Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule, 42564-42567 [2024-10591]
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42564
Federal Register / Vol. 89, No. 95 / Wednesday, May 15, 2024 / Notices
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–
NYSEAMER–2024–27 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.
lotter on DSK11XQN23PROD with NOTICES1
All submissions should refer to file
number SR–NYSEAMER–2024–27. 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–NYSEAMER–2024–27 and should
be submitted on or before June 5, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Sherry R. Haywood,
Assistant Secretary.
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100090; File No. SR–
CboeBZX–2024–034]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fees Schedule
May 9, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 1,
2024, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) 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.
[FR Doc. 2024–10597 Filed 5–14–24; 8:45 am]
20 17
CFR 200.30–3(a)(12).
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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1. Purpose
The Exchange proposes to amend its
Fees Schedule, effective May 1, 2024.
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
17 options venues to which market
participants may direct their order flow.
Based on publicly available information,
no single options exchange has more
than 16% of the market share.3 Thus, in
such a low-concentrated and highly
competitive market, no single options
exchange, including the Exchange,
possesses significant pricing power in
the execution of option order flow. The
Exchange believes that the ever-shifting
market share among the exchanges from
month to month demonstrates that
market participants can shift order flow
or discontinue to reduce use of certain
categories of products, in response to fee
changes. Accordingly, competitive
forces constrain the Exchange’s
transaction fees, and market participants
can readily trade on competing venues
if they deem pricing levels at those
other venues to be more favorable. In
response to competitive pricing, the
Exchange, like other options exchanges,
offers rebates and assesses fees for
certain order types executed on or
routed through the Exchange.
The Exchange’s fee schedule sets forth
standard rebates and rates applied per
contract. For example, the Exchange
provides a rebate of $0.29 per contract
for Market Maker orders that add
liquidity in Penny Securities, yielding
fee code PM. 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.
The Exchange currently offers six
Market Maker Penny Add Volume Tiers
(‘‘MM Penny Add Tier’’) under Footnote
3 See Cboe Global Markets U.S. Options Market
Volume Summary by Month (April 19, 2024),
available at https://markets.cboe.com/us/options/
market_statistics/.
BILLING CODE 8011–01–P
1 15
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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6 of the Fees Schedule, which provide
additional rebates between $0.31 and
$0.43 per contract for qualifying Market
Maker orders (i.e., that yield fee code
PM) 4 where a Member meets certain
liquidity thresholds.
Currently, the MM Penny Add Tiers
include two Market Maker Cross-Asset
Add Tiers, both of which require
participation on the Exchange’s equities
platform (‘‘BZX Equities’’). Under
Market Maker Cross-Asset Add Tier 1,
the Exchange provides a rebate of $0.38
per contract where a Member (1) has an
ADAV 5 in Market Maker orders greater
than or equal to 0.10% of average OCV; 6
(2) has on BZX Equities an ADAV
greater than or equal to 0.40% of
average TCV; 7 and (3) is the Lead
Market Maker (‘‘LMM’’) 8 on BZX
Equities in at least 50 equity symbols.
Under Market Maker Cross-Asset Add
Tier 2, the Exchange currently provides
a rebate of $0.39 per contract where a
Member (1) has an ADAV in Market
Maker orders greater than or equal to
0.20% of average OCV; (2) has on BZX
Equities an ADAV greater than or equal
to 0.45% of average TCV; and (3) is the
LMM on BZX Equities in at least 50
equity symbols.
The Exchange proposes to delete
Market Maker Cross-Asset Add Tier 1
and amend the criteria for Market Maker
Cross-Asset Add Tier 2.9 No Members
are currently satisfying the criteria
under Market Maker Cross-Asset Add
Tier 1, and the Exchange no longer
wishes to, nor is it required to, maintain
the tier. As proposed, under the
remaining Market Maker Cross-Asset
Add Tier, the Exchange will provide a
rebate of $0.39 per contract where a
Member (1) has an ADAV in Market
Maker orders in SPY, QQQ greater than
or equal to 0.20% of average SPY, QQQ
4 Orders yielding fee code PM are Market Maker
orders that add liquidity in Penny Program
Securities and are offered a rebate of $0.29.
5 ‘‘ADAV’’ means average daily added volume
calculated as the number of contracts added.
6 ‘‘OCV’’ means the total equity and ETF options
volume that clears in the Customer range at the
Options Clearing Corporation (‘‘OCC’’) for the
month for which the fees apply, excluding volume
on any day that the Exchange experiences an
Exchange System Disruption and on any day with
a scheduled early market close.
7 ‘‘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.
8 ‘‘Lead Market Maker’’ means a Market Maker
registered with the Exchange for a particular LMM
Security that has committed to maintain Minimum
Performance Standards in the LMM Security. See
Rule 11.8(e).
9 As part of this proposed rule change, the
Exchange proposes to rename ‘‘Market Maker CrossAsset Add Tier 2’’ to ‘‘Market Maker Cross-Asset
Add Tier’’.
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OCV; (2) has on has on [sic] BZX
Equities an ADAV greater than or equal
to 0.45% of average TCV or an ADAV
greater than or equal to 45,000,000,000;
and (3) is the LMM on BZX Equities in
at least 50 equity symbols.
The Exchange believes the amended
tier criteria for the Market Maker CrossAsset Add Tier, along with the existing
MM Penny Add Tiers, continue to
provide an incremental incentive for
Members to strive for the highest tier
levels, which provide increasingly
higher rebates for such transactions.
Overall, the MM Penny Add Tiers,
including the Market Maker Cross-Asset
Add Tier, are designed to encourage
Members to increase their order flow,
thereby contributing to a deeper and
more liquid market, which benefits all
market participants and provides greater
execution opportunities on the
Exchange.
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.10 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 11 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) 12 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) of the Act,13 which
requires that Exchange rules provide for
the equitable allocation of reasonable
dues, fees, and other charges among its
Trading Permit Holders and other
persons using its facilities.
As described above, the Exchange
operates in a highly competitive market
10 15
11 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
12 Id.
13 15
PO 00000
U.S.C. 78f(b)(4).
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42565
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
proposed rule change 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 market participants. The Exchange is
only one of several options venues to
which market participants may direct
their order flow, and it represents a
small percentage of the overall market.
The proposed fee changes reflect a
competitive pricing structure designed
to incentivize market participants to
direct their order flow, which the
Exchange believes would enhance
market quality to the benefit of all
Members.
The Exchange believes that it is
reasonable to eliminate Market Maker
Cross-Asset Add Tier 1 because the
Exchange is not required to maintain
this tier or provide Members an
opportunity to receive enhanced
rebates. As stated, no Members are
currently satisfying the criteria under
these tiers, and the proposed change
enables the Exchange to redirect
resources and funding into other
programs and tiers intended to
incentivize increased order flow.
Further, Members still have other
opportunities to obtain reduced fees via
the remaining MM Penny Add Tiers.
The Exchange believes that
eliminating Market Maker Cross-Asset
Add Tier 1 is equitable and not unfairly
discriminatory because it applies
uniformly to all Members, in that, the
tier will not be available for any
Member. The Exchange also notes that
the proposed change will not adversely
impact any Member’s pricing or their
ability to qualify for other rebate tiers.
Further, the MM Penny Add Tiers will
continue to apply uniformly to all
qualifying Members, in that all Members
that submit the requisite order flow per
each tier program have the opportunity
to compete for and achieve the available
tiers.
Additionally, the Exchange believes
the amended criteria for the remaining
Market Maker Cross-Asset Add Tier is
reasonable, as such changes are
designed to encourage Members to
increase their liquidity on the Exchange
and also their participation on BZX
Equities to continue to achieve the
rebate offered under the Market Maker
Cross-Asset Add Tier. Specifically, the
Exchange believes the amended criteria
reasonably encourages Members to
increase their ADAV in Market Makers
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Federal Register / Vol. 89, No. 95 / Wednesday, May 15, 2024 / Notices
orders in SPY and QQQ over a modestly
higher percentage of average SPY, QQQ
OCV, and to increase their ADAV on
BZX Equities. The Exchange notes that
increased Market Maker activity
(including LMMs), particularly,
facilitates tighter spreads and an
increase in overall liquidity provider
activity, both of which signal additional
corresponding increases in order flow
from other market participants,
contributing towards a robust, wellbalanced market ecosystem. Indeed,
increased overall order flow benefits
investors across both the Exchange’s
options and equities platforms by
continuing to deepen the Exchange’s
liquidity pool, potentially providing
even greater execution incentives and
opportunities, offering additional
flexibility for all investors to enjoy cost
savings, supporting the quality of price
discovery, promoting market
transparency and improving investor
protection.
The Exchange believes that the
proposal represents an equitable
allocation of fees and is not unfairly
discriminatory because it applies
uniformly to all Market Makers.
Additionally, a number of Market
Makers have a reasonable opportunity to
satisfy the criteria of the Cross-Asset
Add Tier, as amended. While the
Exchange has no way of knowing
whether this proposed rule change
would definitively result in any
particular Market Maker qualifying for
the Cross-Asset Add Tier, as amended,
the Exchange anticipates that
approximately one Market Maker will
be able to compete for and achieve the
proposed criteria of the amended tier;
however, the tier is open to any Market
Maker that satisfies the tier’s amended
criteria. The Exchange believes the tier,
as amended, could provide an incentive
for other Members to submit additional
liquidity on BZX Options and Equities
to qualify for the enhanced rebate. To
the extent a Member participates on the
Exchange but not on BZX Equities, the
Exchange does believe that the proposal
is still reasonable, equitably allocated
and non-discriminatory with respect to
such Member based on the overall
benefit to the Exchange resulting from
the success of BZX Equities.
Particularly, the Exchange believes such
success allows the Exchange to continue
to provide and potentially expand its
existing incentive programs to the
benefit of all participants on the
Exchange, whether they participate on
BZX Equities or not. The proposed
change is also fair and equitable in that
membership in BZX Equities is
available to all market participants,
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which would provide them with access
to the benefits on BZX Equities
provided by the proposed change, even
where a member of BZX Equities is not
necessarily eligible for the enhanced
rebate on the Exchange.
The Exchange also notes that it does
not believe the proposed changes will
adversely impact any Member’s pricing
or ability to qualify for other tiers.
Rather, should a Member not meet the
proposed criteria, the Member will
merely not receive the enhanced rebate,
and has alternative choices to aim to
achieve under the MM Penny Add
Tiers. Furthermore, the enhanced rebate
would apply to all Members that meet
the proposed required criteria under
tier.
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
Exchange does not believe the proposed
changes to the MM Penny Add Tiers
will impose any burden on intramarket
competition. Particularly, the proposed
change applies uniformly to all Market
Makers. The proposal to eliminate
Market Maker Cross-Asset Add Tier 1
applies to all Members, in that, such tier
will not be available for any Member.
All Members will continue to have an
opportunity receive enhanced rebates or
reduced fees offered under various tiers,
including the remaining Market Maker
Cross-Asset Add Tier, as amended.
Additionally, the proposal to amend the
remaining Market Maker Cross-Asset
Tier will apply to all Members and all
Members will continue to have an
opportunity to receive the
corresponding rebate through the
program.
All MM Penny Add Tiers are
generally designed to increase the
competitiveness of BZX and incentivize
participants to increase their order flow
on the Exchange, providing for
additional execution opportunities for
market participants and improved price
transparency. An overall increase in add
activity may provide for deeper, more
liquid markets and execution
opportunities at improved prices.
Furthermore, greater overall order flow,
trading opportunities, and pricing
transparency benefit all market
participants on the Exchange by
enhancing market quality and
continuing to encourage Members to
send orders, thereby contributing
towards a robust and well-balanced
market ecosystem.
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As discussed above, to the extent a
Member participates on the Exchange
but not on BZX Equities, the Exchange
notes that the proposed change can
provide an overall benefit to the
Exchange resulting from the success of
BZX Equities. Such success enables the
Exchange to continue to provide and
potentially expand its existing incentive
programs to the benefit of all
participants on the Exchange, whether
they participate on BZX Equities or not.
The proposed pricing program is also
fair and equitable in that membership in
BZX Equities is available to all market
participants.
Additionally, the proposed change is
designed to attract additional order flow
to the Exchange and BZX Equities.
Greater liquidity benefits all market
participants on the Exchange by
providing more trading opportunities
and encourages Members to send orders,
thereby contributing to robust levels of
liquidity, which benefits all market
participant. As a result, the Exchange
believes that the proposed change
furthers 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.’’ 14
The Exchange does not believe that
the proposed rule changes will 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 16
other options exchanges and offexchange venues. Additionally, the
Exchange represents a small percentage
of the overall market. Based on publicly
available information, no single options
exchange has more than 16% of the
market share.15 Therefore, no exchange
possesses significant pricing power in
the execution of option 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
14 Securities Exchange Act Release No. 51808, 70
FR 37495, 37498–99 (June 29, 2005) (S7–10–04)
(Final Rule).
15 See supra note 3.
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Federal Register / Vol. 89, No. 95 / Wednesday, May 15, 2024 / Notices
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.’’ 16 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’. . . .’’.17 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
lotter on DSK11XQN23PROD with NOTICES1
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 18 and paragraph (f) of Rule
19b–4 19 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.
16 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
17 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)).
18 15 U.S.C. 78s(b)(3)(A).
19 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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–10591 Filed 5–14–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
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–2024–034 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–2024–034. 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–2024–034 and should be
submitted on or before June 5, 2024.
PO 00000
[Release No. 34–100089; File No. SR–C2–
2024–006]
Self-Regulatory Organizations; Cboe
C2 Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Relating To Amend Its
Fees Schedule
May 9, 2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on May 1,
2024, Cboe C2 Exchange, Inc. (the
‘‘Exchange’’ or ‘‘C2’’) filed with the
Securities and Exchange Commission
(the ‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
Cboe C2 Exchange, Inc. (the
‘‘Exchange’’ or ‘‘C2’’) 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/
options/regulation/rule_filings/ctwo/),
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
20 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 89, Number 95 (Wednesday, May 15, 2024)]
[Notices]
[Pages 42564-42567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-10591]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100090; File No. SR-CboeBZX-2024-034]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule
May 9, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on May 1, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
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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'') 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 Fees Schedule, effective May 1,
2024.
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 17 options venues to which market participants
may direct their order flow. Based on publicly available information,
no single options exchange has more than 16% of the market share.\3\
Thus, in such a low-concentrated and highly competitive market, no
single options exchange, including the Exchange, possesses significant
pricing power in the execution of option order flow. The Exchange
believes that the ever-shifting market share among the exchanges from
month to month demonstrates that market participants can shift order
flow or discontinue to reduce use of certain categories of products, in
response to fee changes. Accordingly, competitive forces constrain the
Exchange's transaction fees, and market participants can readily trade
on competing venues if they deem pricing levels at those other venues
to be more favorable. In response to competitive pricing, the Exchange,
like other options exchanges, offers rebates and assesses fees for
certain order types executed on or routed through the Exchange.
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\3\ See Cboe Global Markets U.S. Options Market Volume Summary
by Month (April 19, 2024), available at https://markets.cboe.com/us/options/market_statistics/.
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The Exchange's fee schedule sets forth standard rebates and rates
applied per contract. For example, the Exchange provides a rebate of
$0.29 per contract for Market Maker orders that add liquidity in Penny
Securities, yielding fee code PM. 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.
The Exchange currently offers six Market Maker Penny Add Volume
Tiers (``MM Penny Add Tier'') under Footnote
[[Page 42565]]
6 of the Fees Schedule, which provide additional rebates between $0.31
and $0.43 per contract for qualifying Market Maker orders (i.e., that
yield fee code PM) \4\ where a Member meets certain liquidity
thresholds.
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\4\ Orders yielding fee code PM are Market Maker orders that add
liquidity in Penny Program Securities and are offered a rebate of
$0.29.
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Currently, the MM Penny Add Tiers include two Market Maker Cross-
Asset Add Tiers, both of which require participation on the Exchange's
equities platform (``BZX Equities''). Under Market Maker Cross-Asset
Add Tier 1, the Exchange provides a rebate of $0.38 per contract where
a Member (1) has an ADAV \5\ in Market Maker orders greater than or
equal to 0.10% of average OCV; \6\ (2) has on BZX Equities an ADAV
greater than or equal to 0.40% of average TCV; \7\ and (3) is the Lead
Market Maker (``LMM'') \8\ on BZX Equities in at least 50 equity
symbols. Under Market Maker Cross-Asset Add Tier 2, the Exchange
currently provides a rebate of $0.39 per contract where a Member (1)
has an ADAV in Market Maker orders greater than or equal to 0.20% of
average OCV; (2) has on BZX Equities an ADAV greater than or equal to
0.45% of average TCV; and (3) is the LMM on BZX Equities in at least 50
equity symbols.
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\5\ ``ADAV'' means average daily added volume calculated as the
number of contracts added.
\6\ ``OCV'' means the total equity and ETF options volume that
clears in the Customer range at the Options Clearing Corporation
(``OCC'') for the month for which the fees apply, excluding volume
on any day that the Exchange experiences an Exchange System
Disruption and on any day with a scheduled early market close.
\7\ ``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.
\8\ ``Lead Market Maker'' means a Market Maker registered with
the Exchange for a particular LMM Security that has committed to
maintain Minimum Performance Standards in the LMM Security. See Rule
11.8(e).
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The Exchange proposes to delete Market Maker Cross-Asset Add Tier 1
and amend the criteria for Market Maker Cross-Asset Add Tier 2.\9\ No
Members are currently satisfying the criteria under Market Maker Cross-
Asset Add Tier 1, and the Exchange no longer wishes to, nor is it
required to, maintain the tier. As proposed, under the remaining Market
Maker Cross-Asset Add Tier, the Exchange will provide a rebate of $0.39
per contract where a Member (1) has an ADAV in Market Maker orders in
SPY, QQQ greater than or equal to 0.20% of average SPY, QQQ OCV; (2)
has on has on [sic] BZX Equities an ADAV greater than or equal to 0.45%
of average TCV or an ADAV greater than or equal to 45,000,000,000; and
(3) is the LMM on BZX Equities in at least 50 equity symbols.
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\9\ As part of this proposed rule change, the Exchange proposes
to rename ``Market Maker Cross-Asset Add Tier 2'' to ``Market Maker
Cross-Asset Add Tier''.
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The Exchange believes the amended tier criteria for the Market
Maker Cross-Asset Add Tier, along with the existing MM Penny Add Tiers,
continue to provide an incremental incentive for Members to strive for
the highest tier levels, which provide increasingly higher rebates for
such transactions. Overall, the MM Penny Add Tiers, including the
Market Maker Cross-Asset Add Tier, are designed to encourage Members to
increase their order flow, thereby contributing to a deeper and more
liquid market, which benefits all market participants and provides
greater execution opportunities on the Exchange.
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.\10\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \11\ 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) \12\ 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) of the Act,\13\ which
requires that Exchange rules provide for the equitable allocation of
reasonable dues, fees, and other charges among its Trading Permit
Holders and other persons using its facilities.
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\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(5).
\12\ Id.
\13\ 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 proposed rule change
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
market participants. The Exchange is only one of several options venues
to which market participants may direct their order flow, and it
represents a small percentage of the overall market. The proposed fee
changes reflect a competitive pricing structure designed to incentivize
market participants to direct their order flow, which the Exchange
believes would enhance market quality to the benefit of all Members.
The Exchange believes that it is reasonable to eliminate Market
Maker Cross-Asset Add Tier 1 because the Exchange is not required to
maintain this tier or provide Members an opportunity to receive
enhanced rebates. As stated, no Members are currently satisfying the
criteria under these tiers, and the proposed change enables the
Exchange to redirect resources and funding into other programs and
tiers intended to incentivize increased order flow. Further, Members
still have other opportunities to obtain reduced fees via the remaining
MM Penny Add Tiers.
The Exchange believes that eliminating Market Maker Cross-Asset Add
Tier 1 is equitable and not unfairly discriminatory because it applies
uniformly to all Members, in that, the tier will not be available for
any Member. The Exchange also notes that the proposed change will not
adversely impact any Member's pricing or their ability to qualify for
other rebate tiers. Further, the MM Penny Add Tiers will continue to
apply uniformly to all qualifying Members, in that all Members that
submit the requisite order flow per each tier program have the
opportunity to compete for and achieve the available tiers.
Additionally, the Exchange believes the amended criteria for the
remaining Market Maker Cross-Asset Add Tier is reasonable, as such
changes are designed to encourage Members to increase their liquidity
on the Exchange and also their participation on BZX Equities to
continue to achieve the rebate offered under the Market Maker Cross-
Asset Add Tier. Specifically, the Exchange believes the amended
criteria reasonably encourages Members to increase their ADAV in Market
Makers
[[Page 42566]]
orders in SPY and QQQ over a modestly higher percentage of average SPY,
QQQ OCV, and to increase their ADAV on BZX Equities. The Exchange notes
that increased Market Maker activity (including LMMs), particularly,
facilitates tighter spreads and an increase in overall liquidity
provider activity, both of which signal additional corresponding
increases in order flow from other market participants, contributing
towards a robust, well-balanced market ecosystem. Indeed, increased
overall order flow benefits investors across both the Exchange's
options and equities platforms by continuing to deepen the Exchange's
liquidity pool, potentially providing even greater execution incentives
and opportunities, offering additional flexibility for all investors to
enjoy cost savings, supporting the quality of price discovery,
promoting market transparency and improving investor protection.
The Exchange believes that the proposal represents an equitable
allocation of fees and is not unfairly discriminatory because it
applies uniformly to all Market Makers. Additionally, a number of
Market Makers have a reasonable opportunity to satisfy the criteria of
the Cross-Asset Add Tier, as amended. While the Exchange has no way of
knowing whether this proposed rule change would definitively result in
any particular Market Maker qualifying for the Cross-Asset Add Tier, as
amended, the Exchange anticipates that approximately one Market Maker
will be able to compete for and achieve the proposed criteria of the
amended tier; however, the tier is open to any Market Maker that
satisfies the tier's amended criteria. The Exchange believes the tier,
as amended, could provide an incentive for other Members to submit
additional liquidity on BZX Options and Equities to qualify for the
enhanced rebate. To the extent a Member participates on the Exchange
but not on BZX Equities, the Exchange does believe that the proposal is
still reasonable, equitably allocated and non-discriminatory with
respect to such Member based on the overall benefit to the Exchange
resulting from the success of BZX Equities. Particularly, the Exchange
believes such success allows the Exchange to continue to provide and
potentially expand its existing incentive programs to the benefit of
all participants on the Exchange, whether they participate on BZX
Equities or not. The proposed change is also fair and equitable in that
membership in BZX Equities is available to all market participants,
which would provide them with access to the benefits on BZX Equities
provided by the proposed change, even where a member of BZX Equities is
not necessarily eligible for the enhanced rebate on the Exchange.
The Exchange also notes that it does not believe the proposed
changes will adversely impact any Member's pricing or ability to
qualify for other tiers. Rather, should a Member not meet the proposed
criteria, the Member will merely not receive the enhanced rebate, and
has alternative choices to aim to achieve under the MM Penny Add Tiers.
Furthermore, the enhanced rebate would apply to all Members that meet
the proposed required criteria under tier.
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 Exchange does not
believe the proposed changes to the MM Penny Add Tiers will impose any
burden on intramarket competition. Particularly, the proposed change
applies uniformly to all Market Makers. The proposal to eliminate
Market Maker Cross-Asset Add Tier 1 applies to all Members, in that,
such tier will not be available for any Member. All Members will
continue to have an opportunity receive enhanced rebates or reduced
fees offered under various tiers, including the remaining Market Maker
Cross-Asset Add Tier, as amended. Additionally, the proposal to amend
the remaining Market Maker Cross-Asset Tier will apply to all Members
and all Members will continue to have an opportunity to receive the
corresponding rebate through the program.
All MM Penny Add Tiers are generally designed to increase the
competitiveness of BZX and incentivize participants to increase their
order flow on the Exchange, providing for additional execution
opportunities for market participants and improved price transparency.
An overall increase in add activity may provide for deeper, more liquid
markets and execution opportunities at improved prices. Furthermore,
greater overall order flow, trading opportunities, and pricing
transparency benefit all market participants on the Exchange by
enhancing market quality and continuing to encourage Members to send
orders, thereby contributing towards a robust and well-balanced market
ecosystem.
As discussed above, to the extent a Member participates on the
Exchange but not on BZX Equities, the Exchange notes that the proposed
change can provide an overall benefit to the Exchange resulting from
the success of BZX Equities. Such success enables the Exchange to
continue to provide and potentially expand its existing incentive
programs to the benefit of all participants on the Exchange, whether
they participate on BZX Equities or not. The proposed pricing program
is also fair and equitable in that membership in BZX Equities is
available to all market participants.
Additionally, the proposed change is designed to attract additional
order flow to the Exchange and BZX Equities. Greater liquidity benefits
all market participants on the Exchange by providing more trading
opportunities and encourages Members to send orders, thereby
contributing to robust levels of liquidity, which benefits all market
participant. As a result, the Exchange believes that the proposed
change furthers 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.'' \14\
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\14\ 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 does not believe that the proposed rule changes will
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 16 other options exchanges and
off-exchange venues. Additionally, the Exchange represents a small
percentage of the overall market. Based on publicly available
information, no single options exchange has more than 16% of the market
share.\15\ Therefore, no exchange possesses significant pricing power
in the execution of option 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
[[Page 42567]]
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.'' \16\ 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'. . . .''.\17\
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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\15\ See supra note 3.
\16\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\17\ 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 \18\ and paragraph (f) of Rule 19b-4 \19\
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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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 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-2024-034 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-2024-034.
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-2024-034 and
should be submitted on or before June 5, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-10591 Filed 5-14-24; 8:45 am]
BILLING CODE 8011-01-P
