways that
do not use BYX Top. And, as discussed
later in this filing, any External
Distributor of top-of-book data that does
not wish to purchase BYX Top, due to
the price of that data or for any other
reason, can choose to substitute similar
information from other exchanges.
Although the Exchange is not required
to make any data, including top-of-book
data, available through its proprietary
market data platform, the Exchange
believes that making such data available
increases investor choice, and
contributes to a fair and competitive
market. Specifically, making such data
publicly available through proprietary
data feeds allows investors to choose
alternative, potentially less costly,
market data based on their business
needs. For example, a broker or fintech
firm may choose to purchase BYX Top,
or a similar product from another
exchange, in order to perform
investment analysis, or to provide
general information about the market for
U.S. equity securities, respectively. In
either case the choice to purchase BYX
Top would be based on the firm’s
determination of the value of the data
offered by their chosen product
compared to the cost of acquiring this
25 The Exchange notes that broker-dealers are not
required to purchase proprietary market data to
comply with their best execution obligations. See In
the Matter of the Application of Securities Industry
and Financial Markets Association for Review of
Actions Taken by Self-Regulatory Organizations,
Release Nos. 34- 72182; AP–3–15350; AP–3–15351
(May16, 2014). Similarly, there is no requirement in
Regulation NMS or any other rule that proprietary
data be utilized for order routing decisions, and
some broker-dealers and ATSs have chosen not to
do so.
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data instead of receiving similar data
from other sources. BYX Top serves as
a valuable reference for investors that do
not require a consolidated display.
Making alternative products available to
market participants ultimately ensures
competition in the marketplace, and
constrains the ability of exchanges to
charge supra-competitive fees. Further,
in the event that a market data customer
views one exchange’s top-of-book data
product and/or fees as more or less
attractive than a competitor’s offerings
they can and often do switch between
competing products. As discussed,
similar top-of-book information is
available from a number of competing
U.S. equities exchanges.26 This includes
a number of large established exchanges
that charge for access to such top-ofbook data, as well as certain smaller or
new exchange entrants that provide
similar data without charge, in many
cases as a way of attracting customers to
their exchange while they seek to grow
market share. In this way, BYX Top and
other top-of-book products offered by a
number of U.S. equities exchanges, are
all substitutes. The availability of these
substitute products constrains the
Exchange’s ability to charge supracompetitive prices as market
participants can easily obtain similar
data from one of the Exchange’s many
competitors. In fact, the impact of
competition on the market in which
BYX Top is offered to market
participants and investors is showcased
by Exchange affiliates’ other recent fee
changes related to this product, which
involved the reduction of fees to
facilitate the Exchange affiliates’ ability
to compete for customers.
Distributors can discontinue use of
BYX Top at any time and for any reason,
including due to an assessment of the
reasonableness of fees charged. Other
External Distributors are free to
similarly cancel their subscriptions in
favor of a competitor offering, or
cheaper or free data offered by the
Exchange’s affiliated U.S. equities
exchanges, if they believe that the fees
are too high given their particular use
case for obtaining the data that the
Exchange provides over BYX Top. The
Exchange offers all of its proprietary
market data products pursuant to a
month-to-month contract that allows
subscribers to choose to terminate their
subscription at any time. As a result,
there are no contractual or other legal
26 Although the Exchange does not have access to
the customer lists for other competing products, it
understands based on conversations with
subscribers to BYX Top that they typically view
exchange top-of-book products as substitutes and
do not generally look to purchase such data from
more than one national securities exchange.
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Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices
impediments for firms that wish to
cancel their subscription to the
Exchange’s market data products,
including BYX Top. In addition, the
Exchange notes that a majority of
External Distributors of BYX Top either
receive this data through a market data
vendor, as opposed to directly from the
Exchange, or is a market data vendor
itself. Thus, firms can seamlessly switch
to any other competitor product offered
by their chosen vendor without
incurring additional switching costs,
such as the cost of establishing
connectivity to another exchange to
receive its market data.27
In setting the proposed fees for BYX
Top, the Exchange considered the
competitiveness of the market for
proprietary data and all of the
implications of that competition.
Indeed, the Exchange is not in a
position to charge unreasonable fees for
its top-of-book data as there are a
number of competing products in the
market, including products that are
currently offered free of charge by
certain other exchanges that have
determined not to charge for their
market data. The existence of
alternatives to BYX Top ensures that the
Exchange cannot set unreasonable fees
when vendors and subscribers can
freely elect these alternatives or choose
not to purchase a specific proprietary
data product if the attendant fees are not
justified by the returns that any
particular vendor or data recipient
would achieve through the purchase.
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ii. The Proposed Fees Are Reasonable
Given the Value of the Data Provided to
Customers, and When Compared to
Competing Market Data Products
The proposed fees are also reasonable
they would represent a decreased fee for
top-of-book data that has proven
valuable for investors. BYX Top is a
competitively-priced alternative to topof-book data disseminated by other
national securities exchanges. It is
purchased by a wide variety of market
participants and vendors, including data
platforms, websites, fintech firms, buyside investors, retail brokers, regional
banks, and securities firms inside and
outside of the U.S. that desire low cost,
high quality, real-time U.S. equity
market data. By providing lower cost
access to U.S. equity market data, BYX
Top benefits a wide range of investors
that participate in the national market
system. As discussed, the decision to
purchase a particular market data
27 Market
data vendors typically establish
connectivity to a number of national securities
exchanges to be able to offer their market data to
customers.
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product from a particular exchange is
largely based on two factors: (1) The
quality of the data, and (2) the price
charged for access to that data. The
Exchange believes that BYX Top is
competitive on both of these factors.
First, BYX Top would remain
competitively priced compared to
similar products offered by other
comparable U.S. equities exchanges.
Although BYX Top is not offered free of
charge like certain other competitor
offerings, particularly those offered by
newer U.S. equities exchanges that are
seeking to grow market share, it is made
available at a price that is less than the
prices charged by the Exchange’s main
competitors—i.e., those with
comparable market shares and data
quality. Notably, BYX Top would
remain significantly cheaper than
similar products offered by New York
Stock Exchange LLC (‘‘NYSE’’), NYSE
Arca, Inc. (‘‘Arca’’) and Nasdaq in terms
of the fees charged for external
distribution. For example, NYSE
charges a total of $4,000 per month for
access and redistribution of their
equivalent products, i.e., $1,500 per
month for applicable top-of-book
quotation information,28 and an
additional $1,500 per month for
transaction information,29 both of which
are included in BYX Top for a single
fee.30 In addition, a $1,000 per month
redistribution fee is applied. Arca,
which has a similar pricing model to
NYSE, charges a rate of $2,250 per
month for access and redistribution of
its equivalent products, separated into a
$750 per month charge for top-of-book
quotation information, an additional
$750 per month charge for transaction
information, and $750 per month for
redistribution.31 Finally, Nasdaq
charges its External Distributors a fee of
$2,000 per month for Nasdaq Basic,
which includes both top-of-book
quotation information and transaction
information for the same fee, a $350 per
month Data Consolidation fee, and a
$100 per month Monthly
Administrative Fee.32 The external
distribution charges associated with
obtaining comparable U.S. equities
market data from NYSE, Arca and
Nasdaq runs significantly more than the
28 See NYSE PDP Market Data Pricing, Section
1.3, NYSE BBO.
29 See NYSE PDP Market Data Pricing, Section
1.4, NYSE Trades.
30 Supra note 3.
31 See NYSE PDP Market Data Pricing, Section
3.3, NYSE Arca BBO; NYSE PDP Market Data
Pricing, Section 3.4, NYSE Arca Trades.
32 See Nasdaq Equity Rules, Equity 7, Pricing
Schedule, Section 147(c)(1). In addition, Nasdaq
also charges distributors a $100 monthly
administrative fee. See Nasdaq Equity Rules, Equity
7, Pricing Schedule, Section 135.
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
proposed fee to be charged by the
Exchange, meaning that the Exchange
would continue to be offering its data at
a price that is attractive compared to the
prices charged by its competitors.
iii. The Proposed Fees Are Equitable
and Not Unfairly Discriminatory as
External Distributors Will Be Subject to
Uniform Pricing Based on Their Usage
of the Data and Differences Between the
Fees Charged for Internal and External
Distribution Are Appropriate
The Exchange believes the proposed
fees for external distribution of BYX
Top will continue to be allocated fairly
and equitably among subscribers, and
are not unfairly discriminatory, as the
proposed fees will apply equally to all
data recipients that choose to subscribe
to BYX Top and distribute that data to
external subscribers. As proposed, all
External Distributors of BYX Top will
continue to be subject to the same
external distribution fee, regardless of
the type of business that they operate,
or the use they plan to make of the data
feed. Thus, all External Distributors
would have access to BYX Top on the
same equitable and non-discriminatory
terms.
The Exchange believes that it is also
fair and equitable, and not unfairly
discriminatory to charge different fees
for internal and external distribution of
the BYX Top. As the proposed
distribution fee charged to External
Distributors is higher[sic] than the
existing distribution fee charged to
Internal Distributors,33 the proposal is
designed to incentivize External
Distributors to subscribe to BYX Top.
Nonetheless, External Distributors are
subject to professional user fees, nonprofessional user fees, an enterprise fee,
and a digital media enterprise fee to
which Internal Distributors are not
subject.
New External Distributor Fee Credit
The Exchange also believes that
adopting a New External Distributor
Credit for Cboe One Premium is
equitable and reasonable. As discussed
above, a similar New External
Distributor Fee Credit was initially
adopted at the time the Exchange began
to offer the Cboe One Summary to
subscribers. It was intended to
incentivize new Distributors to enlist
Users to subscribe to Cboe One
Summary in an effort to broaden the
product’s distribution. Now the
Exchange proposes to adopt a similar
33 An Internal Distributor of an Exchange Market
Data product is a Distributor that receives the
Exchange Market Data product and then distributes
that data to one or more Users within the
Distributor’s own entity.
E:\FR\FM\24JAN1.SGM
24JAN1
Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices
credit for Cboe One Premium
subscribers for their first three (3)
months to similarly incentivize new
Distributors to enlist Users to subscribe
to Cboe One Premium in an effort to
broaden the product’s distribution.
While this incentive is not available to
Internal Distributors of Cboe One
Premium, the Exchange believes it is
appropriate as Internal Distributors have
no subscribers outside of their own firm.
The Exchange believes extending the
New External Distributor Credit for BYX
Summary Depth from one (1) month to
three (3) months is also equitable and
reasonable, as it (along with
simultaneous corresponding proposals
by the Exchange’s affiliates) ensures the
proposed New External Distributor
Credit for Cboe One Premium will
continue to not cause the combined cost
of subscribing to BYX, EDGA, EDGX,
and BZX Summary Depth feeds for new
External Distributors to be greater than
those currently charged to subscribe to
the Cboe One Premium feed.
jspears on DSK121TN23PROD with NOTICES1
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change would result
in any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The
Exchange operates in a highly
competitive environment, and its ability
to price these data products is
constrained by competition among
exchanges that offer similar data
products to their customers. Top-ofbook data and depth-of-book data is
broadly disseminated by competing U.S.
equities exchanges. There are therefore
a number of alternative products
available to market participants and
investors, including products offered by
certain competing exchanges without
charge. In this competitive environment
potential subscribers are free to choose
which competing product to purchase to
satisfy their need for market
information. Often, the choice comes
down to price, as market data customers
look to purchase cheaper data products,
and quality, as market participants seek
to purchase data that represents
significant market liquidity.
Intramarket Competition. The
Exchange believes that the proposed
fees do not put any market participants
at a relative disadvantage compared to
other market participants. As discussed,
the proposed fees and credit would
apply to all External Distributors of BYX
Top and Cboe One Premium,
respectively, on an equal and nondiscriminatory basis. The difference in
fees for internal and external
VerDate Sep<11>2014
19:36 Jan 21, 2022
Jkt 256001
3603
distribution of BYX Top are reasonably
designed to incentivize External
Distributors to subscribe to BYX To.
Further, the credit applicable to only
External Distributors is appropriate as it
incentivizes such External Distributors
to enlist subscribers, whereas Internal
Distributors have no subscribers outside
their firm. The Exchange therefore
believes that the proposed fees neither
favor nor penalize one or more
categories of market participants in a
manner that would impose an undue
burden on competition.
IV. Solicitation of Comments
Intermarket Competition. The
Exchange believes that the proposed
fees do not impose a burden on
competition or on other SROs that is not
necessary or appropriate in furtherance
of the purposes of the Act. In setting the
proposed fees, the Exchange is
constrained by the availability of
numerous substitute products offered by
other national securities exchanges.
Because market data customers can find
suitable substitute feeds, an exchange
that overprices its market data products
stands a high risk that users may
substitute another product. These
competitive pressures ensure that no
one exchange’s market data fees can
impose an undue burden on
competition, and the Exchange’s
proposed fees do not do so here.
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBYX–2022–001 on the subject line.
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 34 and paragraph (f) of Rule
19b–4 35 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.
34 15
35 17
PO 00000
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
Frm 00109
Fmt 4703
Sfmt 4703
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
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–CboeBYX–2022–001. 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–CboeBYX–2022–001 and
should be submitted on or before
February 14, 2022.
E:\FR\FM\24JAN1.SGM
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3604
Federal Register / Vol. 87, No. 15 / Monday, January 24, 2022 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.36
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022–01227 Filed 1–21–22; 8:45 am]
BILLING CODE 8011–01–P
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–93997; File No. SR–
CboeEDGX–2022–002]
Self-Regulatory Organizations; Cboe
EDGX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend the
Fees Applicable to Various Market
Data Products
January 18, 2022.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on January 4,
2022, Cboe EDGX Exchange, Inc.
(‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
jspears on DSK121TN23PROD with NOTICES1
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGX Exchange, Inc. (‘‘EDGX’’
or the ‘‘Exchange’’) is filing with the
Securities and Exchange Commission
(the ‘‘Commission’’) a proposed rule
change to amend the fees applicable to
various market data products. 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/
options/regulation/rule_filings/edgx/),
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
36 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
19:36 Jan 21, 2022
Jkt 256001
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.
1. Purpose
The Exchange proposes to amend the
Market Data section applicable to its
equities trading platform (‘‘EDGX
Equities’’). Particularly, the Exchange
proposes to (i) increase the External
Distribution fee applicable to EDGX
Top, (ii) modify the External Subscriber
fees applicable to EDGX Top Derived
Data API Service, (iii) adopt a New
External Distributor Credit applicable to
Cboe One Premium, (iv) extend the New
External Distributor Credit applicable to
EDGX Summary Depth Feed from one
(1) month to three (3) months, and (v)
eliminate the waiver of EDGX Top and
EDGX Last Sale External Distribution
fees for External Distributors of EDGX
Depth.
Market Background
The Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets. 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.’’ 3 As
the Commission itself recognized, the
market for trading services in NMS
stocks has become ‘‘more fragmented
and competitive.’’ 4
Equity trading is currently dispersed
across sixteen exchanges, more than 50
alternative trading systems,5 and
numerous broker-dealer internalizers
and wholesalers, all competing fiercely
for order flow. Based on publiclyavailable information, no single U.S.
equities exchange has more than 17%
3 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37495, 37499 (June 29, 2005)
(S7–10–04) (Final Rule) (‘‘Regulation NMS
Adopting Release’’).
4 See Securities Exchange Act Release No. 84875,
84 FR 5202, 5253 (February 20, 2019) (File No. S7–
05–18) (Transaction Fee Pilot for NMS Stocks Final
Rule) (‘‘Transaction Fee Pilot’’).
5 See FINRA ATS Transparency Data, available at
https://otctransparency.finra.org/otctransparency/
AtsData. A list of alternative trading systems
registered with the Commission is available at
https://www.sec.gov/foia/docs/atslist.htm.
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
market share.6 In turn, the market for
top-of-book quotation and transaction
data is highly competitive as national
securities exchanges compete vigorously
with each other to provide efficient,
reliable, and low-cost data to a wide
range of investors and market
participants. In fact, there are twelve
competing products offered by other
national securities exchanges today,7
not counting products offered by the
Exchange’s affiliates, and each of the
Exchange’s affiliated U.S. equities
exchanges also offers similar top-ofbook data. Each of those exchanges offer
top-of-book quotation and last sale
information based on their own
quotation and trading activity that is
substantially similar to the information
provided by the Exchange through the
EDGX Top Feed.8 Exchange top-of-book
data is therefore widely available today
from a number of different sources.
Fees for External Distribution of EDGX
Top
The Exchange first proposes to
increase the external distribution fee
applicable to EDGX Top,9 which is an
uncompressed data feed that offers topof-book quotations and execution
information based on equity orders
entered into the System.10 Currently, the
Exchange charges an external
distribution fee (i.e., distribution
outside the distributor’s own firm) of
$1,500 per month to External
Distributors 11 of EDGX Top. The
6 See Cboe Global Markets, U.S. Equities Market
Volume Summary, Month-to-Date (December 10,
2021) available at https://markets.cboe.com/us/
equities/market_share/.
7 Competing top-of-book products include,
Nasdaq Basic, BX Basic, PSX Basic, NYSE BQT,
NYSE BBO/Trades, NYSE Arca BQT, NYSE Arca
BBO/Trades, NYSE American BBO/Trades, NYSE
Chicago BBO/Trades, IEX TOPS, MIAX PEARL
Equities Top of Market Feed, and MEMX MEMOIR
Top.
8 For example, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’) offers ‘‘Nasdaq Basic’’ which is a realtime market data product that offers best bid and
offer and last sale information for all U.S. exchangelisted securities based on liquidity within the
Nasdaq market center and trades reported to the
FINRA/Nasdaq Trade Reporting Facility (‘‘Nasdaq
TRF’’). See Nasdaq Equity Rules, Equity 7, Pricing
Schedule, Section 147(a). The type of information
contained on the EDGX Top Feed is substantially
similar to that offered through Nasdaq Basic, except
that the Exchange disseminates information about
quotes and trades on EDGX, whereas Nasdaq Basic
provides information about quotes and trades on
Nasdaq and the Nasdaq TRF. Other national
securities with competing top-of-book products also
offer substantially similar types of information
through those top-of-book products.
9 See Exchange Rule 13.8(c).
10 See Exchange Rule 1.5(cc).
11 An External Distributor of an Exchange Market
Data product is a Distributor that receives the
Exchange Market Data product and then distributes
that data to a third party or one or more Users
outside the Distributor’s own entity.
E:\FR\FM\24JAN1.SGM
24JAN1
]]>Agencies
[Federal Register Volume 87, Number 15 (Monday, January 24, 2022)]
[Notices]
[Pages 3599-3604]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-01227]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93996; File No. SR-CboeBYX-2022-001]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Fees Applicable to Various Market Data Products
January 18, 2022.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on January 4, 2022, Cboe BYX Exchange, Inc. (``Exchange'' or
``BYX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\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 BYX Exchange, Inc. (``BYX'' or the ``Exchange'') is filing
with the Securities and Exchange Commission (the ``Commission'') a
proposed rule change to amend the fees applicable to various market
data products. The text of the proposed rule change is provided in
Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (https://markets.cboe.com/us/equities/regulation/rule_filings/byx/), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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 the Market Data section applicable
to its equities trading platform (``BYX Equities''). Particularly, the
Exchange proposes to (i) decrease the External Distribution fee
applicable to BYX Top, (ii) adopt a New External Distributor Credit
applicable to Cboe One Premium, and (iii) extend the New External
Distributor Credit applicable to BYX Summary Depth Feed from one (1)
month to three (3) months.
Market Background
The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. 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.'' \3\ As the Commission
itself recognized, the market for trading services in NMS stocks has
become ``more fragmented and competitive.'' \4\
---------------------------------------------------------------------------
\3\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS Adopting Release'').
\4\ See Securities Exchange Act Release No. 84875, 84 FR 5202,
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
---------------------------------------------------------------------------
Equity trading is currently dispersed across sixteen exchanges,
more than 50 alternative trading systems,\5\ and numerous broker-dealer
internalizers and wholesalers, all competing fiercely for order flow.
Based on publicly-available information, no single U.S. equities
exchange has more than 17% market share.\6\ In turn, the market for
top-of-book quotation and transaction data is highly competitive as
national securities exchanges compete vigorously with each other to
provide efficient, reliable, and low-cost data to a wide range of
investors and market participants. In fact, there are twelve competing
products offered by other national securities exchanges today,\7\ not
counting products offered by the Exchange's affiliates, and each of the
Exchange's affiliated U.S. equities exchanges also offers similar top-
of-book data. Each of those exchanges offer top-of-book quotation and
last sale information based on their own quotation and trading activity
that is substantially similar to the information provided by the
Exchange through the BYX Top Feed.\8\ Exchange top-of-book
[[Page 3600]]
data is therefore widely available today from a number of different
sources.
---------------------------------------------------------------------------
\5\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsData. A list of
alternative trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/atslist.htm.
\6\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (December 10, 2021) available at https://markets.cboe.com/us/equities/market_share/.
\7\ Competing top-of-book products include, Nasdaq Basic, BX
Basic, PSX Basic, NYSE BQT, NYSE BBO/Trades, NYSE Arca BQT, NYSE
Arca BBO/Trades, NYSE American BBO/Trades, NYSE Chicago BBO/Trades,
IEX TOPS, MIAX PEARL Equities Top of Market Feed, and MEMX MEMOIR
Top.
\8\ For example, The Nasdaq Stock Market LLC (``Nasdaq'') offers
``Nasdaq Basic'' which is a real-time market data product that
offers best bid and offer and last sale information for all U.S.
exchange-listed securities based on liquidity within the Nasdaq
market center and trades reported to the FINRA/Nasdaq Trade
Reporting Facility (``Nasdaq TRF''). See Nasdaq Equity Rules, Equity
7, Pricing Schedule, Section 147(a). The type of information
contained on the BYX Top Feed is substantially similar to that
offered through Nasdaq Basic, except that the Exchange disseminates
information about quotes and trades on BYX, whereas Nasdaq Basic
provides information about quotes and trades on Nasdaq and the
Nasdaq TRF. Other national securities with competing top-of-book
products also offer substantially similar types of information
through those top-of-book products.
---------------------------------------------------------------------------
Fees for External Distribution of BYX Top
The Exchange first proposes to decrease the external distribution
fee applicable to BYX Top,\9\ which is an uncompressed data feed that
offers top-of-book quotations and execution information based on equity
orders entered into the System.\10\ Currently, the Exchange charges an
external distribution fee (i.e., distribution outside the distributor's
own firm) of $1,000 per month to External Distributors \11\ of BYX Top.
The Exchange also charges a professional user fee of $1.00 per month, a
non-professional user fee of $0.025 per month, an enterprise fee of
$10,000 per month, and a digital media enterprise fee of $2,500 per
month that is applicable to External Distributors. The external
distribution fees have been in place, without change, since June 1,
2016.\12\ Nonetheless, the Exchange proposes to decrease the monthly
charge for external distribution of BYX Top from $1,000 to $250 per
month (i.e., a decrease of $750 per month),\13\ which would continue to
be cheaper than similar products offered by certain of the Exchange's
competitors.\14\ The Exchange proposes no changes to the professional,
non-professional, enterprise and digital media enterprise fees
associated with external distribution.
---------------------------------------------------------------------------
\9\ See Exchange Rule 11.22(d).
\10\ See Exchange Rule 1.5(aa).
\11\ An External Distributor of an Exchange Market Data product
is a Distributor that receives the Exchange Market Data product and
then distributes that data to a third party or one or more Users
outside the Distributor's own entity.
\12\ See Securities Exchange Act Release No. 77886 (May 23,
2016) 81 FR 33722 (May 27, 2016) (SR-BatsBYX-2016-08).
\13\ The Exchange notes that the fee for Cboe One Summary is
equivalent to the aggregate BYX Top, BZX, Top, EDGX Top, and EDGA
Top fees. The Exchange is not proposing to change the current Cboe
One Summary external distribution fee. Instead, the Cboe EDGX
Exchange, Inc. (``EDGX'') has simultaneously with this proposal
proposed to increase its fee for EDGX Top by $750 in order to ensure
the proposed fee will continue to not cause the combined cost of
subscribing to BYX, EDGA, EDGX, and BZX individual Top and Last Sale
feeds to be greater than those currently charged to subscribe to the
Cboe One Summary fee.
\14\ See infra notes 28, 29, 31, and 32.
---------------------------------------------------------------------------
Cboe One Premium and BYX Top Depth New External Distributor Credit
The Exchange next proposes to adopt a New External Distributor
Credit applicable to Cboe One Premium and extend the New External
Distributor Credit applicable to BYX Summary Depth Feed from one (1)
month to three (3) months. By way of background, Cboe One Premium is a
data feed that disseminates, on a real-time basis, the aggregate best
bid and offer (``BBO'') of all displayed orders for securities traded
on BYX and its affiliated exchanges (i.e., EDGX, Cboe EDGA Exchange,
Inc. (``EDGA''), and Cboe BZX Exchange, Inc. (``BZX'')) and contains
optional functionality which enables recipients to receive aggregated
two-sided quotations from BYX and its affiliated equities exchanges for
up to five (5) price levels.\15\ Currently, the Exchange charges an
external distribution fee of $12,500 per month to External Distributors
of Cboe One Premium. The Exchange now proposes to adopt a New External
Distributor Credit which provide that new External Distributors of the
Cboe One Premium Feed will not be charged an External Distributor Fee
for their first three (3) months in order to allow them to enlist new
Users to receive the Cboe One Summary[sic] Feed. The Exchange believes
the proposal will incentivize External Distributors to enlist new users
to receive Cboe One Premium. To ensure consistency across the Cboe
Equity Exchanges, BZX, EDGX, and EDGA will be filing companion
proposals to reflect this proposal in their respective fee schedules.
---------------------------------------------------------------------------
\15\ The Cboe Aggregated Market (``Cboe One'') Feed is a data
feed that contains the aggregate best bid and offer of all displayed
orders for securities traded on the Exchange and its affiliated
exchanges (i.e., EDGX, EDGA, and BZX). See Exchange Rule 11.22(i).
The Cboe One Feed contains optional functionality which enables
recipients to receive aggregated two-sided quotations from the Cboe
Equities Exchanges for up to five (5) price levels (``Cboe One
Premium Feed''). The Cboe One Premium external distribution fee is
equal to the aggregate BYX Summary Depth, BYX Summary Depth, EDGA
Summary Depth, and BZX Summary Depth external distribution fees.
---------------------------------------------------------------------------
The Exchange notes that it offers similar credits for other market
data products. For example, the Exchange currently offers a one (1)
month New External Distributor Credit applicable to Cboe One
Summary,\16\ which is a data feed that disseminates, on a real-time
basis, the aggregate BBO of all displayed orders for securities traded
on BYX and its affiliated equities exchanges and also contains
individual last sale information for the BYX and its affiliated
equities exchanges.\17\ It also offers a New External Distributor
Credit of one (1) month for subscribers of BYX Summary Depth, which is
a data feed that offers aggregated two-sided quotations for all
displayed orders entered into the System for up to five (5) price
levels. BYX Summary Depth also contains the individual last sale
information, Market Status, Trading Status, and Trade Break
messages.\18\ The External Distribution fees for Cboe One Premium is
equivalent to the aggregate BYX Summary Depth, BZX Summary Depth, EDGX
Summary Depth, and EDGA Summary Depth External Distribution fees. In
order to alleviate any competitive issues that may arise with a vendor
seeking to offer a product similar to the Cboe One Premium Feed based
on the underlying data feeds, the Exchange proposes to also extend the
current New External Distributor Credit for BYX Summary Depth from one
(1) month to three (3) months and the Exchange's affiliates EDGX, BZX
and EDGA are also submitting similar proposals to increase the length
of their respective Summary Depth New External Distributor Credits from
one (1) month to three (3) months. The respective proposals to extend
these credits to three months ensures the proposed New External
Distributor Credit for Cboe One Premium will continue to not cause the
combined cost of subscribing to BYX, EDGA, EDGX, and BZX Summary Depth
feeds for new External Distributors to be greater than those currently
charged to subscribe to the Cboe One Premium feed.
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\16\ See Exchange Rule 11.22(i).
\17\ The Exchange notes that when it first adopted the New
External Distributor Credit for Cboe One Summary, it similarly
applied for a new External Distributor's first three (3) months. See
Securities Exchange Act Release No. 74284 (February 18, 2015), 80 FR
9792 (February 24, 2015) (SR-BYX-2015-09).
\18\ See Exchange Rule 11.22(k)
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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,\19\ in general, and
furthers the objectives of Section 6(b)(4),\20\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its members and other recipients of
Exchange data. In addition, the Exchange believes that the proposed
rule change is consistent with Section 11(A) of the Act as it supports
(i) fair competition among brokers and dealers, among exchange markets,
and between exchange markets and markets other than exchange markets,
and (ii) the availability to brokers, dealers, and investors of
information with respect to quotations for and transactions in
securities.\21\ Finally, the proposed rule change is also consistent
with Rule 603 of Regulation NMS,\22\ which provides
[[Page 3601]]
that any national securities exchange that distributes information with
respect to quotations for or transactions in an NMS stock do so on
terms that are not unreasonably discriminatory.
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\19\ 15 U.S.C. 78f.
\20\ 15 U.S.C. 78f(b)(4).
\21\ 15 U.S.C. 78k-1.
\22\ See 17 CFR 242.603.
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The Exchange operates in a highly competitive environment. Indeed,
there are now sixteen registered U.S equities exchanges, and with the
exception of Long-Term Stock Exchange, Inc. (``LTSE''), which has
determined to not offer any proprietary market data feeds, each of
these exchanges offer associated market data products to their
customers, either with or without a fee. It is in this robust and
competitive market in which the Exchange is proposing to increase its
fees, while still providing its data at a significantly lower price
than competing products offered by other national securities exchanges
with similar data quality.
The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. Further, with respect
to market data, the decision of the United States Court of Appeals for
the District of Columbia Circuit in NetCoalition v. SEC upheld the
Commission's reliance on the existence of competitive market mechanisms
to evaluate the reasonableness and fairness of fees for proprietary
market data: ``In fact, the legislative history indicates that the
Congress intended that the market system `evolve through the interplay
of competitive forces as unnecessary regulatory restrictions are
removed' and that the SEC wield its regulatory power `in those
situations where competition may not be sufficient,' such as in the
creation of a `consolidated transactional reporting system.' '' \23\
The court agreed with the Commission's conclusion that ``Congress
intended that `competitive forces should dictate the services and
practices that constitute the U.S. national market system for trading
equity securities.' '' \24\ As discussed in this filing, significant
competitive forces constrain the ability of the Exchange to charge
supra-competitive fees.
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\23\ NetCoalition v. SEC, 615 F.3d 525, 535 (D.C. Cir. 2010)
(``NetCoalition I'') (quoting H.R. Rep. No. 94-229 at 92 (1975), as
reprinted in 1975 U.S.C.C.A.N. 323).
\24\ Id. at 535.
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BYX Top
i. The BYX Top Feed Is an Optional Market Data Product, and the
Exchange Is Constrained in its Pricing by Significant Competitive
Forces
Subscribing to BYX Top is entirely optional. The Exchange is not
required to make BYX Top available to any customers, nor is any
customer required to purchase BYX Top.\25\ A customer's decision as to
whether to purchase BYX Top is therefore entirely discretionary and is
based on that firms individual business needs. Generally, firms that
choose to subscribe to BYX Top do so because they believe that it is a
cost-effective source for top-of-book data that provides valuable
information about the market for national market system (``NMS'')
stocks traded on the Exchange, where a consolidated display covering
all U.S. equities exchanges is not required. Such firms are able to
determine for themselves whether BYX Top helps them to achieve their
business goals, and if so, whether or not it is attractively priced
compared to other similar top-of-book products offered by competing
exchanges. Indeed, if BYX Top does not provide sufficient value to
firms based on the uses those firms may have for it, such firms may
simply choose to conduct their business operations in ways that do not
use BYX Top. And, as discussed later in this filing, any External
Distributor of top-of-book data that does not wish to purchase BYX Top,
due to the price of that data or for any other reason, can choose to
substitute similar information from other exchanges. Although the
Exchange is not required to make any data, including top-of-book data,
available through its proprietary market data platform, the Exchange
believes that making such data available increases investor choice, and
contributes to a fair and competitive market. Specifically, making such
data publicly available through proprietary data feeds allows investors
to choose alternative, potentially less costly, market data based on
their business needs. For example, a broker or fintech firm may choose
to purchase BYX Top, or a similar product from another exchange, in
order to perform investment analysis, or to provide general information
about the market for U.S. equity securities, respectively. In either
case the choice to purchase BYX Top would be based on the firm's
determination of the value of the data offered by their chosen product
compared to the cost of acquiring this data instead of receiving
similar data from other sources. BYX Top serves as a valuable reference
for investors that do not require a consolidated display. Making
alternative products available to market participants ultimately
ensures competition in the marketplace, and constrains the ability of
exchanges to charge supra-competitive fees. Further, in the event that
a market data customer views one exchange's top-of-book data product
and/or fees as more or less attractive than a competitor's offerings
they can and often do switch between competing products. As discussed,
similar top-of-book information is available from a number of competing
U.S. equities exchanges.\26\ This includes a number of large
established exchanges that charge for access to such top-of-book data,
as well as certain smaller or new exchange entrants that provide
similar data without charge, in many cases as a way of attracting
customers to their exchange while they seek to grow market share. In
this way, BYX Top and other top-of-book products offered by a number of
U.S. equities exchanges, are all substitutes. The availability of these
substitute products constrains the Exchange's ability to charge supra-
competitive prices as market participants can easily obtain similar
data from one of the Exchange's many competitors. In fact, the impact
of competition on the market in which BYX Top is offered to market
participants and investors is showcased by Exchange affiliates' other
recent fee changes related to this product, which involved the
reduction of fees to facilitate the Exchange affiliates' ability to
compete for customers.
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\25\ The Exchange notes that broker-dealers are not required to
purchase proprietary market data to comply with their best execution
obligations. See In the Matter of the Application of Securities
Industry and Financial Markets Association for Review of Actions
Taken by Self-Regulatory Organizations, Release Nos. 34- 72182; AP-
3-15350; AP-3-15351 (May16, 2014). Similarly, there is no
requirement in Regulation NMS or any other rule that proprietary
data be utilized for order routing decisions, and some broker-
dealers and ATSs have chosen not to do so.
\26\ Although the Exchange does not have access to the customer
lists for other competing products, it understands based on
conversations with subscribers to BYX Top that they typically view
exchange top-of-book products as substitutes and do not generally
look to purchase such data from more than one national securities
exchange.
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Distributors can discontinue use of BYX Top at any time and for any
reason, including due to an assessment of the reasonableness of fees
charged. Other External Distributors are free to similarly cancel their
subscriptions in favor of a competitor offering, or cheaper or free
data offered by the Exchange's affiliated U.S. equities exchanges, if
they believe that the fees are too high given their particular use case
for obtaining the data that the Exchange provides over BYX Top. The
Exchange offers all of its proprietary market data products pursuant to
a month-to-month contract that allows subscribers to choose to
terminate their subscription at any time. As a result, there are no
contractual or other legal
[[Page 3602]]
impediments for firms that wish to cancel their subscription to the
Exchange's market data products, including BYX Top. In addition, the
Exchange notes that a majority of External Distributors of BYX Top
either receive this data through a market data vendor, as opposed to
directly from the Exchange, or is a market data vendor itself. Thus,
firms can seamlessly switch to any other competitor product offered by
their chosen vendor without incurring additional switching costs, such
as the cost of establishing connectivity to another exchange to receive
its market data.\27\
---------------------------------------------------------------------------
\27\ Market data vendors typically establish connectivity to a
number of national securities exchanges to be able to offer their
market data to customers.
---------------------------------------------------------------------------
In setting the proposed fees for BYX Top, the Exchange considered
the competitiveness of the market for proprietary data and all of the
implications of that competition. Indeed, the Exchange is not in a
position to charge unreasonable fees for its top-of-book data as there
are a number of competing products in the market, including products
that are currently offered free of charge by certain other exchanges
that have determined not to charge for their market data. The existence
of alternatives to BYX Top ensures that the Exchange cannot set
unreasonable fees when vendors and subscribers can freely elect these
alternatives or choose not to purchase a specific proprietary data
product if the attendant fees are not justified by the returns that any
particular vendor or data recipient would achieve through the purchase.
ii. The Proposed Fees Are Reasonable Given the Value of the Data
Provided to Customers, and When Compared to Competing Market Data
Products
The proposed fees are also reasonable they would represent a
decreased fee for top-of-book data that has proven valuable for
investors. BYX Top is a competitively-priced alternative to top-of-book
data disseminated by other national securities exchanges. It is
purchased by a wide variety of market participants and vendors,
including data platforms, websites, fintech firms, buy-side investors,
retail brokers, regional banks, and securities firms inside and outside
of the U.S. that desire low cost, high quality, real-time U.S. equity
market data. By providing lower cost access to U.S. equity market data,
BYX Top benefits a wide range of investors that participate in the
national market system. As discussed, the decision to purchase a
particular market data product from a particular exchange is largely
based on two factors: (1) The quality of the data, and (2) the price
charged for access to that data. The Exchange believes that BYX Top is
competitive on both of these factors.
First, BYX Top would remain competitively priced compared to
similar products offered by other comparable U.S. equities exchanges.
Although BYX Top is not offered free of charge like certain other
competitor offerings, particularly those offered by newer U.S. equities
exchanges that are seeking to grow market share, it is made available
at a price that is less than the prices charged by the Exchange's main
competitors--i.e., those with comparable market shares and data
quality. Notably, BYX Top would remain significantly cheaper than
similar products offered by New York Stock Exchange LLC (``NYSE''),
NYSE Arca, Inc. (``Arca'') and Nasdaq in terms of the fees charged for
external distribution. For example, NYSE charges a total of $4,000 per
month for access and redistribution of their equivalent products, i.e.,
$1,500 per month for applicable top-of-book quotation information,\28\
and an additional $1,500 per month for transaction information,\29\
both of which are included in BYX Top for a single fee.\30\ In
addition, a $1,000 per month redistribution fee is applied. Arca, which
has a similar pricing model to NYSE, charges a rate of $2,250 per month
for access and redistribution of its equivalent products, separated
into a $750 per month charge for top-of-book quotation information, an
additional $750 per month charge for transaction information, and $750
per month for redistribution.\31\ Finally, Nasdaq charges its External
Distributors a fee of $2,000 per month for Nasdaq Basic, which includes
both top-of-book quotation information and transaction information for
the same fee, a $350 per month Data Consolidation fee, and a $100 per
month Monthly Administrative Fee.\32\ The external distribution charges
associated with obtaining comparable U.S. equities market data from
NYSE, Arca and Nasdaq runs significantly more than the proposed fee to
be charged by the Exchange, meaning that the Exchange would continue to
be offering its data at a price that is attractive compared to the
prices charged by its competitors.
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\28\ See NYSE PDP Market Data Pricing, Section 1.3, NYSE BBO.
\29\ See NYSE PDP Market Data Pricing, Section 1.4, NYSE Trades.
\30\ Supra note 3.
\31\ See NYSE PDP Market Data Pricing, Section 3.3, NYSE Arca
BBO; NYSE PDP Market Data Pricing, Section 3.4, NYSE Arca Trades.
\32\ See Nasdaq Equity Rules, Equity 7, Pricing Schedule,
Section 147(c)(1). In addition, Nasdaq also charges distributors a
$100 monthly administrative fee. See Nasdaq Equity Rules, Equity 7,
Pricing Schedule, Section 135.
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iii. The Proposed Fees Are Equitable and Not Unfairly Discriminatory as
External Distributors Will Be Subject to Uniform Pricing Based on Their
Usage of the Data and Differences Between the Fees Charged for Internal
and External Distribution Are Appropriate
The Exchange believes the proposed fees for external distribution
of BYX Top will continue to be allocated fairly and equitably among
subscribers, and are not unfairly discriminatory, as the proposed fees
will apply equally to all data recipients that choose to subscribe to
BYX Top and distribute that data to external subscribers. As proposed,
all External Distributors of BYX Top will continue to be subject to the
same external distribution fee, regardless of the type of business that
they operate, or the use they plan to make of the data feed. Thus, all
External Distributors would have access to BYX Top on the same
equitable and non-discriminatory terms.
The Exchange believes that it is also fair and equitable, and not
unfairly discriminatory to charge different fees for internal and
external distribution of the BYX Top. As the proposed distribution fee
charged to External Distributors is higher[sic] than the existing
distribution fee charged to Internal Distributors,\33\ the proposal is
designed to incentivize External Distributors to subscribe to BYX Top.
Nonetheless, External Distributors are subject to professional user
fees, non-professional user fees, an enterprise fee, and a digital
media enterprise fee to which Internal Distributors are not subject.
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\33\ An Internal Distributor of an Exchange Market Data product
is a Distributor that receives the Exchange Market Data product and
then distributes that data to one or more Users within the
Distributor's own entity.
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New External Distributor Fee Credit
The Exchange also believes that adopting a New External Distributor
Credit for Cboe One Premium is equitable and reasonable. As discussed
above, a similar New External Distributor Fee Credit was initially
adopted at the time the Exchange began to offer the Cboe One Summary to
subscribers. It was intended to incentivize new Distributors to enlist
Users to subscribe to Cboe One Summary in an effort to broaden the
product's distribution. Now the Exchange proposes to adopt a similar
[[Page 3603]]
credit for Cboe One Premium subscribers for their first three (3)
months to similarly incentivize new Distributors to enlist Users to
subscribe to Cboe One Premium in an effort to broaden the product's
distribution. While this incentive is not available to Internal
Distributors of Cboe One Premium, the Exchange believes it is
appropriate as Internal Distributors have no subscribers outside of
their own firm. The Exchange believes extending the New External
Distributor Credit for BYX Summary Depth from one (1) month to three
(3) months is also equitable and reasonable, as it (along with
simultaneous corresponding proposals by the Exchange's affiliates)
ensures the proposed New External Distributor Credit for Cboe One
Premium will continue to not cause the combined cost of subscribing to
BYX, EDGA, EDGX, and BZX Summary Depth feeds for new External
Distributors to be greater than those currently charged to subscribe to
the Cboe One Premium feed.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change would
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The Exchange
operates in a highly competitive environment, and its ability to price
these data products is constrained by competition among exchanges that
offer similar data products to their customers. Top-of-book data and
depth-of-book data is broadly disseminated by competing U.S. equities
exchanges. There are therefore a number of alternative products
available to market participants and investors, including products
offered by certain competing exchanges without charge. In this
competitive environment potential subscribers are free to choose which
competing product to purchase to satisfy their need for market
information. Often, the choice comes down to price, as market data
customers look to purchase cheaper data products, and quality, as
market participants seek to purchase data that represents significant
market liquidity.
Intramarket Competition. The Exchange believes that the proposed
fees do not put any market participants at a relative disadvantage
compared to other market participants. As discussed, the proposed fees
and credit would apply to all External Distributors of BYX Top and Cboe
One Premium, respectively, on an equal and non-discriminatory basis.
The difference in fees for internal and external distribution of BYX
Top are reasonably designed to incentivize External Distributors to
subscribe to BYX To. Further, the credit applicable to only External
Distributors is appropriate as it incentivizes such External
Distributors to enlist subscribers, whereas Internal Distributors have
no subscribers outside their firm. The Exchange therefore believes that
the proposed fees neither favor nor penalize one or more categories of
market participants in a manner that would impose an undue burden on
competition.
Intermarket Competition. The Exchange believes that the proposed
fees do not impose a burden on competition or on other SROs that is not
necessary or appropriate in furtherance of the purposes of the Act. In
setting the proposed fees, the Exchange is constrained by the
availability of numerous substitute products offered by other national
securities exchanges. Because market data customers can find suitable
substitute feeds, an exchange that overprices its market data products
stands a high risk that users may substitute another product. These
competitive pressures ensure that no one exchange's market data fees
can impose an undue burden on competition, and the Exchange's proposed
fees do not do so here.
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 \34\ and paragraph (f) of Rule 19b-4 \35\
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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\34\ 15 U.S.C. 78s(b)(3)(A).
\35\ 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-CboeBYX-2022-001 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-CboeBYX-2022-001. 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-CboeBYX-2022-001 and should be submitted
on or before February 14, 2022.
[[Page 3604]]
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-01227 Filed 1-21-22; 8:45 am]
BILLING CODE 8011-01-P
