Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove Proposed Rule Change To Amend the BZX Equities Fee Schedule To Add and Modify Certain Step-Up Tiers, Add a Non-Displayed Step-Up Tier and Modify Certain Fee Codes, 30181-30185 [2023-09904]
Download as PDF
<![CDATA[
Federal Register / Vol. 88, No. 90 / Wednesday, May 10, 2023 / Notices
lotter on DSK11XQN23PROD with NOTICES1
Moreover, as described above, another
Exchange similarly charges External
Distributors higher fees as compared to
Internal Distributors for a similar data
product.20
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 because the
Report will be available equally to all
Members and non-Members that choose
to subscribe to the report. As stated, the
Report is optional and Members and
non-Members may choose to subscribe
to such report, or not, based on their
view of the additional benefits and
added value provided by utilizing the
Report. As such, the Exchange believes
the proposed rule change imposes no
burden on intramarket competition.
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, similar
products offered by Nasdaq and the
NYSE Group are priced equally or
comparable to the Report. 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.’’ 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’. . . .’’. Accordingly, the
Exchange does not believe its proposal
imposes any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
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 21 and paragraph (f) of Rule
19b–4 22 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–2023–027 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–2023–027. 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
20 See
VerDate Sep<11>2014
17:49 May 09, 2023
Jkt 259001
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.23
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–09902 Filed 5–9–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97437; File No. SR–
CboeBZX–2023–020]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Suspension of
and Order Instituting Proceedings To
Determine Whether To Approve or
Disapprove Proposed Rule Change To
Amend the BZX Equities Fee Schedule
To Add and Modify Certain Step-Up
Tiers, Add a Non-Displayed Step-Up
Tier and Modify Certain Fee Codes
May 4, 2023.
I. Introduction
On March 6, 2023, Cboe BZX
Exchange, Inc. (the ‘‘Exchange’’ or
‘‘EDGX’’) filed with the Securities and
Exchange Commission (‘‘Commission’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Exchange Act’’ or ‘‘Act’’),1 and Rule
19b–4 thereunder,2 a proposed rule
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
U.S.C. 78s(b)(3)(A).
22 17 CFR 240.19b–4(f).
Nasdaq Rule 7 Section 152.
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. Do not include
personal identifiable information in
submissions; you should submit only
information that you wish to make
available publicly. We may redact in
part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
protection. All submissions should refer
to File Number SR–CboeBZX–2023–027,
and should be submitted on or before
May 31, 2023.
23 17
21 15
PO 00000
Frm 00112
Fmt 4703
1 15
Sfmt 4703
30181
E:\FR\FM\10MYN1.SGM
10MYN1
30182
Federal Register / Vol. 88, No. 90 / Wednesday, May 10, 2023 / Notices
change (File Number SR–CboeBZX–
2023–020) to amend the BZX Equities
Fee Schedule (‘‘Fee Schedule’’) to add
and modify certain Step-Up Tiers, add
a Non-Displayed Step-Up Tier and to
modify Fee Codes HB, HV and HY.3 The
proposed rule change was immediately
effective upon filing with the
Commission pursuant to Section
19(b)(3)(A) of the Act.4 The proposed
rule change was published for comment
in the Federal Register on March 16,
2023.5 The Commission has received no
comment letters on the proposed rule
change. Under Section 19(b)(3)(C) of the
Act,6 the Commission is hereby: (i)
temporarily suspending File Number
SR–CboeBZX–2023–020; and (ii)
instituting proceedings to determine
whether to approve or disapprove File
Number SR–CboeBZX–2023–020.
II. Description of the Proposed Rule
Change
The Exchange operates a ‘‘MakerTaker’’ model whereby it pays credits to
Members 7 that add liquidity and
assesses fees to those that remove
liquidity.8 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.9
According to the Exchange, 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.10
The Exchange proposes to amend its
Fee Schedule to add and modify certain
Step-Up Tiers, add a Non-Displayed
Step-Up Tier and to modify Fee Codes
3 See
Notice, infra note 5, at 16285.
U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
5 See Securities Exchange Act Release No. 97108
(March 10, 2023), 88 FR 16285 (‘‘Notice’’). The
Exchange initially filed the proposed fee changes on
March 1, 2023 (SR–CboeBZX–2023–017). However,
on March 6, 2023, the Exchange withdrew that
filing and submitted SR–CboeBZX–2023–020.
6 15 U.S.C. 78s(b)(3)(C).
7 See BZX Rule 1.5(n). The term ‘‘Member’’ shall
mean any registered broker or dealer that has been
admitted to membership in the Exchange. A
Member will have the status of a ‘‘member’’ of the
Exchange as that term is defined in Section 3(a)(3)
of the Act. Membership may be granted to a sole
proprietor, partnership, corporation, limited
liability company or other organization which is a
registered broker or dealer pursuant to Section 15
of the Act, and which has been approved by the
Exchange.
8 See Notice, supra note 5, at 16286.
9 Id.
10 Id.
lotter on DSK11XQN23PROD with NOTICES1
4 15
VerDate Sep<11>2014
17:49 May 09, 2023
Jkt 259001
HB, HV and HY, which fee changes
became effective on March 6, 2023.11
With respect to the Exchange’s Step-Up
Tiers, 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, V, and Y
where they increase their relative
liquidity each month over a
predetermined baseline.12 The
Exchange now proposes to add a new
Tier 1 and renumber existing Tiers 1
through 3 (existing Step-Up Tiers 1, 2
and 3 would be renumbered to Tiers 2,
3 and 4 respectively, and will be
referred to herein as ‘‘proposed Step-Up
Tier’’ 2, 3 or 4, as applicable).13
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 14 from January
2023 ≥10,000,000 or Member has a StepUp Add TCV 15 from January 2023
≥0.10%; and (2) Member has an ADV 16
≥0.60% of the TCV.17
Proposed Tiers 2 through 4 would
have the same criteria and provide the
same enhanced rebate as existing Tiers
1 through 3, respectively.18
The Exchange also proposes to amend
footnote 2 to add a Non-Displayed StepUp Tier, which will provide Members
an opportunity to receive an enhanced
rebate from the standard rebate for
liquidity adding non-displayed orders
11 Id.
12 Id. See also Fee Schedule, Footnotes 2, StepUp Tiers.
13 Id.
14 ‘‘Step-Up ADAV’’ means ADAV in the relevant
baseline month subtracted from current ADAV. See
Notice, supra note 5, at 16286.
15 ‘‘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. Id.
16 ‘‘ADV’’ means average daily volume calculated
as the number of shares added or removed,
combined, per day. ADV is calculated on a monthly
basis. Id.
17 ‘‘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. The Exchange excludes from its
calculation of TCV volume on any day that the
Exchange experiences an Exchange System
Disruption, on any day with a scheduled early
market close and the Russell Reconstitution Day.
See Fee Schedule, Definitions.
18 See Notice, supra note 5, at 16286.
PO 00000
Frm 00113
Fmt 4703
Sfmt 4703
that yield fee codes HB,19 HV,20 and
HY 21 and meet certain required
volume-based criteria.22 The proposed
criteria for the Non-Displayed 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.
III. Suspension of the Proposed Rule
Change
Pursuant to Section 19(b)(3)(C) of the
Act,23 at any time within 60 days of the
date of filing of an immediately effective
proposed rule change pursuant to
Section 19(b)(1) of the Act,24 the
Commission summarily may
temporarily suspend the change in the
rules of a self-regulatory organization
(‘‘SRO’’) 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. As discussed below, the
Commission believes a temporary
suspension of the proposed rule change
is necessary and appropriate to allow for
additional analysis of the proposed rule
change’s consistency with the Act and
the rules thereunder.
In support of the proposal, the
Exchange argues that is 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.25 The Exchange believes
that its specific proposal reflects a
competitive pricing structure designed
to incentivize market participants to
direct their order flow to the Exchange,
which the Exchange believes would
19 Orders yielding Fee Code ‘‘HB’’ are nondisplayed orders adding liquidity to BZX (Tape B).
See Fee Schedule, Fee Codes and Associated Fees.
To reflect eligibility for the Non-Displayed Step-Up
Tier for Fee Code HB, the Exchange added footnote
to 2 to Fee Code HB.
20 Orders yielding Fee Code ‘‘HV’’ are nondisplayed orders adding liquidity to BZX (Tape A).
Id. To reflect eligibility for the Non-Displayed StepUp Tier for Fee Code HV, the Exchange added
footnote to 2 to Fee Code HV.
21 Orders yielding Fee Code ‘‘HY’’ are nondisplayed orders adding liquidity to BZX (Tape C).
Id. To reflect eligibility for the Non-Displayed StepUp Tier for Fee Code HY, the Exchange added
footnote to 2 to Fee Code HY.
22 See Notice, supra note 5, at 16286.
23 15 U.S.C. 78s(b)(3)(C).
24 15 U.S.C. 78s(b)(1).
25 See Notice, supra note 5, at 16287.
E:\FR\FM\10MYN1.SGM
10MYN1
Federal Register / Vol. 88, No. 90 / Wednesday, May 10, 2023 / Notices
lotter on DSK11XQN23PROD with NOTICES1
enhance market quality to the benefit of
all Members.26 The Exchange states 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.27 According to the
Exchange, 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.28
Furthermore, the Exchange states that
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.29 The Exchange believes that
increased overall order flow benefits all
Members by contributing towards a
robust and well-balanced market
ecosystem.30
Additionally, the Exchange believes
the proposed Step-Up Tier 1 and NonDisplayed 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.31 The Exchange states
that 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.32 According to the Exchange,
this overall increase in activity deepens
the Exchange’s liquidity pool, offers
additional cost savings, supports the
quality of price discovery, promotes
Notice, supra note 5, at 16286.
28 Id.
30 Id.
31 See
Notice, supra note 5, at 16287.
32 Id.
VerDate Sep<11>2014
17:49 May 09, 2023
Jkt 259001
IV. Proceedings To Determine Whether
To Approve or Disapprove the
Proposed Rule Change
In addition to temporarily suspending
the proposal, the Commission also
hereby institutes proceedings pursuant
34 Id.
42 Id.
35 Id.
43 15
36 Id.
38 Id.
39 Id.
41 See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose
of, and Statutory Basis for, the Proposed Rule
Change’’).
PO 00000
Frm 00114
U.S.C. 78f(b)(4).
U.S.C. 78f(b)(5).
45 15 U.S.C. 78f(b)(8).
46 See 15 U.S.C. 78f(b)(4), (5), and (8),
respectively.
47 For purposes of temporarily suspending the
proposed rule change, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
44 15
40 Id.
29 Id.
exchanges file their proposed rule
changes, specify that such statement
‘‘should be sufficiently detailed and
specific to support a finding that the
proposed rule change is consistent with
[those] requirements.’’ 42
Section 6 of the Act, including
Sections 6(b)(4), (5), and (8), requires
the rules of an exchange to (1) provide
for the equitable allocation of reasonable
fees among members, issuers, and other
persons using the exchange’s
facilities; 43 (2) perfect the mechanism of
a free and open market and a national
market system, protect investors and the
public interest, and not be designed to
permit unfair discrimination between
customers, issuers, brokers, or
dealers; 44 and (3) not impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.45
In temporarily suspending the
Exchange’s fee change, the Commission
intends to further consider whether the
proposal, in particular the proposed
modifications to add and modify certain
Step-Up Tiers and add a Non-Displayed
Step-Up Tier, is consistent with the
statutory requirements applicable to a
national securities exchange under the
Act. The Commission will consider
whether the proposed rule change
satisfies the standards under the Act
and the rules thereunder requiring,
among other things, that an exchange’s
rules provide for the equitable
allocation of reasonable fees among
members, issuers, and other persons
using its facilities; not permit unfair
discrimination between customers,
issuers, brokers or dealers; and do not
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.46
Therefore, the Commission finds that
it is appropriate in the public interest,
for the protection of investors, and
otherwise in furtherance of the purposes
of the Act, to temporarily suspend the
proposed rule change.47
33 Id.
37 Id.
26 Id.
27 See
market transparency, and improves
market quality for all investors.33
The Exchange also 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.34
Further, according to the Exchange, the
proposed rebates are commensurate
with the proposed criteria.35 The
Exchange states that the rebates
reasonably reflect the difficulty in
achieving the applicable criteria as
proposed.36 The Exchange also states
that the proposed tier/rebate will not
adversely impact any Member’s ability
to qualify for other reduced fee or
enhanced rebate tiers.37 Should a
Member not meet the proposed criteria
under the modified tier, the Member
will merely not receive that
corresponding enhanced rebate.38
Additionally, the Exchange states that
relative volume-based incentives and
discounts have been widely adopted by
exchanges, including the Exchange, 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.39 According to the Exchange,
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.40
When exchanges file their proposed
rule changes with the Commission,
including fee filings like the Exchange’s
present proposal, they are required to
provide a statement supporting the
proposal’s basis under the Act and the
rules and regulations thereunder
applicable to the exchange.41 The
instructions to Form 19b–4, on which
30183
Fmt 4703
Sfmt 4703
E:\FR\FM\10MYN1.SGM
10MYN1
30184
Federal Register / Vol. 88, No. 90 / Wednesday, May 10, 2023 / Notices
lotter on DSK11XQN23PROD with NOTICES1
to Sections 19(b)(3)(C) 48 and 19(b)(2)(B)
of the Act 49 to determine whether the
proposed rule change should be
approved or disapproved. Institution of
proceedings does not indicate that the
Commission has reached any
conclusions with respect to any of the
issues involved. Rather, the Commission
seeks and encourages interested persons
to provide additional comment on the
proposed rule change to inform the
Commission’s analysis of whether to
approve or disapprove the proposed
rule change.
Pursuant to Section 19(b)(2)(B) of the
Act,50 the Commission is providing
notice of the grounds for possible
disapproval under consideration:
• Whether the Exchange has
demonstrated how the proposal is
consistent with Section 6(b)(4) of the
Act, which requires that the rules of a
national securities exchange ‘‘provide
for the equitable allocation of reasonable
dues, fees, and other charges among its
members and issuers and other persons
using its facilities;’’ 51
• Whether the Exchange has
demonstrated how the proposal is
consistent with Section 6(b)(5) of the
Act, which requires, among other
things, that the rules of a national
securities exchange be ‘‘designed to
perfect the operation of a free and open
market and a national market system’’
and ‘‘protect investors and the public
interest,’’ and not be ‘‘designed to
permit unfair discrimination between
customers, issuers, brokers, or
dealers;’’ 52 and
• Whether the Exchange has
demonstrated how the proposal is
consistent with Section 6(b)(8) of the
Act, which requires that the rules of a
national securities exchange ‘‘not
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of [the Act].’’ 53
As discussed in Section III above, the
Exchange argues that all Members will
48 15 U.S.C. 78s(b)(3)(C). Once the Commission
temporarily suspends a proposed rule change,
Section 19(b)(3)(C) of the Act requires that the
Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule
change should be approved or disapproved.
49 15 U.S.C. 78s(b)(2)(B).
50 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the
Act also provides that proceedings to determine
whether to disapprove a proposed rule change must
be concluded within 180 days of the date of
publication of notice of the filing of the proposed
rule change. See id. The time for conclusion of the
proceedings may be extended for up to 60 days if
the Commission finds good cause for such
extension and publishes its reasons for so finding,
or if the exchange consents to the longer period. See
id.
51 15 U.S.C. 78f(b)(4).
52 15 U.S.C. 78f(b)(5).
53 15 U.S.C. 78f(b)(8).
VerDate Sep<11>2014
17:49 May 09, 2023
Jkt 259001
be eligible for the proposed new tiers
and have the opportunity to meet the
tiers’ criteria. The Exchange further
states the proposal provides a
reasonable means to incentivize
Members to continue to send certain
types of order flow to the Exchange.
Because the proposed Step-Up Tier and
Non-Displayed Step-Up Tier are
designed to provide more favorable
pricing to Members with volume
increases over specified baseline
months, questions are raised as to
whether the Exchange has satisfied its
burden to demonstrate that such tiers
will, as the Exchange argues, continue
to provide a reasonable means to
incentivize Members to send certain
types of order flow to the Exchange, in
a manner consistent with the Act and
the rules thereunder when the specified
baseline months remain the same and
may continue indefinitely.
Under the Commission’s Rules of
Practice, the ‘‘burden to demonstrate
that a proposed rule change is
consistent with the [Act] and the rules
and regulations issued thereunder . . .
is on the [SRO] that proposed the rule
change.’’ 54 The description of a
proposed rule change, its purpose and
operation, its effect, and a legal analysis
of its consistency with applicable
requirements must all be sufficiently
detailed and specific to support an
affirmative Commission finding,55 and
any failure of an SRO to provide this
information may result in the
Commission not having a sufficient
basis to make an affirmative finding that
a proposed rule change is consistent
with the Act and the applicable rules
and regulations.56
The Commission is instituting
proceedings to allow for additional
consideration and comment on the
issues raised herein, including as to
whether the proposal is consistent with
the Act, specifically, with its
requirements that the rules of a national
securities exchange provide for the
equitable allocation of reasonable dues,
fees, and other charges among its
members, issuers, and other persons
using its facilities; are designed to
perfect the operation of a free and open
market and a national market system,
and to protect investors and the public
interest; are not designed to permit
unfair discrimination between
customers, issuers, brokers, or dealers;
and do not impose any burden on
competition that is not necessary or
appropriate in furtherance of the
54 17
CFR 201.700(b)(3).
id.
56 See id.
55 See
PO 00000
Frm 00115
Fmt 4703
Sfmt 4703
purposes of the Act; 57 as well as any
other provision of the Act, or the rules
and regulations thereunder.
V. Commission’s Solicitation of
Comments
The Commission requests written
views, data, and arguments with respect
to the concerns identified above as well
as any other relevant concerns. Such
comments should be submitted by May
31, 2023. Rebuttal comments should be
submitted by June 14, 2023. Although
there do not appear to be any issues
relevant to approval or disapproval that
would be facilitated by an oral
presentation of views, data, and
arguments, the Commission will
consider, pursuant to Rule 19b–4, any
request for an opportunity to make an
oral presentation.58
The Commission asks that
commenters address the sufficiency and
merit of the Exchange’s statements in
support of the proposal, in addition to
any other comments they may wish to
submit about the proposed rule change.
Interested persons are invited to
submit written data, views, and
arguments concerning the proposed rule
change, including whether the proposal
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 No. 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
57 See
15 U.S.C. 78f(b)(4), (5), and (8).
U.S.C. 78s(b)(2). Section 19(b)(2) of the Act
grants the Commission flexibility to determine what
type of proceeding—either oral or notice and
opportunity for written comments—is appropriate
for consideration of a particular proposal by an
SRO. See Securities Acts Amendments of 1975,
Report of the Senate Committee on Banking,
Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
58 15
E:\FR\FM\10MYN1.SGM
10MYN1
Federal Register / Vol. 88, No. 90 / Wednesday, May 10, 2023 / Notices
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. Do not include
personal identifiable information in
submissions; you should submit only
information that you wish to make
available publicly. We may redact in
part or withhold entirely from
publication submitted material that is
obscene or subject to copyright
protection. All submissions should refer
to File Number SR–CboeBZX–2023–020
and should be submitted on or before
May 31, 2023. Rebuttal comments
should be submitted by June 14, 2023.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(3)(C) of the Act,59 that File
Number SR–CboeBZX–2023–020 be and
hereby is, temporarily suspended. In
addition, the Commission is instituting
proceedings to determine whether the
proposed rule change should be
approved or disapproved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.60
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023–09904 Filed 5–9–23; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–97432; File No. SR–
CboeEDGA–2023–007]
Self-Regulatory Organizations; Cboe
EDGA Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fee Schedule
lotter on DSK11XQN23PROD with NOTICES1
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
59 15
U.S.C. 78s(b)(3)(C).
CFR 200.30–3(a)(57) and (58).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
60 17
VerDate Sep<11>2014
17:49 May 09, 2023
Jkt 259001
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) 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/edga/),
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
SECURITIES AND EXCHANGE
COMMISSION
May 4, 2023.
notice is hereby given that on May 1,
2023, Cboe EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) 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.
The Exchange proposes to amend its
Fee Schedule applicable to its equities
trading platform (‘‘EDGA Equities’’) by
introducing new fee code DX and
modifying the description of existing fee
code DQ. The Exchange proposes to
implement these changes effective May
1, 2023.
The Exchange first notes that it
operates in a highly competitive market
in which market participants can
readily direct order flow to competing
venues if they deem fee levels at a
particular venue to be excessive or
incentives to be insufficient. More
specifically, the Exchange is only one of
16 registered equities exchanges, as well
as a number of alternative trading
PO 00000
Frm 00116
Fmt 4703
Sfmt 4703
30185
systems and other off-exchange venues
that do not have similar self-regulatory
responsibilities under the Securities
Exchange Act of 1934 (the ‘‘Act’’), to
which market participants may direct
their order flow. Based on publicly
available information,3 no single
registered equities exchange has more
than 16% 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
‘‘Taker-Maker’’ model whereby it pays
credits to members that remove
liquidity and assesses fees to those that
add liquidity. The Exchange’s Fee
Schedule sets forth the standard rebates
and rates applied per share for orders
that remove and provide liquidity,
respectively. Currently, for orders in
securities priced at or above $1.00, the
Exchange provides a standard rebate of
$0.00180 [sic] per share for orders that
remove liquidity and assesses a fee of
$0.0030 per share for orders that add
liquidity.4 For orders in securities
priced below $1.00, the Exchange does
not assess any fees or provide any
rebates for orders that add or remove
liquidity.5 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.
Fee Codes DQ and DX
The Exchange currently offers fee
code DQ, which is appended to
Midpoint Discretionary Orders
(‘‘MDOs’’) 6 using the Quote Depletion
Protection (‘‘QDP’’) 7 order instruction.
QDP is designed to provide enhanced
protections to MDOs by tracking
significant executions that constitute the
best bid or offer on the EDGA Book 8 and
enabling Users to avoid potentially
unfavorable executions by preventing
MDOs entered with the optional QDP
instruction from exercising discretion to
trade at more aggressive prices when
3 See Cboe Global Markets, U.S. Equities Market
Volume Summary, Month-to-Date (April 21, 2023),
available at https://www.cboe.com/us/equities/
market_statistics/.
4 See EDGA Equities Fee Schedule, Standard
Rates.
5 Id.
6 See Exchange Rule 11.8(e).
7 See Exchange Rule 11.8(e)(10).
8 See Exchange Rule 1.5(d).
E:\FR\FM\10MYN1.SGM
10MYN1
]]>Agencies
[Federal Register Volume 88, Number 90 (Wednesday, May 10, 2023)]
[Notices]
[Pages 30181-30185]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-09904]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97437; File No. SR-CboeBZX-2023-020]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.;
Suspension of and Order Instituting Proceedings To Determine Whether To
Approve or Disapprove Proposed Rule Change To Amend the BZX Equities
Fee Schedule To Add and Modify Certain Step-Up Tiers, Add a Non-
Displayed Step-Up Tier and Modify Certain Fee Codes
May 4, 2023.
I. Introduction
On March 6, 2023, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``EDGX'') filed with the Securities and Exchange Commission
(``Commission''), pursuant to Section 19(b)(1) of the Securities
Exchange Act of 1934 (``Exchange Act'' or ``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule
[[Page 30182]]
change (File Number SR-CboeBZX-2023-020) to amend the BZX Equities Fee
Schedule (``Fee Schedule'') to add and modify certain Step-Up Tiers,
add a Non-Displayed Step-Up Tier and to modify Fee Codes HB, HV and
HY.\3\ The proposed rule change was immediately effective upon filing
with the Commission pursuant to Section 19(b)(3)(A) of the Act.\4\ The
proposed rule change was published for comment in the Federal Register
on March 16, 2023.\5\ The Commission has received no comment letters on
the proposed rule change. Under Section 19(b)(3)(C) of the Act,\6\ the
Commission is hereby: (i) temporarily suspending File Number SR-
CboeBZX-2023-020; and (ii) instituting proceedings to determine whether
to approve or disapprove File Number SR-CboeBZX-2023-020.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Notice, infra note 5, at 16285.
\4\ 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take
effect upon filing with the Commission if it is designated by the
exchange as ``establishing or changing a due, fee, or other charge
imposed by the self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory organization.''
15 U.S.C. 78s(b)(3)(A)(ii).
\5\ See Securities Exchange Act Release No. 97108 (March 10,
2023), 88 FR 16285 (``Notice''). The Exchange initially filed the
proposed fee changes on March 1, 2023 (SR-CboeBZX-2023-017).
However, on March 6, 2023, the Exchange withdrew that filing and
submitted SR-CboeBZX-2023-020.
\6\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------
II. Description of the Proposed Rule Change
The Exchange operates a ``Maker-Taker'' model whereby it pays
credits to Members \7\ that add liquidity and assesses fees to those
that remove liquidity.\8\ 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.\9\ According
to the Exchange, 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.\10\
---------------------------------------------------------------------------
\7\ See BZX Rule 1.5(n). The term ``Member'' shall mean any
registered broker or dealer that has been admitted to membership in
the Exchange. A Member will have the status of a ``member'' of the
Exchange as that term is defined in Section 3(a)(3) of the Act.
Membership may be granted to a sole proprietor, partnership,
corporation, limited liability company or other organization which
is a registered broker or dealer pursuant to Section 15 of the Act,
and which has been approved by the Exchange.
\8\ See Notice, supra note 5, at 16286.
\9\ Id.
\10\ Id.
---------------------------------------------------------------------------
The Exchange proposes to amend its Fee Schedule to add and modify
certain Step-Up Tiers, add a Non-Displayed Step-Up Tier and to modify
Fee Codes HB, HV and HY, which fee changes became effective on March 6,
2023.\11\ With respect to the Exchange's Step-Up Tiers, 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, V, and Y where they
increase their relative liquidity each month over a predetermined
baseline.\12\ The Exchange now proposes to add a new Tier 1 and
renumber existing Tiers 1 through 3 (existing Step-Up Tiers 1, 2 and 3
would be renumbered to Tiers 2, 3 and 4 respectively, and will be
referred to herein as ``proposed Step-Up Tier'' 2, 3 or 4, as
applicable).\13\ Specifically, proposed Tier 1 would provide for the
following:
---------------------------------------------------------------------------
\11\ Id.
\12\ Id. See also Fee Schedule, Footnotes 2, Step-Up Tiers.
\13\ Id.
---------------------------------------------------------------------------
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 \14\ from January 2023
>=10,000,000 or Member has a Step-Up Add TCV \15\ from January 2023
>=0.10%; and (2) Member has an ADV \16\ >=0.60% of the TCV.\17\
---------------------------------------------------------------------------
\14\ ``Step-Up ADAV'' means ADAV in the relevant baseline month
subtracted from current ADAV. See Notice, supra note 5, at 16286.
\15\ ``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. Id.
\16\ ``ADV'' means average daily volume calculated as the number
of shares added or removed, combined, per day. ADV is calculated on
a monthly basis. Id.
\17\ ``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. The Exchange excludes from its calculation of TCV volume
on any day that the Exchange experiences an Exchange System
Disruption, on any day with a scheduled early market close and the
Russell Reconstitution Day. See Fee Schedule, Definitions.
---------------------------------------------------------------------------
Proposed Tiers 2 through 4 would have the same criteria and provide
the same enhanced rebate as existing Tiers 1 through 3,
respectively.\18\
---------------------------------------------------------------------------
\18\ See Notice, supra note 5, at 16286.
---------------------------------------------------------------------------
The Exchange also 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 for liquidity
adding non-displayed orders that yield fee codes HB,\19\ HV,\20\ and HY
\21\ and meet certain required volume-based criteria.\22\ The proposed
criteria for the Non-Displayed Step-Up Tier is as follows:
---------------------------------------------------------------------------
\19\ Orders yielding Fee Code ``HB'' are non-displayed orders
adding liquidity to BZX (Tape B). See Fee Schedule, Fee Codes and
Associated Fees. To reflect eligibility for the Non-Displayed Step-
Up Tier for Fee Code HB, the Exchange added footnote to 2 to Fee
Code HB.
\20\ Orders yielding Fee Code ``HV'' are non-displayed orders
adding liquidity to BZX (Tape A). Id. To reflect eligibility for the
Non-Displayed Step-Up Tier for Fee Code HV, the Exchange added
footnote to 2 to Fee Code HV.
\21\ Orders yielding Fee Code ``HY'' are non-displayed orders
adding liquidity to BZX (Tape C). Id. To reflect eligibility for the
Non-Displayed Step-Up Tier for Fee Code HY, the Exchange added
footnote to 2 to Fee Code HY.
\22\ See Notice, supra note 5, at 16286.
---------------------------------------------------------------------------
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.
III. Suspension of the Proposed Rule Change
Pursuant to Section 19(b)(3)(C) of the Act,\23\ at any time within
60 days of the date of filing of an immediately effective proposed rule
change pursuant to Section 19(b)(1) of the Act,\24\ the Commission
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') 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. As discussed below, the Commission believes a temporary
suspension of the proposed rule change is necessary and appropriate to
allow for additional analysis of the proposed rule change's consistency
with the Act and the rules thereunder.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78s(b)(3)(C).
\24\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
In support of the proposal, the Exchange argues that is 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.\25\
The Exchange believes that its specific proposal reflects a competitive
pricing structure designed to incentivize market participants to direct
their order flow to the Exchange, which the Exchange believes would
[[Page 30183]]
enhance market quality to the benefit of all Members.\26\ The Exchange
states 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.\27\ According to the
Exchange, 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.\28\
Furthermore, the Exchange states that 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.\29\ The Exchange believes that increased overall order
flow benefits all Members by contributing towards a robust and well-
balanced market ecosystem.\30\
---------------------------------------------------------------------------
\25\ See Notice, supra note 5, at 16287.
\26\ Id.
\27\ See Notice, supra note 5, at 16286.
\28\ Id.
\29\ Id.
\30\ Id.
---------------------------------------------------------------------------
Additionally, 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.\31\ The Exchange states that 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.\32\ According to the Exchange, 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.\33\
---------------------------------------------------------------------------
\31\ See Notice, supra note 5, at 16287.
\32\ Id.
\33\ Id.
---------------------------------------------------------------------------
The Exchange also 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.\34\
Further, according to the Exchange, the proposed rebates are
commensurate with the proposed criteria.\35\ The Exchange states that
the rebates reasonably reflect the difficulty in achieving the
applicable criteria as proposed.\36\ The Exchange also states that the
proposed tier/rebate will not adversely impact any Member's ability to
qualify for other reduced fee or enhanced rebate tiers.\37\ Should a
Member not meet the proposed criteria under the modified tier, the
Member will merely not receive that corresponding enhanced rebate.\38\
---------------------------------------------------------------------------
\34\ Id.
\35\ Id.
\36\ Id.
\37\ Id.
\38\ Id.
---------------------------------------------------------------------------
Additionally, the Exchange states that relative volume-based
incentives and discounts have been widely adopted by exchanges,
including the Exchange, 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.\39\ According to the
Exchange, 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.\40\
---------------------------------------------------------------------------
\39\ Id.
\40\ Id.
---------------------------------------------------------------------------
When exchanges file their proposed rule changes with the
Commission, including fee filings like the Exchange's present proposal,
they are required to provide a statement supporting the proposal's
basis under the Act and the rules and regulations thereunder applicable
to the exchange.\41\ The instructions to Form 19b-4, on which exchanges
file their proposed rule changes, specify that such statement ``should
be sufficiently detailed and specific to support a finding that the
proposed rule change is consistent with [those] requirements.'' \42\
---------------------------------------------------------------------------
\41\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory
Organization's Statement of the Purpose of, and Statutory Basis for,
the Proposed Rule Change'').
\42\ Id.
---------------------------------------------------------------------------
Section 6 of the Act, including Sections 6(b)(4), (5), and (8),
requires the rules of an exchange to (1) provide for the equitable
allocation of reasonable fees among members, issuers, and other persons
using the exchange's facilities; \43\ (2) perfect the mechanism of a
free and open market and a national market system, protect investors
and the public interest, and not be designed to permit unfair
discrimination between customers, issuers, brokers, or dealers; \44\
and (3) not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.\45\
---------------------------------------------------------------------------
\43\ 15 U.S.C. 78f(b)(4).
\44\ 15 U.S.C. 78f(b)(5).
\45\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
In temporarily suspending the Exchange's fee change, the Commission
intends to further consider whether the proposal, in particular the
proposed modifications to add and modify certain Step-Up Tiers and add
a Non-Displayed Step-Up Tier, is consistent with the statutory
requirements applicable to a national securities exchange under the
Act. The Commission will consider whether the proposed rule change
satisfies the standards under the Act and the rules thereunder
requiring, among other things, that an exchange's rules provide for the
equitable allocation of reasonable fees among members, issuers, and
other persons using its facilities; not permit unfair discrimination
between customers, issuers, brokers or dealers; and do not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of the Act.\46\
---------------------------------------------------------------------------
\46\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
---------------------------------------------------------------------------
Therefore, the Commission finds that it is appropriate in the
public interest, for the protection of investors, and otherwise in
furtherance of the purposes of the Act, to temporarily suspend the
proposed rule change.\47\
---------------------------------------------------------------------------
\47\ For purposes of temporarily suspending the proposed rule
change, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change
In addition to temporarily suspending the proposal, the Commission
also hereby institutes proceedings pursuant
[[Page 30184]]
to Sections 19(b)(3)(C) \48\ and 19(b)(2)(B) of the Act \49\ to
determine whether the proposed rule change should be approved or
disapproved. Institution of proceedings does not indicate that the
Commission has reached any conclusions with respect to any of the
issues involved. Rather, the Commission seeks and encourages interested
persons to provide additional comment on the proposed rule change to
inform the Commission's analysis of whether to approve or disapprove
the proposed rule change.
---------------------------------------------------------------------------
\48\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily
suspends a proposed rule change, Section 19(b)(3)(C) of the Act
requires that the Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule change should be
approved or disapproved.
\49\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\50\ the Commission is
providing notice of the grounds for possible disapproval under
consideration:
---------------------------------------------------------------------------
\50\ 15 U.S.C. 78s(b)(2)(B). Section 19(b)(2)(B) of the Act also
provides that proceedings to determine whether to disapprove a
proposed rule change must be concluded within 180 days of the date
of publication of notice of the filing of the proposed rule change.
See id. The time for conclusion of the proceedings may be extended
for up to 60 days if the Commission finds good cause for such
extension and publishes its reasons for so finding, or if the
exchange consents to the longer period. See id.
---------------------------------------------------------------------------
Whether the Exchange has demonstrated how the proposal is
consistent with Section 6(b)(4) of the Act, which requires that the
rules of a national securities exchange ``provide for the equitable
allocation of reasonable dues, fees, and other charges among its
members and issuers and other persons using its facilities;'' \51\
---------------------------------------------------------------------------
\51\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Whether the Exchange has demonstrated how the proposal is
consistent with Section 6(b)(5) of the Act, which requires, among other
things, that the rules of a national securities exchange be ``designed
to perfect the operation of a free and open market and a national
market system'' and ``protect investors and the public interest,'' and
not be ``designed to permit unfair discrimination between customers,
issuers, brokers, or dealers;'' \52\ and
---------------------------------------------------------------------------
\52\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Whether the Exchange has demonstrated how the proposal is
consistent with Section 6(b)(8) of the Act, which requires that the
rules of a national securities exchange ``not impose any burden on
competition not necessary or appropriate in furtherance of the purposes
of [the Act].'' \53\
---------------------------------------------------------------------------
\53\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
As discussed in Section III above, the Exchange argues that all
Members will be eligible for the proposed new tiers and have the
opportunity to meet the tiers' criteria. The Exchange further states
the proposal provides a reasonable means to incentivize Members to
continue to send certain types of order flow to the Exchange. Because
the proposed Step-Up Tier and Non-Displayed Step-Up Tier are designed
to provide more favorable pricing to Members with volume increases over
specified baseline months, questions are raised as to whether the
Exchange has satisfied its burden to demonstrate that such tiers will,
as the Exchange argues, continue to provide a reasonable means to
incentivize Members to send certain types of order flow to the
Exchange, in a manner consistent with the Act and the rules thereunder
when the specified baseline months remain the same and may continue
indefinitely.
Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the [SRO]
that proposed the rule change.'' \54\ The description of a proposed
rule change, its purpose and operation, its effect, and a legal
analysis of its consistency with applicable requirements must all be
sufficiently detailed and specific to support an affirmative Commission
finding,\55\ and any failure of an SRO to provide this information may
result in the Commission not having a sufficient basis to make an
affirmative finding that a proposed rule change is consistent with the
Act and the applicable rules and regulations.\56\
---------------------------------------------------------------------------
\54\ 17 CFR 201.700(b)(3).
\55\ See id.
\56\ See id.
---------------------------------------------------------------------------
The Commission is instituting proceedings to allow for additional
consideration and comment on the issues raised herein, including as to
whether the proposal is consistent with the Act, specifically, with its
requirements that the rules of a national securities exchange provide
for the equitable allocation of reasonable dues, fees, and other
charges among its members, issuers, and other persons using its
facilities; are designed to perfect the operation of a free and open
market and a national market system, and to protect investors and the
public interest; are not designed to permit unfair discrimination
between customers, issuers, brokers, or dealers; and do not impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act; \57\ as well as any other
provision of the Act, or the rules and regulations thereunder.
---------------------------------------------------------------------------
\57\ See 15 U.S.C. 78f(b)(4), (5), and (8).
---------------------------------------------------------------------------
V. Commission's Solicitation of Comments
The Commission requests written views, data, and arguments with
respect to the concerns identified above as well as any other relevant
concerns. Such comments should be submitted by May 31, 2023. Rebuttal
comments should be submitted by June 14, 2023. Although there do not
appear to be any issues relevant to approval or disapproval that would
be facilitated by an oral presentation of views, data, and arguments,
the Commission will consider, pursuant to Rule 19b-4, any request for
an opportunity to make an oral presentation.\58\
---------------------------------------------------------------------------
\58\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants the
Commission flexibility to determine what type of proceeding--either
oral or notice and opportunity for written comments--is appropriate
for consideration of a particular proposal by an SRO. See Securities
Acts Amendments of 1975, Report of the Senate Committee on Banking,
Housing and Urban Affairs to Accompany S. 249, S. Rep. No. 75, 94th
Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------
The Commission asks that commenters address the sufficiency and
merit of the Exchange's statements in support of the proposal, in
addition to any other comments they may wish to submit about the
proposed rule change.
Interested persons are invited to submit written data, views, and
arguments concerning the proposed rule change, including whether the
proposal 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 No. 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
[[Page 30185]]
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. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to File Number SR-CboeBZX-2023-020 and should be submitted
on or before May 31, 2023. Rebuttal comments should be submitted by
June 14, 2023.
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(3)(C) of the
Act,\59\ that File Number SR-CboeBZX-2023-020 be and hereby is,
temporarily suspended. In addition, the Commission is instituting
proceedings to determine whether the proposed rule change should be
approved or disapproved.
---------------------------------------------------------------------------
\59\ 15 U.S.C. 78s(b)(3)(C).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\60\
---------------------------------------------------------------------------
\60\ 17 CFR 200.30-3(a)(57) and (58).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-09904 Filed 5-9-23; 8:45 am]
BILLING CODE 8011-01-P
