Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule, 49518-49521 [2023-16122]
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Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Notices
operative delay is consistent with the
protection of investors and the public
interest. Therefore, the Commission
hereby waives the operative delay and
designates the proposal operative upon
filing.16
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.
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
a.m. and 3 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–CboeEDGX–2023–046 and should be
submitted on or before August 21, 2023.
IV. Solicitation of Comments
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.17
J. Matthew DeLesDernier,
Deputy Secretary.
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–
CboeEDGX–2023–046 on the subject
line.
ddrumheller on DSK120RN23PROD with NOTICES1
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–CboeEDGX–2023–046. 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
[FR Doc. 2023–16112 Filed 7–28–23; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–97977; File No. SR–
CboeBZX–2023–049]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fee Schedule
July 25, 2023.
Pursuant to section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on July 12,
2023, Cboe BZX Exchange, Inc.
(‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
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.
16 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
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17 17
CFR 200.30–3(a)(12), (a)(59).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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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 Add Volume
Tier and renumber the remaining tiers;
(2) adopt a new Step-Up Tier; and (3)
modifying the rates associated with
certain fee codes. The Exchange
proposes to implement the proposed
change to its fee schedule on July 3,
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
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
3 The Exchange initially filed the proposed fee
change on June 30, 2023 (SR-CboeBZX–2023–045).
On July 12, 2023, the Exchange withdrew that
proposal and submitted this proposal.
4 See Cboe Global Markets, U.S. Equities Market
Volume Summary, Month-to-Date (June 22, 2023),
available at https://www.cboe.com//equities/
market_statistics/.
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Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Notices
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.
Add Volume Tiers
Pursuant to footnote 1 of the Fee
Schedule, the Exchange currently offers
various Add/Remove Volume Tiers. In
particular, the Exchange offers seven
Add Volume Tiers that provide
Members an opportunity to receive
enhanced rebates for orders yielding fee
codes B,7 V,8 and Y 9 where a Member
reaches certain add volume-based
criteria offered in each tier. The
Exchange now proposes to introduce a
new Add Volume Tier 4 and renumber
existing Add Volume Tiers 4–7. The
proposed criteria of new Add Volume
Tier 4 is as follows:
• Proposed Add Volume Tier 4 will
provide a rebate of $0.0028 per share for
qualifying orders (i.e., orders yielding
fee codes B, V, or Y) where (1) Member
is enrolled in at least 50 BZX-listed LMP
Securities 10 for which it meets the
5 See
BZX Equities Fee Schedule, Standard Rates.
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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).
10 ‘‘LMP Securities’’ means a list of securities
included in the Liquidity Management Program, the
universe of which will be determined by the
Exchange and published in a circular distributed to
Members and on the Exchange’s website. Such LMP
Securities will include all Cboe-listed ETPs and
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following criteria for at least 50% of the
trading days in the applicable month: (i)
Member has an NBBO Time 11 ≥15% or
an NBBO Size Time 12 ≥25%; and (ii)
Member has a Displayed Size Time 13
≥90%; and (2) Member is enrolled in at
least 30 LMM Securities; 14 and (3)
Member has an ADAV as a percentage
of TCV 15 ≥0.15%.
The Exchange’s proposal to introduce
a new Add Volume Tier 4 is designed
to provide Members with an additional
way in which to receive an enhanced
rebate if certain criteria are satisfied,
specifically by incentivizing additional
volume in securities identified by the
Exchange, including BZX-listed
securities. The Exchange believes that
by introducing proposed Add Volume
Tier 4 Members are incentivized to add
displayed volume on the Exchange,
thereby contributing to a deeper and
more liquid market, which benefits all
market participants and provides greater
execution opportunities on the
Exchange.
yielding fee codes B, V, or Y) where
Member has a Step-Up ADAV 16 from
June 2023 ≥10,000,000.
Additionally, the Exchange notes that
Proposed Step-Up Tier 1 will expire no
later than September 30, 2023, which
the Exchange will indicate on the
Exchange’s fee schedule.
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. Increased overall order flow
benefits all Members by contributing
towards a robust and well-balanced
market ecosystem.
Step-Up Tiers
Pursuant to footnote 2 of the Fee
Schedule, the Exchange currently offers
two Step Up Tiers 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.
The Exchange now proposes to add a
new Step-Up Tier 1. Proposed Step-Up
Tier 1 would provide for the following:
• Proposed Step-Up Tier 1 would
offer an enhanced rebate of $0.0028 per
share for qualifying orders (i.e., orders
Fee Code Changes
The Exchange offers various fee codes
for orders routed away from the
Exchange. The Exchange is proposing to
modify the routing fees associated with
fee codes BY,17 BJ,18 AX,19 AA,20 AY,21
P,22 and RY 23 to match the base add or
remove rate for the associated market
center to which the order is routed. The
rebates for fee codes BJ, AA, and P will
be revised to $0.0016 per share in
securities priced above $1.00.24 The
rebates for fee codes BY and AY will be
revised to $0.0002 per share in
securities priced above $1.00.25 The fee
for fee code RY will be revised to
$0.0020 per share in securities priced
above $1.00.26 The fee for fee code AX
will be revised to $0.0030 per share in
securities priced above $1.00.27 There
certain non-Cboe listed-ETPs for which the
Exchange wants to incentive Members to provide
enhanced market quality. All Cboe-listed securities
will be LMP Securities immediately upon listing on
the Exchange. The Exchange will not remove a
security from the list of LMP Securities without 30
days prior notice.
11 ‘‘NBBO Time’’ means the average of the
percentage of time during regular trading hours
during which the Member maintains at least 100
shares at each of the NBB and NBO.
12 ‘‘NBBO Size Time’’ means the percentage of
time during regular trading hours during which
there are size-setting quotes at the NBBO on the
Exchange.
13 ‘‘Displayed Size Time’’ means the percentage of
time during regular trading hours during which the
Member maintains at least 2,500 displayed shares
on the bid and separately maintains at least 2,500
displayed shares on the offer that are priced no
more than 2% away from the NBB and NBO,
respectively.
14 ‘‘LMM Securities’’ are BZX-listed securities for
which a Lead Market Maker (‘‘LMM’’) for which the
Member is the LMM.
15 ‘‘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.
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16 ‘‘Step-Up ADAV’’ means ADAV in the relevant
baseline month subtracted from current ADAV.
17 Fee code BY is appended to orders routed to
BYX using Destination Specific, TRIM or SLIM
routing strategy.
18 Fee code BJ is appended to orders routed to
EDGA using TRIM or SLIM routing strategy.
19 Fee code AX is appended to orders routed to
EDGX using ALLB routing strategy.
20 Fee code AA is appended to orders routed to
EDGA using ALLB routing strategy.
21 Fee code AY is appended to orders routed to
BYX using the ALLB routing strategy.
22 Fee code P is appended to orders routed to
EDGX that add liquidity.
23 Fee code RY is appended to orders routed to
BYX that add liquidity.
24 See BZX Equities Fee Schedule, Standard
Rates; EDGA Equities Fee Schedule, Standard Rates.
25 See BYX Equities Fee Schedule, Standard
Rates.
26 Id.
27 See EDGX Equities Fee Schedule, Standard
Rates.
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Federal Register / Vol. 88, No. 145 / Monday, July 31, 2023 / Notices
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are no changes to the fees or rebates
associated with securities priced below
$1.00.
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.28 Specifically,
the Exchange believes the proposed rule
change is consistent with the section
6(b)(5) 29 requirements that the rules of
an exchange be designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, to remove impediments to
and perfect the mechanism of a free and
open market and a national market
system, and, in general, to protect
investors and the public interest.
Additionally, the Exchange believes the
proposed rule change is consistent with
the section 6(b)(5) 30 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) 31 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 Add Volume Tier 4 and
a new Step-Up Tier 1 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 Add Volume Tier 4 and StepUp Tier 1 are reasonable as they serve
to incentivize Members to increase their
liquidity-adding, displayed volume,
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 are designed to
incentivize continuous displayed
liquidity, which signals other market
participants to take the additional
execution opportunities provided by
such liquidity. 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.
The Exchange believes the proposed
changes to fee codes BY, BJ, AX, AA,
AY, P, and RY are reasonable and not
unfairly discriminatory as these changes
will apply to all Members and do not
represent a significant departure from
the Exchange’s general pricing structure.
Indeed, the proposed changes to these
fee codes are intended to match the base
add or remove rates on the Exchanges
affiliates.32 The Exchange also believes
the proposed Add Volume Tier 4 and
Step-Up Tier 1 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 offexchange 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 proposed
Add Volume Tier 4 and at least one
Member will be able to satisfy the
criteria proposed under proposed StepUp 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,33 including the Exchange,34
and are reasonable, equitable and nondiscriminatory because they are open to
32 Supra
notes 24–27.
e.g., EDGX Equities Fee Schedule, Footnote
1, Add/Remove Volume Tiers.
34 See e.g., BZX Equities Fee Schedule, Footnote
1, Add/Remove Volume Tiers.
28 15
U.S.C. 78f(b).
29 15 U.S.C. 78f(b)(5).
30 Id.
31 15 U.S.C. 78f(b)(4)
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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
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.’’ 35
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
are eligible for the proposed Add
Volume Tier 4 and proposed Step-Up
Tier 1, have a reasonable opportunity to
meet the tiers’ criteria and will receive
the corresponding additional rebates if
such criteria are met. Additionally, the
proposed tiers 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 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
33 See
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35 Securities Exchange Act Release No. 51808, 70
FR 37495, 37498–99 (June 29, 2005) (S7–10–04)
(Final Rule).
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enhancing market quality and
continuing to encourage Members to
send orders, thereby contributing
towards a robust and well-balanced
market ecosystem.
The Exchange believes the proposal to
revise the applicable fees or rebates
associated with routing orders away
from the Exchange does not a burden on
intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. The fees and
rebates associated with routing orders
away from the Exchange apply to all
Members on an equal and nondiscriminatory basis and Members can
choose to use (or not use) the
Exchange’s routing functionality as part
of their decision to submit order flow to
the Exchange.
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
exchange has more than 15% 36 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.’’ 37 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
36 Supra
note 4.
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
37 See
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‘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’. . ..’’.38 Accordingly, the
Exchange does not believe its proposed
fee change imposes any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
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 39 and paragraph (f) of Rule
19b–4 40 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.
49521
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–2023–049. 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
a.m. and 3 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–2023–049 and should be
submitted on or before August 21, 2023.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.41
J. Matthew DeLesDernier,
Deputy Secretary.
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–2023–049 on the subject line.
SECURITIES AND EXCHANGE
COMMISSION
38 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)).
39 15 U.S.C. 78s(b)(3)(A).
40 17 CFR 240.19b–4(f).
Upon Written Request, Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
PO 00000
Frm 00088
Fmt 4703
Sfmt 4703
[FR Doc. 2023–16122 Filed 7–28–23; 8:45 am]
BILLING CODE 8011–01–P
[SEC File No. 270–424, OMB Control No.
3235–0473]
Proposed Collection; Comment
Request; Extension: Rule 17Ad–3(b)
41 17
E:\FR\FM\31JYN1.SGM
CFR 200.30–3(a)(12).
31JYN1
]]>Agencies
[Federal Register Volume 88, Number 145 (Monday, July 31, 2023)]
[Notices]
[Pages 49518-49521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16122]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97977; File No. SR-CboeBZX-2023-049]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule
July 25, 2023.
Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on July 12, 2023, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\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 Add Volume Tier and renumber the remaining tiers; (2) adopt a new
Step-Up Tier; and (3) modifying the rates associated with certain fee
codes. The Exchange proposes to implement the proposed change to its
fee schedule on July 3, 2023.\3\
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\3\ The Exchange initially filed the proposed fee change on June
30, 2023 (SR-CboeBZX-2023-045). On July 12, 2023, the Exchange
withdrew that proposal and submitted this proposal.
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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 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
[[Page 49519]]
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.
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\4\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (June 22, 2023), available at https://www.cboe.com//equities/market_statistics/.
\5\ See BZX Equities Fee Schedule, Standard Rates.
\6\ Id.
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Add Volume Tiers
Pursuant to footnote 1 of the Fee Schedule, the Exchange currently
offers various Add/Remove Volume Tiers. In particular, the Exchange
offers seven Add Volume Tiers that provide Members an opportunity to
receive enhanced rebates for orders yielding fee codes B,\7\ V,\8\ and
Y \9\ where a Member reaches certain add volume-based criteria offered
in each tier. The Exchange now proposes to introduce a new Add Volume
Tier 4 and renumber existing Add Volume Tiers 4-7. The proposed
criteria of new Add Volume Tier 4 is as follows:
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\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).
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Proposed Add Volume Tier 4 will provide a rebate of
$0.0028 per share for qualifying orders (i.e., orders yielding fee
codes B, V, or Y) where (1) Member is enrolled in at least 50 BZX-
listed LMP Securities \10\ for which it meets the following criteria
for at least 50% of the trading days in the applicable month: (i)
Member has an NBBO Time \11\ >=15% or an NBBO Size Time \12\ >=25%; and
(ii) Member has a Displayed Size Time \13\ >=90%; and (2) Member is
enrolled in at least 30 LMM Securities; \14\ and (3) Member has an ADAV
as a percentage of TCV \15\ >=0.15%.
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\10\ ``LMP Securities'' means a list of securities included in
the Liquidity Management Program, the universe of which will be
determined by the Exchange and published in a circular distributed
to Members and on the Exchange's website. Such LMP Securities will
include all Cboe-listed ETPs and certain non-Cboe listed-ETPs for
which the Exchange wants to incentive Members to provide enhanced
market quality. All Cboe-listed securities will be LMP Securities
immediately upon listing on the Exchange. The Exchange will not
remove a security from the list of LMP Securities without 30 days
prior notice.
\11\ ``NBBO Time'' means the average of the percentage of time
during regular trading hours during which the Member maintains at
least 100 shares at each of the NBB and NBO.
\12\ ``NBBO Size Time'' means the percentage of time during
regular trading hours during which there are size-setting quotes at
the NBBO on the Exchange.
\13\ ``Displayed Size Time'' means the percentage of time during
regular trading hours during which the Member maintains at least
2,500 displayed shares on the bid and separately maintains at least
2,500 displayed shares on the offer that are priced no more than 2%
away from the NBB and NBO, respectively.
\14\ ``LMM Securities'' are BZX-listed securities for which a
Lead Market Maker (``LMM'') for which the Member is the LMM.
\15\ ``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.
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The Exchange's proposal to introduce a new Add Volume Tier 4 is
designed to provide Members with an additional way in which to receive
an enhanced rebate if certain criteria are satisfied, specifically by
incentivizing additional volume in securities identified by the
Exchange, including BZX-listed securities. The Exchange believes that
by introducing proposed Add Volume Tier 4 Members are incentivized to
add displayed volume on the Exchange, thereby contributing to a deeper
and more liquid market, which benefits all market participants and
provides greater execution opportunities on the Exchange.
Step-Up Tiers
Pursuant to footnote 2 of the Fee Schedule, the Exchange currently
offers two Step Up Tiers 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. The Exchange now
proposes to add a new Step-Up Tier 1. Proposed Step-Up Tier 1 would
provide for the following:
Proposed Step-Up Tier 1 would offer an enhanced rebate of
$0.0028 per share for qualifying orders (i.e., orders yielding fee
codes B, V, or Y) where Member has a Step-Up ADAV \16\ from June 2023
>=10,000,000.
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\16\ ``Step-Up ADAV'' means ADAV in the relevant baseline month
subtracted from current ADAV.
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Additionally, the Exchange notes that Proposed Step-Up Tier 1 will
expire no later than September 30, 2023, which the Exchange will
indicate on the Exchange's fee schedule.
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. Increased overall order flow benefits
all Members by contributing towards a robust and well-balanced market
ecosystem.
Fee Code Changes
The Exchange offers various fee codes for orders routed away from
the Exchange. The Exchange is proposing to modify the routing fees
associated with fee codes BY,\17\ BJ,\18\ AX,\19\ AA,\20\ AY,\21\
P,\22\ and RY \23\ to match the base add or remove rate for the
associated market center to which the order is routed. The rebates for
fee codes BJ, AA, and P will be revised to $0.0016 per share in
securities priced above $1.00.\24\ The rebates for fee codes BY and AY
will be revised to $0.0002 per share in securities priced above
$1.00.\25\ The fee for fee code RY will be revised to $0.0020 per share
in securities priced above $1.00.\26\ The fee for fee code AX will be
revised to $0.0030 per share in securities priced above $1.00.\27\
There
[[Page 49520]]
are no changes to the fees or rebates associated with securities priced
below $1.00.
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\17\ Fee code BY is appended to orders routed to BYX using
Destination Specific, TRIM or SLIM routing strategy.
\18\ Fee code BJ is appended to orders routed to EDGA using TRIM
or SLIM routing strategy.
\19\ Fee code AX is appended to orders routed to EDGX using ALLB
routing strategy.
\20\ Fee code AA is appended to orders routed to EDGA using ALLB
routing strategy.
\21\ Fee code AY is appended to orders routed to BYX using the
ALLB routing strategy.
\22\ Fee code P is appended to orders routed to EDGX that add
liquidity.
\23\ Fee code RY is appended to orders routed to BYX that add
liquidity.
\24\ See BZX Equities Fee Schedule, Standard Rates; EDGA
Equities Fee Schedule, Standard Rates.
\25\ See BYX Equities Fee Schedule, Standard Rates.
\26\ Id.
\27\ See EDGX Equities Fee Schedule, Standard Rates.
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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.\28\ Specifically, the Exchange believes the proposed rule change
is consistent with the section 6(b)(5) \29\ requirements that the rules
of an exchange be designed to prevent fraudulent and manipulative acts
and practices, to promote just and equitable principles of trade, to
foster cooperation and coordination with persons engaged in regulating,
clearing, settling, processing information with respect to, and
facilitating transactions in securities, to remove impediments to and
perfect the mechanism of a free and open market and a national market
system, and, in general, to protect investors and the public interest.
Additionally, the Exchange believes the proposed rule change is
consistent with the section 6(b)(5) \30\ 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) \31\
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.
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\28\ 15 U.S.C. 78f(b).
\29\ 15 U.S.C. 78f(b)(5).
\30\ Id.
\31\ 15 U.S.C. 78f(b)(4)
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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 Add Volume Tier 4 and a new Step-Up
Tier 1 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 Add Volume Tier 4 and
Step-Up Tier 1 are reasonable as they serve to incentivize Members to
increase their liquidity-adding, displayed volume, 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 are designed to
incentivize continuous displayed liquidity, which signals other market
participants to take the additional execution opportunities provided by
such liquidity. 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.
The Exchange believes the proposed changes to fee codes BY, BJ, AX,
AA, AY, P, and RY are reasonable and not unfairly discriminatory as
these changes will apply to all Members and do not represent a
significant departure from the Exchange's general pricing structure.
Indeed, the proposed changes to these fee codes are intended to match
the base add or remove rates on the Exchanges affiliates.\32\ The
Exchange also believes the proposed Add Volume Tier 4 and Step-Up Tier
1 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 proposed Add Volume Tier 4
and at least one Member will be able to satisfy the criteria proposed
under proposed 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.
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\32\ Supra notes 24-27.
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Additionally, the Exchange notes that relative volume-based
incentives and discounts have been widely adopted by exchanges,\33\
including the Exchange,\34\ 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.
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\33\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
\34\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove
Volume Tiers.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. 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.'' \35\
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\35\ Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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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 are
eligible for the proposed Add Volume Tier 4 and proposed Step-Up Tier
1, have a reasonable opportunity to meet the tiers' criteria and will
receive the corresponding additional rebates if such criteria are met.
Additionally, the proposed tiers 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 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
[[Page 49521]]
enhancing market quality and continuing to encourage Members to send
orders, thereby contributing towards a robust and well-balanced market
ecosystem.
The Exchange believes the proposal to revise the applicable fees or
rebates associated with routing orders away from the Exchange does not
a burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. The fees and
rebates associated with routing orders away from the Exchange apply to
all Members on an equal and non-discriminatory basis and Members can
choose to use (or not use) the Exchange's routing functionality as part
of their decision to submit order flow to the Exchange.
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 exchange has more
than 15% \36\ 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.'' \37\ 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'. . ..''.\38\ Accordingly, the Exchange does not believe its
proposed fee change imposes any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
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\36\ Supra note 4.
\37\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\38\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010)
(quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to section
19(b)(3)(A) of the Act \39\ and paragraph (f) of Rule 19b-4 \40\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission will institute proceedings to
determine whether the proposed rule change should be approved or
disapproved.
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\39\ 15 U.S.C. 78s(b)(3)(A).
\40\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-CboeBZX-2023-049 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-2023-049. 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
a.m. and 3 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-2023-049 and should
be submitted on or before August 21, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\41\
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\41\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-16122 Filed 7-28-23; 8:45 am]
BILLING CODE 8011-01-P
