Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule Related to Physical Port Fees, 33432-33436 [2024-09065]

Download as PDF 33432 Federal Register / Vol. 89, No. 83 / Monday, April 29, 2024 / Notices Rule 14.11(e)(4), Commodity-Based Trust Shares. The proposed rule change was published for comment in the Federal Register on March 13, 2024.3 Section 19(b)(2) of the Act 4 provides that within 45 days of the publication of notice of the filing of a proposed rule change, or within such longer period up to 90 days as the Commission may designate if it finds such longer period to be appropriate and publishes its reasons for so finding or as to which the self-regulatory organization consents, the Commission shall either approve the proposed rule change, disapprove the proposed rule change, or institute proceedings to determine whether the proposed rule change should be disapproved. The 45th day after publication of the notice for this proposed rule change is April 27, 2024. The Commission is extending this 45day time period. The Commission finds it appropriate to designate a longer period within which to take action on the proposed rule change so that it has sufficient time to consider the proposed rule change and the issues raised therein. Accordingly, the Commission, pursuant to section 19(b)(2) of the Act,5 designates June 11, 2024, as the date by which the Commission shall either approve or disapprove, or institute proceedings to determine whether to disapprove, the proposed rule change (File No. SR–CboeBZX–2024–018). For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.6 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–09062 Filed 4–26–24; 8:45 am] BILLING CODE 8011–01–P [Release No. 34–100013; File No. SR– CboeBZX–2024–030] Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule Related to Physical Port Fees 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. 1. Purpose The Exchange proposes to amend its fee schedule for its equity options platform (‘‘BZX Options’’) relating to physical connectivity fees.3 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 The Exchange initially filed the proposed fee changes on July 3, 2023 (SR–CboeBZX–2023–047). On September 1, 2023, the Exchange withdrew that filing and submitted SR–CboeBZX–2023–068. On September 29, 2023, the Securities and Exchange Commission issued a Suspension of and Order Instituting Proceedings to Determine whether to Approve or Disapprove a Proposed Rule Change to Amend its Fees Schedule Related to Physical Port Fees (the ‘‘OIP’’). On September 29, 2023, the Exchange filed the proposed fee change (SR– CboeBZX–2023–79). On October 13, 2023, the Exchange withdrew that filing and submitted SR– 2 17 April 23, 2024. khammond on DSKJM1Z7X2PROD with NOTICES I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Cboe BZX Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BZX Options’’) proposes to amend its Fees 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. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change SECURITIES AND EXCHANGE COMMISSION Pursuant to section 19(b)(1) of the Securities Exchange Act of 1934 3 See Securities Exchange Act Release No. 99686 (Mar. 7, 2024), 89 FR 18447. Comments on the proposed rule change are available at: https:// www.sec.gov/comments/sr-cboebzx-2024-018/ srcboebzx2024018.htm. 4 15 U.S.C. 78s(b)(2). 5 15 U.S.C. 78s(b)(2). 6 17 CFR 200.30–3(a)(31). VerDate Sep<11>2014 (‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 18, 2024, Cboe BZX Exchange, Inc. (the ‘‘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. 20:54 Apr 26, 2024 Jkt 262001 PO 00000 Frm 00121 Fmt 4703 Sfmt 4703 By way of background, a physical port is utilized by a Member or non-Member to connect to the Exchange at the data centers where the Exchange’s servers are located. The Exchange currently assesses the following physical connectivity fees for Members and nonMembers on a monthly basis: $2,500 per physical port for a 1 gigabit (‘‘Gb’’) circuit and $7,500 per physical port for a 10 Gb circuit. The Exchange proposes to increase the monthly fee for 10 Gb physical ports from $7,500 to $8,500 per port. The Exchange notes the proposed fee change better enables it to continue to maintain and improve its market technology and services and also notes that the proposed fee amount, even as amended, continues to be in line with, or even lower than, amounts assessed by other exchanges for similar connections.4 The physical ports may also be used to access the Systems for the following affiliate exchanges and only one monthly fee currently (and will continue) to apply per port: the Exchange’s equities platform (BZX Equities), Cboe EDGX Exchange, Inc. (options and equities platforms), Cboe BYX Exchange, Inc., Cboe EDGA Exchange, Inc., and Cboe C2 Exchange, Inc., (‘‘Affiliate Exchanges’’).5 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of section 6(b) of the Act.6 Specifically, the Exchange believes the proposed rule change is consistent with the section 6(b)(5) 7 requirements that the rules of an exchange be designed to prevent fraudulent and manipulative acts and CboeBZX–2023–083. On December 12, 2023 the Exchange withdrew that filing and submitted SR– CboeBZX–2023–104. On February 9, 2024, the Exchange withdrew that filing and submitted SR– CboeBZX–2024–017. On April 9, 2024, the Exchange withdrew that filing and submitted this SR–CboeBZX–2024–028. On April 18, 2024, the Exchange withdrew that filing and submitted this filing. 4 See e.g., The Nasdaq Stock Market LLC (‘‘Nasdaq’’), General 8, Connectivity to the Exchange. Nasdaq and its affiliated exchanges charge a monthly fee of $15,000 for each 10Gb Ultra fiber connection to the respective exchange, which is analogous to the Exchange’s 10Gb physical port. See also New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago Inc., NYSE National, Inc. Connectivity Fee Schedule, which provides that 10 Gb LX LCN Circuits (which are analogous to the Exchange’s 10 Gb physical port) are assessed $22,000 per month, per port. 5 The Affiliate Exchanges are also submitting contemporaneous identical rule filings. 6 15 U.S.C. 78f(b). 7 15 U.S.C. 78f(b)(5). E:\FR\FM\29APN1.SGM 29APN1 khammond on DSKJM1Z7X2PROD with NOTICES Federal Register / Vol. 89, No. 83 / Monday, April 29, 2024 / Notices 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) 8 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The Exchange also believes the proposed rule change is consistent with section 6(b)(4) 9 of the Act, which requires that Exchange rules provide for the equitable allocation of reasonable dues, fees, and other charges among its Members and other persons using its facilities. The Exchange believes the proposed fee change is reasonable as it reflects a moderate increase in physical connectivity fees for 10 Gb physical ports. Further, the current 10 Gb physical port fee has remained unchanged since June 2018.10 Since its last increase over 5 years ago however, there has been notable inflation. Particularly, the dollar has had an average inflation rate of 3.9% per year between 2018 and today, producing a cumulative price increase of approximately 21.1% inflation since the fee for the 10 Gb physical port was last modified.11 Moreover, the Exchange historically does not increase fees every year, notwithstanding inflation. Accordingly, the Exchange believes the proposed fee is reasonable as it represents only an approximate 13% increase from the rates adopted five years ago, notwithstanding the cumulative rate of 21.1%. The Exchange is also unaware of any standard that suggests any fee proposal that exceeds a certain yearly or cumulative inflation rate is unreasonable, and in any event, in this instance the increase is well below the cumulative rate. Additionally, the Exchange believes the proposed fee increase is reasonable in light of recent and anticipated connectivity-related upgrades and changes. The Exchange and its affiliated exchanges recently launched a multiyear initiative to improve Cboe 8 Id. 9 15 U.S.C. 78f(b)(4). Securities and Exchange Release No. 83429 (June 14, 2018), 83 FR 28685 (June 20, 2018) (SR– CboeBZX–2018–038). 11 See https://www.officialdata.org/us/inflation/ 2010?amount=1. 10 See VerDate Sep<11>2014 20:54 Apr 26, 2024 Jkt 262001 Exchange Platform performance and capacity requirements to increase competitiveness, support growth and advance a consistent world class platform. The goal of the project, among other things, is to provide faster and more consistent order handling and matching performance for options, while ensuring quicker processing time and supporting increasing volumes and capacity needs. For example, the Exchange recently performed switch hardware upgrades. Particularly, the Exchange replaced existing customer access switches with newer models, which the Exchange believes resulted in increased determinism. The recent switch upgrades also increased the Exchange’s capacity to accommodate more physical ports by nearly 50%. Network bandwidth was also increased nearly two-fold as a result of the upgrades, which among other things, can lead to reduce message queuing. The Exchange also believes these newer models result in less natural variance in the processing of messages. The Exchange notes that it incurred costs associated with purchasing and upgrading to these newer models, of which the Exchange has not otherwise passed through or offset. As of April 1, 2024, market participants also having the option of connecting to a new data center (i.e., Secaucus NY6 Data Center (‘‘NY6’’)), in addition to the current data centers at NY4 and NY5. The Exchange made NY6 available in response to customer requests in connection with their need for additional space and capacity. In order to make this space available, the Exchange expended significant resources to prepare this space, and will also incur ongoing costs with respect to maintaining this offering, including costs related to power, space, fiber, cabinets, panels, labor and maintenance of racks. The Exchange also incurred a large cost with respect to ensuring NY6 would be latency equalized, as it is for NY4 and NY5. The Exchange also has made various other improvements since the current physical port rates were adopted in 2018. For example, the Exchange has updated its customer portal to provide more transparency with respect to firms’ respective connectivity subscriptions, enabling them to better monitor, evaluate and adjust their connections based on their evolving business needs. The Exchange also performs proactive audits on a weekly basis to ensure that all customer cross connects continue to fall within allowable tolerances for Latency Equalized connections. Accordingly, the Exchange expended, and will continue to expend, resources PO 00000 Frm 00122 Fmt 4703 Sfmt 4703 33433 to innovate and modernize technology so that it may benefit its Members and continue to compete among other options markets. The ability to continue to innovate with technology and offer new products to market participants allows the Exchange to remain competitive in the options space which currently has 17 options markets and potential new entrants. The Exchange also believes the proposed fee is reasonable as it is still in line with, or even lower than, amounts assessed by other exchanges for similar connections.12 Indeed, the Exchange believes assessing fees that are a lower rate than fees assessed by other exchanges for analogous connectivity (which were similarly adopted via the rule filing process and filed with the Commission) is reasonable. As noted above, the proposed fee is also the same as is concurrently being proposed for its Affiliate Exchanges. Further, Members are able to utilize a single port to connect to any of the Affiliate Exchanges with no additional fee assessed for that same physical port. Particularly, the Exchange believes the proposed monthly per port fee is reasonable, equitable and not unfairly discriminatory as it is assessed only once, even if it connects with another affiliate exchange since only one port is being used and the Exchange does not wish to charge multiple fees for the same port. Indeed, the Exchange notes that several ports are in fact purchased and utilized across one or more of the Exchange’s affiliated Exchanges (and charged only once). The Exchange also believes that the proposed fee change is not unfairly discriminatory because it would be assessed uniformly across all market participants that purchase the physical ports. The Exchange believes increasing the fee for 10 Gb physical ports and charging a higher fee as compared to the 1 Gb physical port is equitable as the 1 Gb physical port is 1/10th the size of the 10 Gb physical port and therefore does not offer access to many of the products and services offered by the Exchange (e.g., ability to receive certain market data products). Thus, the value of the 1 Gb alternative is lower than the value of 12 See e.g., The Nasdaq Stock Market LLC (‘‘Nasdaq’’), General 8, Connectivity to the Exchange. Nasdaq and its affiliated exchanges charge a monthly fee of $15,000 for each 10Gb Ultra fiber connection to the respective exchange, which is analogous to the Exchange’s 10Gb physical port. See also New York Stock Exchange LLC, NYSE American LLC, NYSE Arca, Inc., NYSE Chicago Inc., NYSE National, Inc. Connectivity Fee Schedule, which provides that 10 Gb LX LCN Circuits (which are analogous to the Exchange’s 10 Gb physical port) are assessed $22,000 per month, per port. E:\FR\FM\29APN1.SGM 29APN1 khammond on DSKJM1Z7X2PROD with NOTICES 33434 Federal Register / Vol. 89, No. 83 / Monday, April 29, 2024 / Notices the 10 Gb alternative, when measured based on the type of Exchange access it offers. Moreover, market participants that purchase 10 Gb physical ports utilize the most bandwidth and therefore consume the most resources from the network. The Exchange also anticipates that firms that utilize 10 Gb ports will benefit the most from the Exchange’s investment in offering NY6 as the Exchange anticipates there will be much higher quantities of 10 Gb physical ports connecting from NY6 as compared to 1 Gb ports. Indeed, the Exchange notes that 10 Gb physical ports account for approximately 90% of physical ports across the NY4, NY5, and NY6 data centers, and to date, 80% of new port connections in NY6 are 10 Gb ports. As such, the Exchange believes the proposed fee change for 10 Gb physical ports is reasonably and appropriately allocated. The Exchange also notes Members and non-Members will continue to choose the method of connectivity based on their specific needs and no broker-dealer is required to become a Member of, let alone connect directly to, the Exchange. There is also no regulatory requirement that any market participant connect to any one particular exchange. Market participants may voluntarily choose to become a member of one or more of a number of different exchanges, of which, the Exchange is but one choice. Additionally, any Exchange member that is dissatisfied with the proposal is free to choose not to be a member of the Exchange and send order flow to another exchange. Moreover, direct connectivity is not a requirement to participate on the Exchange. The Exchange also believes substitutable products and services are available to market participants, including, among other things, other options exchanges that a market participant may connect to in lieu of the Exchange and/or trading of any options product, such as within the Over-the-Counter (OTC) markets which do not require connectivity to the Exchange. Indeed, there are currently 17 registered options exchanges that trade options (13 of which are not affiliated with Cboe), some of which have similar or lower connectivity fees.13 Based on publicly available information, no single options exchange has more than approximately 19% of the market share.14 Further, low barriers to entry mean that new exchanges may rapidly 13 Id. 14 See Cboe Global Markets U.S. Options Market Volume Summary (April 8, 2024), available at https://markets.cboe.com/us/options/market_ statistics/. VerDate Sep<11>2014 20:54 Apr 26, 2024 Jkt 262001 enter the market and offer additional substitute platforms to further compete with the Exchange and the products it offers. For example, there are 3 exchanges that have been added in the U.S. options markets in the last 5 years (i.e., Nasdaq MRX, LLC, MIAX Pearl, LLC, MIAX Emerald LLC, and most recently, MEMX LLC). As noted above, there is no regulatory requirement that any market participant connect to any one options exchange, nor that any market participant connect at a particular connection speed or act in a particular capacity on the Exchange, or trade any particular product offered on an exchange. Moreover, membership is not a requirement to participate on the Exchange. Indeed, the Exchange is unaware of any one options exchange whose membership includes every registered broker-dealer. By way of example, while the Exchange has 61 members that trade options, Cboe EDGX has 51 members that trade options, and Cboe C2 has 52 Trading Permit Holders (‘‘TPHs’’) (i.e., members). There is also no firm that is a Member of BZX Options only. Further, based on publicly available information regarding a sample of the Exchange’s competitors, NYSE American Options has 71 members 15, and NYSE Arca Options has 69 members 16, MIAX Options has 46 members 17 and MIAX Pearl Options has 40 members.18 Vigorous competition among national securities exchanges provides many alternatives for firms to voluntarily decide whether direct connectivity to the Exchange is appropriate and worthwhile, and as noted above, no broker-dealer is required to become a Member of the Exchange, let alone connect directly to it. In the event that a market participant views the Exchange’s proposed fee change as more or less attractive than the competition, that market participant can choose to connect to the Exchange indirectly or may choose not to connect to that exchange and connect instead to one or more of the other 13 non-Cboe affiliated options markets. Indeed, market participants are free to choose which exchange to use to satisfy their business needs. Moreover, if the Exchange charges excessive fees, it may stand to 15 See https://www.nyse.com/markets/americanoptions/membership#directory. 16 See https://www.nyse.com/markets/arcaoptions/membership#directory. 17 See https://www.miaxglobal.com/sites/default/ files/page-files/MIAX_Options_Exchange_ Members_April_2023_04282023.pdf. 18 See https://www.miaxglobal.com/sites/default/ files/page-files/MIAX_Pearl_Exchange_Members_ 01172023_0.pdf. PO 00000 Frm 00123 Fmt 4703 Sfmt 4703 lose not only connectivity revenues but also revenues associated with the execution of orders routed to it, and, to the extent applicable, market data revenues. The Exchange believes that this competitive dynamic imposes powerful restraints on the ability of any exchange to charge unreasonable fees for connectivity. Notwithstanding the foregoing, the Exchange still believes that the proposed fee increase is reasonable, equitably allocated and not unfairly discriminatory, even for market participants that determine to connect directly to the Exchange for business purposes, as those business reasons should presumably result in revenue capable of covering the proposed fee. The Exchange lastly notes that it is not required by the Exchange Act, nor any other rule or regulation, to undertake a cost-of-service or rate-making approach with respect to fee proposals. Moreover, Congress’s intent in enacting the 1975 Amendments to the Act was to enable competition—rather than government order—to determine prices. The principal purpose of the amendments was to facilitate the creation of a national market system for the trading of securities. Congress intended that this ‘‘national market system evolve through the interplay of competitive forces as unnecessary regulatory restrictions are removed.’’ 19 Other provisions of the Act confirm that intent. For example, the Act provides that an exchange must design its rules ‘‘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.’’ 20 Likewise, the Act grants the Commission authority to amend or repeal ‘‘[t]he rules of [an] exchange [that] impose any burden on competition not necessary or appropriate in furtherance of the purposes of this chapter.’’ 21 In short, the promotion of free and open competition was a core congressional objective in creating the national market system.22 Indeed, the Commission has historically interpreted that mandate to promote competitive forces to determine 19 See H.R. Rep. No. 94–229, at 92 (1975) (Conf. Rep.) (emphasis added) 20 15 U.S.C. 78f(b)(5). 21 15 U.S.C. 78f(8). 22 See also 15 U.S.C. 78k–l(a)(1)(C)(ii) (purposes of Exchange Act include to promote ‘‘fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets’’); Order, 73 FR at 74781 (‘‘The Exchange Act and its legislative history strongly support the Commission’s reliance on competition, whenever possible, in meeting its regulatory responsibilities for overseeing the SROs and the national market system.’’). E:\FR\FM\29APN1.SGM 29APN1 Federal Register / Vol. 89, No. 83 / Monday, April 29, 2024 / Notices khammond on DSKJM1Z7X2PROD with NOTICES prices whenever compatible with a national market system. Accordingly, the Exchange believes it has met its burden to demonstrate that its proposed fee change is reasonable and consistent with the immediate filing process chosen by Congress, which created a system whereby market forces determine access fees in the vast majority of cases, subject to oversight only in particular cases of abuse or market failure. Lastly, and importantly, the Exchange believes that, even if it were possible as a matter of economic theory, cost-based pricing for the proposed fee would be so complicated that it could not be done practically. 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. The proposed fee change will not impact intramarket competition because it will apply to all similarly situated Members equally (i.e., all market participants that choose to purchase the 10 Gb physical port). Additionally, the Exchange does not believe its proposed pricing will impose a barrier to entry to smaller participants and notes that its proposed connectivity pricing is associated with relative usage of the various market participants. For example, market participants with modest capacity needs can continue to buy the less expensive 1 Gb physical port (which cost is not changing). While pricing may be increased for the larger capacity physical ports, such options provide far more capacity and are purchased by those that consume more resources from the network. Accordingly, the proposed connectivity fees do not favor certain categories of market participants in a manner that would impose a burden on competition; rather, the allocation reflects the network resources consumed by the various size of market participants—lowest bandwidth consuming members pay the least, and highest bandwidth consuming members pays the most. The Exchange’s proposed fee is also still lower than some fees for similar connectivity on other exchanges and therefore may stimulate intermarket competition by attracting additional firms to connect to the Exchange or at least should not deter interested participants from connecting directly to the Exchange. Further, if the changes proposed herein are unattractive to market participants, the Exchange can, and likely will, see a decline in connectivity via 10 Gb physical ports as VerDate Sep<11>2014 21:07 Apr 26, 2024 Jkt 262001 a result. The Exchange operates in a highly competitive market in which market participants can determine whether or not to connect directly to the Exchange based on the value received compared to the cost of doing so. Indeed, market participants have numerous alternative venues that they may participate on and direct their order flow, including 13 non-Cboe affiliated options markets, as well as offexchange venues, where competitive products are available for trading. 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.’’ 23 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’. . . .’’.24 Accordingly, the Exchange does not believe its proposed 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. 23 See Securities Exchange Act Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005). 24 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)). PO 00000 Frm 00124 Fmt 4703 Sfmt 4703 33435 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 25 and paragraph (f) of Rule 19b–4 26 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–2024–030 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–2024–030. 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 25 15 26 17 E:\FR\FM\29APN1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). 29APN1 33436 Federal Register / Vol. 89, No. 83 / Monday, April 29, 2024 / Notices 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–2024–030 and should be submitted on or before May 20, 2024. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.27 Sherry R. Haywood, Assistant Secretary. [FR Doc. 2024–09065 Filed 4–26–24; 8:45 am] BILLING CODE 8011–01–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #20284 and #20285; MORONGO BAND OF MISSION INDIANS Disaster Number CA–20013] Presidential Declaration of a Major Disaster for Public Assistance Only for the Morongo Band of Mission Indians This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the Morongo Band of Mission Indians (FEMA–4772–DR), dated 04/19/2024. Incident: Severe Storms and Flooding. Incident Period: 01/31/2024 through 02/09/2024. DATES: Issued on 04/19/2024. Physical Loan Application Deadline Date: 06/18/2024. Economic Injury (EIDL) Loan Application Deadline Date: 01/21/2025. ADDRESSES: Visit the MySBA Loan Portal at https://lending.sba.gov to apply for a disaster assistance loan. FOR FURTHER INFORMATION CONTACT: Alan Escobar, Office of Disaster Recovery & Resilience, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205–6734. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the President’s major disaster declaration on 04/19/2024, Private Non-Profit organizations that provide essential khammond on DSKJM1Z7X2PROD with NOTICES 27 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 20:54 Apr 26, 2024 Jkt 262001 Visit the MySBA Loan Portal at https://lending.sba.gov to apply for a disaster assistance loan. FOR FURTHER INFORMATION CONTACT: Alan Escobar, Office of Disaster Recovery & Resilience, U.S. Small Business Administration, 409 3rd Street SW, Suite 6050, Washington, DC 20416, (202) 205–6734. SUPPLEMENTARY INFORMATION: Notice is hereby given that as a result of the President’s major disaster declaration on 04/19/2024, Private Non-Profit organizations that provide essential services of a governmental nature may file disaster loan applications online using the MySBA Loan Portal https:// lending.sba.gov or other locally Percent announced locations. Please contact the For Physical Damage: SBA disaster assistance customer Non-Profit Organizations with service center by email at Credit Available Elsewhere ... 3.250 disastercustomerservice@sba.gov or by Non-Profit Organizations withphone at 1–800–659–2955 for further out Credit Available Elseassistance. where ..................................... 3.250 The following areas have been For Economic Injury: determined to be adversely affected by Non-Profit Organizations withthe disaster: out Credit Available Elsewhere ..................................... 3.250 Primary Counties: Chittenden, Essex, Franklin, Lamoille, Orleans. The number assigned to this disaster The Interest Rates are: for physical damage is 202846 and for economic injury is 202850. Percent (Catalog of Federal Domestic Assistance Number 59008) Francisco Sa´nchez, Jr., Associate Administrator, Office of Disaster Recovery & Resilience. U.S. Small Business Administration. ACTION: Notice. AGENCY: SUMMARY: services of a governmental nature may file disaster loan applications online using the MySBA Loan Portal https:// lending.sba.gov or other locally announced locations. Please contact the SBA disaster assistance customer service center by email at disastercustomerservice@sba.gov or by phone at 1–800–659–2955 for further assistance. The following areas have been determined to be adversely affected by the disaster: Primary Area: Morongo Band of Mission Indians. The Interest Rates are: [FR Doc. 2024–09119 Filed 4–26–24; 8:45 am] BILLING CODE 8026–09–P SMALL BUSINESS ADMINISTRATION [Disaster Declaration #20280 and #20281; Vermont Disaster Number VT–20000] Presidential Declaration of a Major Disaster for Public Assistance Only for the State of Vermont U.S. Small Business Administration. ACTION: Notice. AGENCY: ADDRESSES: For Physical Damage: Non-Profit Organizations with Credit Available Elsewhere ... Non-Profit Organizations without Credit Available Elsewhere ..................................... For Economic Injury: Non-Profit Organizations without Credit Available Elsewhere ..................................... 3.250 3.250 3.250 The number assigned to this disaster for physical damage is 20280B and for economic injury is 202810. (Catalog of Federal Domestic Assistance Number 59008) Francisco Sa´nchez, Jr., Associate Administrator, Office of Disaster Recovery & Resilience. [FR Doc. 2024–09120 Filed 4–26–24; 8:45 am] BILLING CODE 8026–09–P This is a Notice of the Presidential declaration of a major disaster for Public Assistance Only for the State of Vermont (FEMA–4770–DR), dated 04/19/2024. Incident: Severe Winter Storm. Incident Period: 01/09/2024 through 01/13/2024. DATES: Issued on 04/19/2024. Physical Loan Application Deadline Date: 06/18/2024. Economic Injury (EIDL) Loan Application Deadline Date: 01/21/2025. SUMMARY: PO 00000 Frm 00125 Fmt 4703 Sfmt 4703 SMALL BUSINESS ADMINISTRATION [Disaster Declaration #20286 and #20287; Hoopa Valley Tribe Disaster Number CA– 20014] Presidential Declaration of a Major Disaster for Public Assistance Only for the Hoopa Valley Tribe U.S. Small Business Administration. ACTION: Notice. AGENCY: E:\FR\FM\29APN1.SGM 29APN1

Agencies

[Federal Register Volume 89, Number 83 (Monday, April 29, 2024)]
[Notices]
[Pages 33432-33436]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-09065]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-100013; File No. SR-CboeBZX-2024-030]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fees Schedule Related to Physical Port Fees

April 23, 2024.
    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 April 18, 2024, Cboe BZX Exchange, Inc. (the ``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.
---------------------------------------------------------------------------

    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX Options'') 
proposes to amend its Fees 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 for its equity 
options platform (``BZX Options'') relating to physical connectivity 
fees.\3\
---------------------------------------------------------------------------

    \3\ The Exchange initially filed the proposed fee changes on 
July 3, 2023 (SR-CboeBZX-2023-047). On September 1, 2023, the 
Exchange withdrew that filing and submitted SR-CboeBZX-2023-068. On 
September 29, 2023, the Securities and Exchange Commission issued a 
Suspension of and Order Instituting Proceedings to Determine whether 
to Approve or Disapprove a Proposed Rule Change to Amend its Fees 
Schedule Related to Physical Port Fees (the ``OIP''). On September 
29, 2023, the Exchange filed the proposed fee change (SR-CboeBZX-
2023-79). On October 13, 2023, the Exchange withdrew that filing and 
submitted SR-CboeBZX-2023-083. On December 12, 2023 the Exchange 
withdrew that filing and submitted SR-CboeBZX-2023-104. On February 
9, 2024, the Exchange withdrew that filing and submitted SR-CboeBZX-
2024-017. On April 9, 2024, the Exchange withdrew that filing and 
submitted this SR-CboeBZX-2024-028. On April 18, 2024, the Exchange 
withdrew that filing and submitted this filing.
---------------------------------------------------------------------------

    By way of background, a physical port is utilized by a Member or 
non-Member to connect to the Exchange at the data centers where the 
Exchange's servers are located. The Exchange currently assesses the 
following physical connectivity fees for Members and non-Members on a 
monthly basis: $2,500 per physical port for a 1 gigabit (``Gb'') 
circuit and $7,500 per physical port for a 10 Gb circuit. The Exchange 
proposes to increase the monthly fee for 10 Gb physical ports from 
$7,500 to $8,500 per port. The Exchange notes the proposed fee change 
better enables it to continue to maintain and improve its market 
technology and services and also notes that the proposed fee amount, 
even as amended, continues to be in line with, or even lower than, 
amounts assessed by other exchanges for similar connections.\4\ The 
physical ports may also be used to access the Systems for the following 
affiliate exchanges and only one monthly fee currently (and will 
continue) to apply per port: the Exchange's equities platform (BZX 
Equities), Cboe EDGX Exchange, Inc. (options and equities platforms), 
Cboe BYX Exchange, Inc., Cboe EDGA Exchange, Inc., and Cboe C2 
Exchange, Inc., (``Affiliate Exchanges'').\5\
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    \4\ See e.g., The Nasdaq Stock Market LLC (``Nasdaq''), General 
8, Connectivity to the Exchange. Nasdaq and its affiliated exchanges 
charge a monthly fee of $15,000 for each 10Gb Ultra fiber connection 
to the respective exchange, which is analogous to the Exchange's 
10Gb physical port. See also New York Stock Exchange LLC, NYSE 
American LLC, NYSE Arca, Inc., NYSE Chicago Inc., NYSE National, 
Inc. Connectivity Fee Schedule, which provides that 10 Gb LX LCN 
Circuits (which are analogous to the Exchange's 10 Gb physical port) 
are assessed $22,000 per month, per port.
    \5\ The Affiliate Exchanges are also submitting contemporaneous 
identical rule filings.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of section 6(b) of the Act.\6\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
section 6(b)(5) \7\ requirements that the rules of an exchange be 
designed to prevent fraudulent and manipulative acts and

[[Page 33433]]

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) \8\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers. The Exchange also believes the 
proposed rule change is consistent with section 6(b)(4) \9\ of the Act, 
which requires that Exchange rules provide for the equitable allocation 
of reasonable dues, fees, and other charges among its Members and other 
persons using its facilities.
---------------------------------------------------------------------------

    \6\ 15 U.S.C. 78f(b).
    \7\ 15 U.S.C. 78f(b)(5).
    \8\ Id.
    \9\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    The Exchange believes the proposed fee change is reasonable as it 
reflects a moderate increase in physical connectivity fees for 10 Gb 
physical ports. Further, the current 10 Gb physical port fee has 
remained unchanged since June 2018.\10\ Since its last increase over 5 
years ago however, there has been notable inflation. Particularly, the 
dollar has had an average inflation rate of 3.9% per year between 2018 
and today, producing a cumulative price increase of approximately 21.1% 
inflation since the fee for the 10 Gb physical port was last 
modified.\11\ Moreover, the Exchange historically does not increase 
fees every year, notwithstanding inflation. Accordingly, the Exchange 
believes the proposed fee is reasonable as it represents only an 
approximate 13% increase from the rates adopted five years ago, 
notwithstanding the cumulative rate of 21.1%. The Exchange is also 
unaware of any standard that suggests any fee proposal that exceeds a 
certain yearly or cumulative inflation rate is unreasonable, and in any 
event, in this instance the increase is well below the cumulative rate.
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    \10\ See Securities and Exchange Release No. 83429 (June 14, 
2018), 83 FR 28685 (June 20, 2018) (SR-CboeBZX-2018-038).
    \11\ See https://www.officialdata.org/us/inflation/2010?amount=1.
---------------------------------------------------------------------------

    Additionally, the Exchange believes the proposed fee increase is 
reasonable in light of recent and anticipated connectivity-related 
upgrades and changes. The Exchange and its affiliated exchanges 
recently launched a multi-year initiative to improve Cboe Exchange 
Platform performance and capacity requirements to increase 
competitiveness, support growth and advance a consistent world class 
platform. The goal of the project, among other things, is to provide 
faster and more consistent order handling and matching performance for 
options, while ensuring quicker processing time and supporting 
increasing volumes and capacity needs. For example, the Exchange 
recently performed switch hardware upgrades. Particularly, the Exchange 
replaced existing customer access switches with newer models, which the 
Exchange believes resulted in increased determinism. The recent switch 
upgrades also increased the Exchange's capacity to accommodate more 
physical ports by nearly 50%. Network bandwidth was also increased 
nearly two-fold as a result of the upgrades, which among other things, 
can lead to reduce message queuing. The Exchange also believes these 
newer models result in less natural variance in the processing of 
messages. The Exchange notes that it incurred costs associated with 
purchasing and upgrading to these newer models, of which the Exchange 
has not otherwise passed through or offset.
    As of April 1, 2024, market participants also having the option of 
connecting to a new data center (i.e., Secaucus NY6 Data Center 
(``NY6'')), in addition to the current data centers at NY4 and NY5. The 
Exchange made NY6 available in response to customer requests in 
connection with their need for additional space and capacity. In order 
to make this space available, the Exchange expended significant 
resources to prepare this space, and will also incur ongoing costs with 
respect to maintaining this offering, including costs related to power, 
space, fiber, cabinets, panels, labor and maintenance of racks. The 
Exchange also incurred a large cost with respect to ensuring NY6 would 
be latency equalized, as it is for NY4 and NY5.
    The Exchange also has made various other improvements since the 
current physical port rates were adopted in 2018. For example, the 
Exchange has updated its customer portal to provide more transparency 
with respect to firms' respective connectivity subscriptions, enabling 
them to better monitor, evaluate and adjust their connections based on 
their evolving business needs. The Exchange also performs proactive 
audits on a weekly basis to ensure that all customer cross connects 
continue to fall within allowable tolerances for Latency Equalized 
connections. Accordingly, the Exchange expended, and will continue to 
expend, resources to innovate and modernize technology so that it may 
benefit its Members and continue to compete among other options 
markets. The ability to continue to innovate with technology and offer 
new products to market participants allows the Exchange to remain 
competitive in the options space which currently has 17 options markets 
and potential new entrants.
    The Exchange also believes the proposed fee is reasonable as it is 
still in line with, or even lower than, amounts assessed by other 
exchanges for similar connections.\12\ Indeed, the Exchange believes 
assessing fees that are a lower rate than fees assessed by other 
exchanges for analogous connectivity (which were similarly adopted via 
the rule filing process and filed with the Commission) is reasonable. 
As noted above, the proposed fee is also the same as is concurrently 
being proposed for its Affiliate Exchanges. Further, Members are able 
to utilize a single port to connect to any of the Affiliate Exchanges 
with no additional fee assessed for that same physical port. 
Particularly, the Exchange believes the proposed monthly per port fee 
is reasonable, equitable and not unfairly discriminatory as it is 
assessed only once, even if it connects with another affiliate exchange 
since only one port is being used and the Exchange does not wish to 
charge multiple fees for the same port. Indeed, the Exchange notes that 
several ports are in fact purchased and utilized across one or more of 
the Exchange's affiliated Exchanges (and charged only once).
---------------------------------------------------------------------------

    \12\ See e.g., The Nasdaq Stock Market LLC (``Nasdaq''), General 
8, Connectivity to the Exchange. Nasdaq and its affiliated exchanges 
charge a monthly fee of $15,000 for each 10Gb Ultra fiber connection 
to the respective exchange, which is analogous to the Exchange's 
10Gb physical port. See also New York Stock Exchange LLC, NYSE 
American LLC, NYSE Arca, Inc., NYSE Chicago Inc., NYSE National, 
Inc. Connectivity Fee Schedule, which provides that 10 Gb LX LCN 
Circuits (which are analogous to the Exchange's 10 Gb physical port) 
are assessed $22,000 per month, per port.
---------------------------------------------------------------------------

    The Exchange also believes that the proposed fee change is not 
unfairly discriminatory because it would be assessed uniformly across 
all market participants that purchase the physical ports. The Exchange 
believes increasing the fee for 10 Gb physical ports and charging a 
higher fee as compared to the 1 Gb physical port is equitable as the 1 
Gb physical port is 1/10th the size of the 10 Gb physical port and 
therefore does not offer access to many of the products and services 
offered by the Exchange (e.g., ability to receive certain market data 
products). Thus, the value of the 1 Gb alternative is lower than the 
value of

[[Page 33434]]

the 10 Gb alternative, when measured based on the type of Exchange 
access it offers. Moreover, market participants that purchase 10 Gb 
physical ports utilize the most bandwidth and therefore consume the 
most resources from the network. The Exchange also anticipates that 
firms that utilize 10 Gb ports will benefit the most from the 
Exchange's investment in offering NY6 as the Exchange anticipates there 
will be much higher quantities of 10 Gb physical ports connecting from 
NY6 as compared to 1 Gb ports. Indeed, the Exchange notes that 10 Gb 
physical ports account for approximately 90% of physical ports across 
the NY4, NY5, and NY6 data centers, and to date, 80% of new port 
connections in NY6 are 10 Gb ports. As such, the Exchange believes the 
proposed fee change for 10 Gb physical ports is reasonably and 
appropriately allocated.
    The Exchange also notes Members and non-Members will continue to 
choose the method of connectivity based on their specific needs and no 
broker-dealer is required to become a Member of, let alone connect 
directly to, the Exchange. There is also no regulatory requirement that 
any market participant connect to any one particular exchange. Market 
participants may voluntarily choose to become a member of one or more 
of a number of different exchanges, of which, the Exchange is but one 
choice. Additionally, any Exchange member that is dissatisfied with the 
proposal is free to choose not to be a member of the Exchange and send 
order flow to another exchange. Moreover, direct connectivity is not a 
requirement to participate on the Exchange. The Exchange also believes 
substitutable products and services are available to market 
participants, including, among other things, other options exchanges 
that a market participant may connect to in lieu of the Exchange and/or 
trading of any options product, such as within the Over-the-Counter 
(OTC) markets which do not require connectivity to the Exchange. 
Indeed, there are currently 17 registered options exchanges that trade 
options (13 of which are not affiliated with Cboe), some of which have 
similar or lower connectivity fees.\13\ Based on publicly available 
information, no single options exchange has more than approximately 19% 
of the market share.\14\ Further, low barriers to entry mean that new 
exchanges may rapidly enter the market and offer additional substitute 
platforms to further compete with the Exchange and the products it 
offers. For example, there are 3 exchanges that have been added in the 
U.S. options markets in the last 5 years (i.e., Nasdaq MRX, LLC, MIAX 
Pearl, LLC, MIAX Emerald LLC, and most recently, MEMX LLC).
---------------------------------------------------------------------------

    \13\ Id.
    \14\ See Cboe Global Markets U.S. Options Market Volume Summary 
(April 8, 2024), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------

    As noted above, there is no regulatory requirement that any market 
participant connect to any one options exchange, nor that any market 
participant connect at a particular connection speed or act in a 
particular capacity on the Exchange, or trade any particular product 
offered on an exchange. Moreover, membership is not a requirement to 
participate on the Exchange. Indeed, the Exchange is unaware of any one 
options exchange whose membership includes every registered broker-
dealer. By way of example, while the Exchange has 61 members that trade 
options, Cboe EDGX has 51 members that trade options, and Cboe C2 has 
52 Trading Permit Holders (``TPHs'') (i.e., members). There is also no 
firm that is a Member of BZX Options only. Further, based on publicly 
available information regarding a sample of the Exchange's competitors, 
NYSE American Options has 71 members \15\, and NYSE Arca Options has 69 
members \16\, MIAX Options has 46 members \17\ and MIAX Pearl Options 
has 40 members.\18\
---------------------------------------------------------------------------

    \15\ See https://www.nyse.com/markets/american-options/membership#directory.
    \16\ See https://www.nyse.com/markets/arca-options/membership#directory.
    \17\ See https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Options_Exchange_Members_April_2023_04282023.pdf.
    \18\ See https://www.miaxglobal.com/sites/default/files/page-files/MIAX_Pearl_Exchange_Members_01172023_0.pdf.
---------------------------------------------------------------------------

    Vigorous competition among national securities exchanges provides 
many alternatives for firms to voluntarily decide whether direct 
connectivity to the Exchange is appropriate and worthwhile, and as 
noted above, no broker-dealer is required to become a Member of the 
Exchange, let alone connect directly to it. In the event that a market 
participant views the Exchange's proposed fee change as more or less 
attractive than the competition, that market participant can choose to 
connect to the Exchange indirectly or may choose not to connect to that 
exchange and connect instead to one or more of the other 13 non-Cboe 
affiliated options markets. Indeed, market participants are free to 
choose which exchange to use to satisfy their business needs. Moreover, 
if the Exchange charges excessive fees, it may stand to lose not only 
connectivity revenues but also revenues associated with the execution 
of orders routed to it, and, to the extent applicable, market data 
revenues. The Exchange believes that this competitive dynamic imposes 
powerful restraints on the ability of any exchange to charge 
unreasonable fees for connectivity. Notwithstanding the foregoing, the 
Exchange still believes that the proposed fee increase is reasonable, 
equitably allocated and not unfairly discriminatory, even for market 
participants that determine to connect directly to the Exchange for 
business purposes, as those business reasons should presumably result 
in revenue capable of covering the proposed fee. The Exchange lastly 
notes that it is not required by the Exchange Act, nor any other rule 
or regulation, to undertake a cost-of-service or rate-making approach 
with respect to fee proposals. Moreover, Congress's intent in enacting 
the 1975 Amendments to the Act was to enable competition--rather than 
government order--to determine prices. The principal purpose of the 
amendments was to facilitate the creation of a national market system 
for the trading of securities. Congress intended that this ``national 
market system evolve through the interplay of competitive forces as 
unnecessary regulatory restrictions are removed.'' \19\ Other 
provisions of the Act confirm that intent. For example, the Act 
provides that an exchange must design its rules ``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.'' \20\ Likewise, the Act grants the Commission authority to 
amend or repeal ``[t]he rules of [an] exchange [that] impose any burden 
on competition not necessary or appropriate in furtherance of the 
purposes of this chapter.'' \21\ In short, the promotion of free and 
open competition was a core congressional objective in creating the 
national market system.\22\ Indeed, the Commission has historically 
interpreted that mandate to promote competitive forces to determine

[[Page 33435]]

prices whenever compatible with a national market system. Accordingly, 
the Exchange believes it has met its burden to demonstrate that its 
proposed fee change is reasonable and consistent with the immediate 
filing process chosen by Congress, which created a system whereby 
market forces determine access fees in the vast majority of cases, 
subject to oversight only in particular cases of abuse or market 
failure. Lastly, and importantly, the Exchange believes that, even if 
it were possible as a matter of economic theory, cost-based pricing for 
the proposed fee would be so complicated that it could not be done 
practically.
---------------------------------------------------------------------------

    \19\ See H.R. Rep. No. 94-229, at 92 (1975) (Conf. Rep.) 
(emphasis added)
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ 15 U.S.C. 78f(8).
    \22\ See also 15 U.S.C. 78k-l(a)(1)(C)(ii) (purposes of Exchange 
Act include to promote ``fair competition among brokers and dealers, 
among exchange markets, and between exchange markets and markets 
other than exchange markets''); Order, 73 FR at 74781 (``The 
Exchange Act and its legislative history strongly support the 
Commission's reliance on competition, whenever possible, in meeting 
its regulatory responsibilities for overseeing the SROs and the 
national market system.'').
---------------------------------------------------------------------------

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. The proposed fee change will 
not impact intramarket competition because it will apply to all 
similarly situated Members equally (i.e., all market participants that 
choose to purchase the 10 Gb physical port). Additionally, the Exchange 
does not believe its proposed pricing will impose a barrier to entry to 
smaller participants and notes that its proposed connectivity pricing 
is associated with relative usage of the various market participants. 
For example, market participants with modest capacity needs can 
continue to buy the less expensive 1 Gb physical port (which cost is 
not changing). While pricing may be increased for the larger capacity 
physical ports, such options provide far more capacity and are 
purchased by those that consume more resources from the network. 
Accordingly, the proposed connectivity fees do not favor certain 
categories of market participants in a manner that would impose a 
burden on competition; rather, the allocation reflects the network 
resources consumed by the various size of market participants--lowest 
bandwidth consuming members pay the least, and highest bandwidth 
consuming members pays the most.
    The Exchange's proposed fee is also still lower than some fees for 
similar connectivity on other exchanges and therefore may stimulate 
intermarket competition by attracting additional firms to connect to 
the Exchange or at least should not deter interested participants from 
connecting directly to the Exchange. Further, if the changes proposed 
herein are unattractive to market participants, the Exchange can, and 
likely will, see a decline in connectivity via 10 Gb physical ports as 
a result. The Exchange operates in a highly competitive market in which 
market participants can determine whether or not to connect directly to 
the Exchange based on the value received compared to the cost of doing 
so. Indeed, market participants have numerous alternative venues that 
they may participate on and direct their order flow, including 13 non-
Cboe affiliated options markets, as well as off-exchange venues, where 
competitive products are available for trading. 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.'' \23\ 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'. . . .''.\24\ Accordingly, the Exchange 
does not believe its proposed change imposes any burden on competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act.
---------------------------------------------------------------------------

    \23\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \24\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
---------------------------------------------------------------------------

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to section 
19(b)(3)(A) of the Act \25\ and paragraph (f) of Rule 19b-4 \26\ 
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.
---------------------------------------------------------------------------

    \25\ 15 U.S.C. 78s(b)(3)(A).
    \26\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeBZX-2024-030 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-2024-030. 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

[[Page 33436]]

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-2024-030 and should be submitted on or before May 20, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\27\
---------------------------------------------------------------------------

    \27\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-09065 Filed 4-26-24; 8:45 am]
BILLING CODE 8011-01-P
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