Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend its Fee Schedule, 16285-16288 [2023-05337]

Download as PDF Federal Register / Vol. 88, No. 51 / Thursday, March 16, 2023 / Notices p. To consumer reporting agencies, as defined in the Fair Credit Reporting Act (15 U.S.C. 1681a(f) or the Federal Claims Collection Act of 1966 (31 U.S.C. 3701(a)(3)), pursuant to 5 U.S.C. 552a(b)(12) and in accordance with 31 U.S.C. 3711(e). 5. The address to which the information should be sent. Individuals requesting access must also comply with OPM’s Privacy Act regulations regarding verification of identity and access to records (5 CFR 297). POLICIES AND PRACTICES FOR RETRIEVAL OF RECORDS: CONTESTING RECORD PROCEDURES: The records may be retrieved by name, DUNs, UEIs, Social Security number, tax identification number, claim number, or other personal identifiers available in this system of records. POLICIES AND PRACTICES FOR RETENTION AND DISPOSAL OF RECORDS: The records in this system of records are retained and disposed of in accordance with General Records Schedule 1.1. The record schedule requires that the records be destroyed six years after final payment or cancellation, but longer retention is authorized if required for business use. ADMINISTRATIVE, TECHNICAL, AND PHYSICAL SAFEGUARDS: Records in this system of records are protected from unauthorized access and misuse through various administrative, technical and physical security measures. OPM’s security measures are in compliance with the Federal Information Security Modernization Act (Pub. L. 113–283), associated Office of Management and Budget policies, and applicable standards and guidance from the National Institute of Standards and Technology. Strict controls have been imposed to minimize the risk of compromising the information that is stored. Access to the paper and electronic records in this system of records is limited to those individuals who have a need to know the information for the performance of their official duties and who have appropriate clearances or permissions. ddrumheller on DSK120RN23PROD with NOTICES1 RECORD ACCESS PROCEDURES: Individuals seeking notification of and access to their records in this system of records may submit a request in writing to the Office of Personnel Management, Office of Privacy and Information Management—FOIA, 1900 E Street NW, Washington, DC 20415– 7900 or by emailing foia@opm.gov. Individuals must furnish the following information for their records to be located: 1. Full name. 2. Social Security number or Tax identification number. 3. Claim number, where applicable. 4. The type of information requested. VerDate Sep<11>2014 19:10 Mar 15, 2023 Jkt 259001 Individuals wishing to request amendment of records about them should write to the Office of Personnel Management, Office of Privacy and Information Management—FOIA, 1900 E Street NW, Washington, DC 20415– 7900, ATTN: OPM CFO; or by emailing foia@opm.gov. Requests for amendment of records should include the words ‘‘PRIVACY ACT AMENDMENT REQUEST’’ in capital letters at the top of the request letter or in the subject line of the email. Individuals must furnish the following information in writing for their records to be located: 1. Full name. 2. Social Security number or Tax identification number. 3. Claim number, if applicable. 4. Precise identification of the information to be amended. Individuals requesting amendment must also follow OPM’s Privacy Act regulations regarding verification of identity and amendment to records (5 CFR 297). NOTIFICATION PROCEDURES: See ‘‘Record Access Procedure.’’ EXEMPTIONS PROMULGATED FOR THE SYSTEM: None. HISTORY: 86 FR 23441 (May 3, 2021). [FR Doc. 2023–05346 Filed 3–15–23; 8:45 am] BILLING CODE 6325–67–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–97108; File No. SR– CboeBZX–2023–020] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend its Fee Schedule March 10, 2023. 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 March 6, 2023, Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX’’) filed with the 1 15 2 17 PO 00000 U.S.C. 78s(b)(1). CFR 240.19b–4. Frm 00056 Fmt 4703 Sfmt 4703 16285 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’’ or ‘‘BZX Equities’’) 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/), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend its Fee Schedule applicable to its equities trading platform (‘‘BZX Equities’’) as follows: (1) adopt a new Step-Up Tier and renumber the remaining tiers; and (2) adopt a new Non-Displayed Step-Up Tier. The Exchange proposes to implement the proposed change to its fee schedule on March 6, 2023.3 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 3 The Exchange initially filed the proposed fee changes on March 1, 2023 (SR–CboeBZX–2023– 017). On March 6, 2023, the Exchange withdrew that filing and submitted this proposal. E:\FR\FM\16MRN1.SGM 16MRN1 16286 Federal Register / Vol. 88, No. 51 / Thursday, March 16, 2023 / Notices 16 registered equities exchanges, as well as a number of alternative trading systems and other off-exchange venues that do not have similar self-regulatory responsibilities under the Exchange Act, to which market participants may direct their order flow. Based on publicly available information,4 no single registered equities exchange has more than 15% of the market share. Thus, in such a low-concentrated and highly competitive market, no single equities exchange possesses significant pricing power in the execution of order flow. The Exchange in particular operates a ‘‘Maker-Taker’’ model whereby it pays credits to Members that add liquidity and assesses fees to those that remove liquidity. The Exchange’s fee schedule sets forth the standard rebates and rates applied per share for orders that provide and remove liquidity, respectively. Currently, for orders in securities priced at or above $1.00, the Exchange provides a standard rebate of $0.00160 per share for orders that add liquidity and assesses a fee of $0.0030 per share for orders that remove liquidity.5 For orders in securities priced below $1.00, the Exchange does not provide a rebate or assess a fee for orders that add liquidity and assesses a fee of 0.30% of total dollar value for orders that remove liquidity.6 Additionally, in response to the competitive environment, the Exchange also offers tiered pricing which provides Members opportunities to qualify for higher rebates or reduced fees where certain volume criteria and thresholds are met. Tiered pricing provides an incremental incentive for Members to strive for higher tier levels, which provides increasingly higher benefits or discounts for satisfying increasingly more stringent criteria. Step-Up Tiers Non-Displayed Step-Up Tier ddrumheller on DSK120RN23PROD with NOTICES1 Pursuant to footnote 2 of the Fee Schedule, the Exchange currently offers Step Up Tiers (tiers 1 through 3) that provide Members an opportunity to receive an enhanced rebate from the standard rebate for liquidity adding orders that yield fee codes B,7 V,8 and Y 9 where they increase their relative liquidity each month over a 4 See Cboe Global Markets, U.S. Equities Market Volume Summary, Month-to-Date (February 22, 2023), available at https://www.cboe.com/us/ equities/market_statistics/. 5 See BZX Equities Fee Schedule, Standard Rates. 6 Id. 7 Orders yielding Fee Code ‘‘B’’ are displayed orders adding liquidity to BZX (Tape B). 8 Orders yielding Fee Code ‘‘V’’ are displayed orders adding liquidity to BZX (Tape A). 9 Orders yielding Fee Code ‘‘Y’’ are displayed orders adding liquidity to BZX (Tape C). VerDate Sep<11>2014 19:10 Mar 15, 2023 predetermined baseline. Specifically, the Tiers are as follows: • Tier 1 offers an enhanced rebate of $0.0032 per share for qualifying orders (i.e., orders yielding fee codes B, V, or Y) where (1) MPID has a Step-Up Add TCV 10 from May 2019 ≥0.10%; and (2) MPID has an ADV 11 ≥0.50% of the TCV. • Tier 2 offers an enhanced rebate of $0.0032 per share for qualifying orders (i.e., orders yielding fee codes B, V, or Y) where (1) Member has a Step-Up ADAV 12 from January 2022 ≥10,000,000 or Members has a Step-Up Add TCV from January 2022 ≥0.10%; and (2) Member has an ADV ≥0.30% of the TCV or Members has an ADV ≥35,000,000. • Tier 3 offers an enhanced rebate of $0.0032 per share for qualifying orders (i.e., orders yielding fee codes B, V, or Y) where (1) MPID has a Step-Up ADAV from May 2021 ≥30,000,000 or MPID has a Step-Up Add TCV from May 2021 ≥0.30%; and (2) MPID has an ADV ≥0.30% of the TCV or MPID has an ADV ≥35,000,000. The Exchange now proposes to add a new Tier 1 and renumber existing Tiers 1 through 3. Specifically, proposed Tier 1 would provide for the following: • Proposed Tier 1 would offer an enhanced rebate of $0.0031 per share for qualifying orders (i.e., orders yielding fee codes B, V, or Y) where (1) Member has a Step-Up ADAV from January 2023 ≥10,000,000 or Member has a Step-Up Add TCV from January 2023 ≥0.10%; and (2) Member has an ADV ≥0.60% of the TCV. Proposed Tiers 2 through 4 would have the same criteria and provide the same enhanced rebate as existing Tiers 1 through 3, respectively. The only proposed change is to modify the Tier numbers of Tier 1 through 3 to Tier 2 through 4, respectively. Jkt 259001 In addition to the adoption of a new Step-Up Tier 1, the Exchange now proposes to amend footnote 2 to add a Non-Displayed Step-Up Tier, which will provide Members an opportunity to receive an enhanced rebate from the 10 ‘‘Step-Up Add TCV’’ means ADAV as a percentage of TCV in the relevant baseline month subtracted from current ADAV as a percentage of TCV. ADAV means average daily added volume calculated as the number of shares added per day. ADAV is calculated on a monthly basis. TCV means total consolidated volume calculated as the volume reported by all exchanges and trade reporting facilities to a consolidated transaction reporting plan for the month for which the fees apply. 11 ‘‘ADV’’ means average daily volume calculated as the number of shares added or removed, combined, per day. ADV is calculated on a monthly basis. 12 ‘‘Step-Up ADAV’’ means ADAV in the relevant baseline month subtracted from current ADAV. PO 00000 Frm 00057 Fmt 4703 Sfmt 4703 standard rebate 13 for liquidity adding non-displayed orders that yield fee codes HB,14 HV,15 and HY 16 and meet certain required volume-based criteria. The proposed criteria for the NonDisplayed Step-Up Tier is as follows: • The proposed Non-Displayed StepUp Tier would offer an enhanced rebate of $0.0025 per share for qualifying orders (i.e., orders yielding fee codes HB, HV, or HY) where (1) Member has a Step-Up ADAV from January 2023 ≥10,000,000 or Member has a Step-Up Add TCV from January 2023 ≥0.10%; and (2) Member has an ADV ≥0.60% of the TCV. The Exchange notes that the Step-Up Tiers in general are designed to provide Members with additional opportunities to receive enhanced rebates by increasing their order flow to the Exchange, which further contributes to a deeper, more liquid market and provides even more execution opportunities for active market participants. Like other Step-Up Tiers, the proposed Step-Up Tier 1 is designed to give members an additional opportunity to receive an enhanced rebate for orders meeting the applicable criteria. Furthermore, the proposed Non-Displayed Step-Up Tier is designed to increase the Members’ provision of liquidity to the Exchange, which increases execution opportunities and provides for overall enhanced price discovery and price improvement opportunities on the Exchange. Increased overall order flow benefits all Members by contributing towards a robust and well-balanced market ecosystem. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Act and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.17 Specifically, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 18 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 13 Currently, the Exchange provides a standard rebate of $0.00100 per share for liquidity adding non-displayed orders that yield fee codes HB, HV, or HY. 14 Orders yielding Fee Code ‘‘HB’’ are nondisplayed orders adding liquidity to BZX (Tape B). 15 Orders yielding Fee Code ‘‘HV’’ are nondisplayed orders adding liquidity to BZX (Tape A). 16 Orders yielding Fee Code ‘‘HY’’ are nondisplayed orders adding liquidity to BZX (Tape C). 17 15 U.S.C. 78f(b). 18 15 U.S.C. 78f(b)(5). E:\FR\FM\16MRN1.SGM 16MRN1 ddrumheller on DSK120RN23PROD with NOTICES1 Federal Register / Vol. 88, No. 51 / Thursday, March 16, 2023 / Notices in regulating, clearing, settling, processing information with respect to, and facilitating transactions in securities, to remove impediments to and perfect the mechanism of a free and open market and a national market system, and, in general, to protect investors and the public interest. Additionally, the Exchange believes the proposed rule change is consistent with the Section 6(b)(5) 19 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers as well as Section 6(b)(4) 20 as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its Members and other persons using its facilities. 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 Exchange believes that its proposal to introduce a new Step-Up Tier 1 and a new Non-Displayed Step-Up Tier 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 believes the proposed StepUp Tier 1 and Non-Displayed Step-Up Tier are reasonable as they serve to incentivize Members to increase their liquidity-adding, displayed volume (Step-Up Tier 1) and liquidity-adding, non-displayed volume (Non-Displayed Step-Up Tier), which benefit all market participants by incentivizing continuous liquidity and thus, deeper, more liquid markets as well as increased execution opportunities. Particularly, the proposed incentives to provide displayed liquidity are designed to incentivize continuous displayed liquidity, which signals other market participants to take the additional execution opportunities provided by such liquidity, while the proposed incentives to provide non-displayed liquidity will further contribute to a deeper, more liquid market and provide even more execution opportunities for active market participants at improved prices. This overall increase in activity deepens the Exchange’s liquidity pool, offers additional cost savings, supports the quality of price discovery, promotes market transparency, and improves market quality for all investors. 19 Id. 20 15 U.S.C. 78f(b)(4). VerDate Sep<11>2014 19:10 Mar 15, 2023 Jkt 259001 In particular, the Exchange believes the proposed Step-Up Tier 1 and NonDisplayed Step-Up Tier represent an equitable allocation of rebates and are not unfairly discriminatory because all Members are eligible for those tiers and would have the opportunity to meet a tier’s criteria and would receive the proposed rebate if such criteria is met. Further, the proposed rebates are commensurate with the proposed criteria. That is, the rebates reasonably reflect the difficulty in achieving the applicable criteria as proposed. 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 would definitely result in any Members qualifying for the proposed tier. While the Exchange has no way of predicting with certainty how the proposed tiers will impact Member activity, the Exchange anticipates that at least one Member will be able to satisfy the criteria proposed under Step-Up Tier 1 and Non-Displayed Step-Up Tier 1. The Exchange also notes that proposed tier/ rebate will not adversely impact any Member’s ability to qualify for other reduced fee or enhanced rebate tiers. Should a Member not meet the proposed criteria under the modified tier, the Member will merely not receive that corresponding enhanced rebate. Additionally, the Exchange notes that relative volume-based incentives and discounts have been widely adopted by exchanges,21 including the Exchange,22 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. Competing equity exchanges offer similar tiered pricing structures, including schedules of rebates and fees that apply based upon members achieving certain volume and/or growth thresholds, as well as assess similar fees or rebates for similar types of orders, to that of the Exchange. B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. Rather, as 21 See, e.g., EDGX Equities Fee Schedule, Footnote 1, Add/Remove Volume Tiers. 22 See, e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove Volume Tiers. PO 00000 Frm 00058 Fmt 4703 Sfmt 4703 16287 discussed above, the Exchange believes that the proposed changes would encourage the submission of additional order flow to a public exchange, thereby promoting market depth, execution incentives and enhanced execution opportunities, as well as price discovery and transparency for all Members. As a result, the Exchange believes that the proposed changes further 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.’’ 23 The Exchange believes the proposed rule changes do not impose any burden on intramarket competition that is not necessary or appropriate in furtherance of the purposes of the Act. Particularly, the proposed tier changes apply to all Members equally in that all Members continue to be eligible for the current Step-Up Tiers, the proposed Step-Up Tier 1, and proposed Non-Displayed Step-Up Tier, have a reasonable opportunity to meet the tiers’ criteria and will receive the corresponding additional rebates if such criteria are met. Additionally, the proposed tier changes are designed to attract additional order flow to the Exchange. The Exchange believes that the proposed tier criteria would incentivize market participants to direct liquidity adding displayed and non-displayed order flow to the Exchange, bringing with it additional execution opportunities for market participants and improved price transparency. Greater overall order flow, trading opportunities, and pricing transparency benefits all market participants on the Exchange by enhancing market quality and continuing to encourage Members to send orders, thereby contributing towards a robust and well-balanced market ecosystem. 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 direct their order flow, including 15 other equities exchanges and off exchange venues and alternative trading systems. Additionally, the Exchange represents a small percentage of the overall market. Based on publicly available information, no single equities 23 Securities Exchange Act Release No. 51808, 70 FR 37495, 37498–99 (June 29, 2005) (S7–10–04) (Final Rule). E:\FR\FM\16MRN1.SGM 16MRN1 16288 Federal Register / Vol. 88, No. 51 / Thursday, March 16, 2023 / Notices exchange has more than 15% 24 of the market share. Therefore, no exchange possesses significant pricing power in the execution of order flow. Indeed, participants can readily choose to send their orders to other exchange and offexchange 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 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.’’ 25 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’ . . . .’’.26 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. ddrumheller on DSK120RN23PROD with NOTICES1 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 27 and paragraph (f) of Rule 24 Supra note 3. Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 26 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)). 27 15 U.S.C. 78s(b)(3)(A). 25 See VerDate Sep<11>2014 19:10 Mar 15, 2023 Jkt 259001 19b–4 28 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. IV. Solicitation of Comments Interested persons are invited to submit written data, views and arguments concerning the foregoing, including whether the proposed rule change is consistent with the Act. Comments may be submitted by any of the following methods: Electronic Comments • Use the Commission’s internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rule-comments@ sec.gov. Please include File Number SR– CboeBZX–2023–020 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–2023–020. 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 such filing also will be available for inspection and copying at the principal office of the Exchange. All comments 28 17 PO 00000 CFR 240.19b–4(f). Frm 00059 Fmt 4703 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–2023–020 and should be submitted on or before April 6, 2023. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.29 J. Matthew DeLesDernier, Deputy Secretary. [FR Doc. 2023–05337 Filed 3–15–23; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [SEC File No. 270–493, OMB Control No. 3235–0550] Submission for OMB Review; Comment Request; Extension: Securities Act Rule 477 Upon Written Request Copies Available From: Securities and Exchange Commission, Office of FOIA Services, 100 F Street NE, Washington, DC 20549–2736 Notice is hereby given that, pursuant to the Paperwork Reduction Act of 1995 (44 U.S.C. 3501 et seq.), the Securities and Exchange Commission (‘‘Commission’’) has submitted to the Office of Management and Budget this request for extension of the previously approved collection of information discussed below. Rule 477 (17 CFR 230.477) under the Securities Act of 1933 (15 U.S.C. 77a et seq.) sets forth procedures for withdrawing a registration statement, including any amendments or exhibits to the registration statement. The rule provides that if an issuer intends to rely on the safe harbor contained in Securities Act Rule 155 to conduct an unregistered private offering of securities, the issuer must affirmatively state in the withdrawal application that it plans to undertake a subsequent private offering of its securities. Without this statement, the Commission would not be able to monitor a company’s reliance on, and compliance with, Securities Act Rule 155(c). All information submitted to the Commission under Securities Act Rule 477 is available to the public for review. Information provided under Securities Act Rule 477 is mandatory. The 29 17 Sfmt 4703 E:\FR\FM\16MRN1.SGM CFR 200.30–3(a)(12). 16MRN1

Agencies

[Federal Register Volume 88, Number 51 (Thursday, March 16, 2023)]
[Notices]
[Pages 16285-16288]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-05337]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97108; File No. SR-CboeBZX-2023-020]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
its Fee Schedule

March 10, 2023.
    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 March 6, 2023, 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'' or ``BZX 
Equities'') 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/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule applicable to its 
equities trading platform (``BZX Equities'') as follows: (1) adopt a 
new Step-Up Tier and renumber the remaining tiers; and (2) adopt a new 
Non-Displayed Step-Up Tier. The Exchange proposes to implement the 
proposed change to its fee schedule on March 6, 2023.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
March 1, 2023 (SR-CboeBZX-2023-017). On March 6, 2023, the Exchange 
withdrew that filing and submitted this proposal.
---------------------------------------------------------------------------

    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

[[Page 16286]]

16 registered equities exchanges, as well as a number of alternative 
trading systems and other off-exchange venues that do not have similar 
self-regulatory responsibilities under the Exchange Act, to which 
market participants may direct their order flow. Based on publicly 
available information,\4\ no single registered equities exchange has 
more than 15% of the market share. Thus, in such a low-concentrated and 
highly competitive market, no single equities exchange possesses 
significant pricing power in the execution of order flow. The Exchange 
in particular operates a ``Maker-Taker'' model whereby it pays credits 
to Members that add liquidity and assesses fees to those that remove 
liquidity. The Exchange's fee schedule sets forth the standard rebates 
and rates applied per share for orders that provide and remove 
liquidity, respectively. Currently, for orders in securities priced at 
or above $1.00, the Exchange provides a standard rebate of $0.00160 per 
share for orders that add liquidity and assesses a fee of $0.0030 per 
share for orders that remove liquidity.\5\ For orders in securities 
priced below $1.00, the Exchange does not provide a rebate or assess a 
fee for orders that add liquidity and assesses a fee of 0.30% of total 
dollar value for orders that remove liquidity.\6\ Additionally, in 
response to the competitive environment, the Exchange also offers 
tiered pricing which provides Members opportunities to qualify for 
higher rebates or reduced fees where certain volume criteria and 
thresholds are met. Tiered pricing provides an incremental incentive 
for Members to strive for higher tier levels, which provides 
increasingly higher benefits or discounts for satisfying increasingly 
more stringent criteria.
---------------------------------------------------------------------------

    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (February 22, 2023), available at https://www.cboe.com/us/equities/market_statistics/.
    \5\ See BZX Equities Fee Schedule, Standard Rates.
    \6\ Id.
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Step-Up Tiers
    Pursuant to footnote 2 of the Fee Schedule, the Exchange currently 
offers Step Up Tiers (tiers 1 through 3) that provide Members an 
opportunity to receive an enhanced rebate from the standard rebate for 
liquidity adding orders that yield fee codes B,\7\ V,\8\ and Y \9\ 
where they increase their relative liquidity each month over a 
predetermined baseline. Specifically, the Tiers are as follows:
---------------------------------------------------------------------------

    \7\ Orders yielding Fee Code ``B'' are displayed orders adding 
liquidity to BZX (Tape B).
    \8\ Orders yielding Fee Code ``V'' are displayed orders adding 
liquidity to BZX (Tape A).
    \9\ Orders yielding Fee Code ``Y'' are displayed orders adding 
liquidity to BZX (Tape C).
---------------------------------------------------------------------------

     Tier 1 offers an enhanced rebate of $0.0032 per share for 
qualifying orders (i.e., orders yielding fee codes B, V, or Y) where 
(1) MPID has a Step-Up Add TCV \10\ from May 2019 >=0.10%; and (2) MPID 
has an ADV \11\ >=0.50% of the TCV.
---------------------------------------------------------------------------

    \10\ ``Step-Up Add TCV'' means ADAV as a percentage of TCV in 
the relevant baseline month subtracted from current ADAV as a 
percentage of TCV. ADAV means average daily added volume calculated 
as the number of shares added per day. ADAV is calculated on a 
monthly basis. TCV means total consolidated volume calculated as the 
volume reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply.
    \11\ ``ADV'' means average daily volume calculated as the number 
of shares added or removed, combined, per day. ADV is calculated on 
a monthly basis.
---------------------------------------------------------------------------

     Tier 2 offers an enhanced rebate of $0.0032 per share for 
qualifying orders (i.e., orders yielding fee codes B, V, or Y) where 
(1) Member has a Step-Up ADAV \12\ from January 2022 >=10,000,000 or 
Members has a Step-Up Add TCV from January 2022 >=0.10%; and (2) Member 
has an ADV >=0.30% of the TCV or Members has an ADV >=35,000,000.
---------------------------------------------------------------------------

    \12\ ``Step-Up ADAV'' means ADAV in the relevant baseline month 
subtracted from current ADAV.
---------------------------------------------------------------------------

     Tier 3 offers an enhanced rebate of $0.0032 per share for 
qualifying orders (i.e., orders yielding fee codes B, V, or Y) where 
(1) MPID has a Step-Up ADAV from May 2021 >=30,000,000 or MPID has a 
Step-Up Add TCV from May 2021 >=0.30%; and (2) MPID has an ADV >=0.30% 
of the TCV or MPID has an ADV >=35,000,000.
    The Exchange now proposes to add a new Tier 1 and renumber existing 
Tiers 1 through 3. Specifically, proposed Tier 1 would provide for the 
following:
     Proposed Tier 1 would offer an enhanced rebate of $0.0031 
per share for qualifying orders (i.e., orders yielding fee codes B, V, 
or Y) where (1) Member has a Step-Up ADAV from January 2023 
>=10,000,000 or Member has a Step-Up Add TCV from January 2023 >=0.10%; 
and (2) Member has an ADV >=0.60% of the TCV.
    Proposed Tiers 2 through 4 would have the same criteria and provide 
the same enhanced rebate as existing Tiers 1 through 3, respectively. 
The only proposed change is to modify the Tier numbers of Tier 1 
through 3 to Tier 2 through 4, respectively.
Non-Displayed Step-Up Tier
    In addition to the adoption of a new Step-Up Tier 1, the Exchange 
now proposes to amend footnote 2 to add a Non-Displayed Step-Up Tier, 
which will provide Members an opportunity to receive an enhanced rebate 
from the standard rebate \13\ for liquidity adding non-displayed orders 
that yield fee codes HB,\14\ HV,\15\ and HY \16\ and meet certain 
required volume-based criteria. The proposed criteria for the Non-
Displayed Step-Up Tier is as follows:
---------------------------------------------------------------------------

    \13\ Currently, the Exchange provides a standard rebate of 
$0.00100 per share for liquidity adding non-displayed orders that 
yield fee codes HB, HV, or HY.
    \14\ Orders yielding Fee Code ``HB'' are non-displayed orders 
adding liquidity to BZX (Tape B).
    \15\ Orders yielding Fee Code ``HV'' are non-displayed orders 
adding liquidity to BZX (Tape A).
    \16\ Orders yielding Fee Code ``HY'' are non-displayed orders 
adding liquidity to BZX (Tape C).
---------------------------------------------------------------------------

     The proposed Non-Displayed Step-Up Tier would offer an 
enhanced rebate of $0.0025 per share for qualifying orders (i.e., 
orders yielding fee codes HB, HV, or HY) where (1) Member has a Step-Up 
ADAV from January 2023 >=10,000,000 or Member has a Step-Up Add TCV 
from January 2023 >=0.10%; and (2) Member has an ADV >=0.60% of the 
TCV.
    The Exchange notes that the Step-Up Tiers in general are designed 
to provide Members with additional opportunities to receive enhanced 
rebates by increasing their order flow to the Exchange, which further 
contributes to a deeper, more liquid market and provides even more 
execution opportunities for active market participants. Like other 
Step-Up Tiers, the proposed Step-Up Tier 1 is designed to give members 
an additional opportunity to receive an enhanced rebate for orders 
meeting the applicable criteria. Furthermore, the proposed Non-
Displayed Step-Up Tier is designed to increase the Members' provision 
of liquidity to the Exchange, which increases execution opportunities 
and provides for overall enhanced price discovery and price improvement 
opportunities on the Exchange. Increased overall order flow benefits 
all Members by contributing towards a robust and well-balanced market 
ecosystem.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\17\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \18\ 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

[[Page 16287]]

in regulating, clearing, settling, processing information with respect 
to, and facilitating transactions in securities, to remove impediments 
to and perfect the mechanism of a free and open market and a national 
market system, and, in general, to protect investors and the public 
interest. Additionally, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \19\ requirement that the rules 
of an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \20\ 
as it is designed to provide for the equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities.
---------------------------------------------------------------------------

    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ Id.
    \20\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    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 Exchange believes that 
its proposal to introduce a new Step-Up Tier 1 and a new Non-Displayed 
Step-Up Tier 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 believes the proposed Step-Up 
Tier 1 and Non-Displayed Step-Up Tier are reasonable as they serve to 
incentivize Members to increase their liquidity-adding, displayed 
volume (Step-Up Tier 1) and liquidity-adding, non-displayed volume 
(Non-Displayed Step-Up Tier), which benefit all market participants by 
incentivizing continuous liquidity and thus, deeper, more liquid 
markets as well as increased execution opportunities. Particularly, the 
proposed incentives to provide displayed liquidity are designed to 
incentivize continuous displayed liquidity, which signals other market 
participants to take the additional execution opportunities provided by 
such liquidity, while the proposed incentives to provide non-displayed 
liquidity will further contribute to a deeper, more liquid market and 
provide even more execution opportunities for active market 
participants at improved prices. This overall increase in activity 
deepens the Exchange's liquidity pool, offers additional cost savings, 
supports the quality of price discovery, promotes market transparency, 
and improves market quality for all investors.
    In particular, the Exchange believes the proposed Step-Up Tier 1 
and Non-Displayed Step-Up Tier represent an equitable allocation of 
rebates and are not unfairly discriminatory because all Members are 
eligible for those tiers and would have the opportunity to meet a 
tier's criteria and would receive the proposed rebate if such criteria 
is met. Further, the proposed rebates are commensurate with the 
proposed criteria. That is, the rebates reasonably reflect the 
difficulty in achieving the applicable criteria as proposed. 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 would 
definitely result in any Members qualifying for the proposed tier. 
While the Exchange has no way of predicting with certainty how the 
proposed tiers will impact Member activity, the Exchange anticipates 
that at least one Member will be able to satisfy the criteria proposed 
under Step-Up Tier 1 and Non-Displayed Step-Up Tier 1. The Exchange 
also notes that proposed tier/rebate will not adversely impact any 
Member's ability to qualify for other reduced fee or enhanced rebate 
tiers. Should a Member not meet the proposed criteria under the 
modified tier, the Member will merely not receive that corresponding 
enhanced rebate.
    Additionally, the Exchange notes that relative volume-based 
incentives and discounts have been widely adopted by exchanges,\21\ 
including the Exchange,\22\ 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. Competing equity exchanges 
offer similar tiered pricing structures, including schedules of rebates 
and fees that apply based upon members achieving certain volume and/or 
growth thresholds, as well as assess similar fees or rebates for 
similar types of orders, to that of the Exchange.
---------------------------------------------------------------------------

    \21\ See, e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
    \22\ See, e.g., BZX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
---------------------------------------------------------------------------

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

    The Exchange does not believe that the proposed rule change will 
impose any burden on 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 changes would encourage the 
submission of additional order flow to a public exchange, thereby 
promoting market depth, execution incentives and enhanced execution 
opportunities, as well as price discovery and transparency for all 
Members. As a result, the Exchange believes that the proposed changes 
further 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.'' \23\
---------------------------------------------------------------------------

    \23\ 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 changes do not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
tier changes apply to all Members equally in that all Members continue 
to be eligible for the current Step-Up Tiers, the proposed Step-Up Tier 
1, and proposed Non-Displayed Step-Up Tier, have a reasonable 
opportunity to meet the tiers' criteria and will receive the 
corresponding additional rebates if such criteria are met. 
Additionally, the proposed tier changes are designed to attract 
additional order flow to the Exchange. The Exchange believes that the 
proposed tier criteria would incentivize market participants to direct 
liquidity adding displayed and non-displayed order flow to the 
Exchange, bringing with it additional execution opportunities for 
market participants and improved price transparency. Greater overall 
order flow, trading opportunities, and pricing transparency benefits 
all market participants on the Exchange by enhancing market quality and 
continuing to encourage Members to send orders, thereby contributing 
towards a robust and well-balanced market ecosystem.
    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 direct their order flow, including 15 other equities exchanges and 
off exchange venues and alternative trading systems. Additionally, the 
Exchange represents a small percentage of the overall market. Based on 
publicly available information, no single equities

[[Page 16288]]

exchange has more than 15% \24\ of the market share. Therefore, no 
exchange possesses significant pricing power in the execution of 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 
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.'' \25\ 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' . . . .''.\26\ 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.
---------------------------------------------------------------------------

    \24\ Supra note 3.
    \25\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \26\ 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 \27\ and paragraph (f) of Rule 19b-4 \28\ 
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.
---------------------------------------------------------------------------

    \27\ 15 U.S.C. 78s(b)(3)(A).
    \28\ 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-2023-020 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-2023-020. 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 such 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-2023-020 and should be submitted 
on or before April 6, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
---------------------------------------------------------------------------

    \29\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-05337 Filed 3-15-23; 8:45 am]
BILLING CODE 8011-01-P
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