Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fees Schedule, 65941-65945 [2024-17950]
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Federal Register / Vol. 89, No. 156 / Tuesday, August 13, 2024 / Notices
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[Notice: 24–050]
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SUMMARY:
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Trenton J. Roche,
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[FR Doc. 2024–17960 Filed 8–12–24; 8:45 am]
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[Release No. 34–100669; File No. SRCboeBZX–2024–074]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend Its
Fees Schedule
August 7, 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 August 1,
2024, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘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.
Christopher Doyle,
Attorney, Ethics and Legal Compliance.
[FR Doc. 2024–17943 Filed 8–12–24; 8:45 am]
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BILLING CODE 7710–12–P
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 89, No. 156 / Tuesday, August 13, 2024 / Notices
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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 August 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 12% of the market share.3 Thus, in
such a low-concentrated and highly
competitive market, no single options
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. For
example, the Exchange currently offers
four Market Maker Penny Add Volume
Tiers (‘‘MM Penny Add Tier’’) under
footnote 6 of the Fee Schedule which
3 See Cboe Global Markets U.S. Options Monthly
Market Volume Summary (July 30, 2024), available
at https://markets.cboe.com/us/options/market_
statistics/.
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provide rebates between $0.31 and
$0.43 per contract for qualifying Market
Maker orders which meet certain add
liquidity thresholds and yield fee code
PM.
Currently, the MM Penny Add Tiers
includes one Market Maker Cross-Asset
Add Tier, which requires participation
on the Exchange’s equities platform
(‘‘BZX Equities’’). Under the Market
Maker Cross-Asset Add Tier, the
Exchange provides a rebate of $0.39 per
contract where a Member (1) has an
ADAV 4 in Market Maker orders in SPY,
QQQ ≥ 0.20% of average SPY, QQQ
OCV 5; (2) has on BZX Equities an
ADAV greater than or equal to 0.45% of
average TCV 6 or an ADAV ≥
45,000,000,000; and (3) is the Lead
Market Maker (‘‘LMM’’) 7 on BZX
Equities in at least 50 equity symbols.
The Exchange proposes to amend the
rebate for the Market Maker Cross-Asset
Add Tier,8 from $0.39 per contract to
$0.38 per contract.
Further, the Exchange proposes to
adopt a new MM Penny Add Tier,
specifically Market Maker Cross-Asset
Add Tier 2, which requires participation
on BZX Equities. Under the proposed
tier, the Exchange would provide a
rebate of $0.39 per contract where a
Member (1) has an ADAV in Market
Maker orders in SPY, QQQ ≥0.25% of
average SPY, QQQ OCV; (2) has on BZX
Equities an ADAV ≥ 0.45% of average
TCV or an ADAV ≥47,500,000; and (3)
is the LMM on BZX Equities in at least
50 equity symbols.
The Exchange believes the amended
rebate for Market Maker Cross-Asset
Tier 1 and the proposed Market Maker
Cross-Asset Tier 2, 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,
4 ‘‘ADAV’’ means average daily added volume
calculated as the number of contracts added.
5 ‘‘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.
6 ‘‘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.
7 ‘‘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).
8 As part of this proposed rule change, the
Exchange proposes to rename this Market Maker
Cross-Asset Tier as Market Maker Cross-Asset Tier
1
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including the Market Maker Cross-Asset
Add Tiers (current and proposed) 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.
Additionally, the Exchange assesses
fees in connection with orders routed
away to various exchanges. The
Exchange notes that its current
approach to routing fees is to set forth
in a simple manner certain subcategories of fees that approximate the
cost of routing to other options
exchanges based on the cost of
transaction fees assessed by each venue
as well as costs to the Exchange for
routing (i.e., clearing fees, connectivity
and other infrastructure costs,
membership fees, etc.) (collectively,
‘‘Routing Costs’’). The Exchange then
monitors the fees charged as compared
to the costs of its routing services and
adjusts its routing fees and/or subcategories to ensure that the Exchange’s
fees do indeed result in a rough
approximation of overall Routing Costs,
and are not significantly higher or lower
in any area. The Exchange notes that
another options exchange currently
assesses routing fees in a similar manner
as the Exchange’s current approach to
assessing approximate routing fees.9
Currently, under the Fee Codes and
Associated Fees section of the Fees
Schedule, fee code RP is appended to
routed Customer orders to NYSE
American (‘‘AMEX’’), BOX Options
Exchange (‘‘BOX’’), Cboe Exchange, Inc.
(‘‘Cboe’’), Cboe EDGX Exchange, Inc.
(‘‘EDGX’’), MIAX Options Exchange
(‘‘MIAX’’) or Nasdaq PHLX LLC
(‘‘PHLX’’) (excluding orders in SPY
options to PHLX) and assesses a charge
of $0.25 per contract. The Exchange
proposes to amend fee code RP to add
applicable Customer orders routed to
MIAX Sapphire, LLC (‘‘SPHR’’), in
anticipation of the launch of the new
options exchange. The charge assessed
per contract for fee code RP remain the
same under the proposed rule change.
The proposed changes result in an
assessment of fees that, in anticipation
of the launch of another options
exchange, is more in line with the
Exchange’s current approach to routing
fees, that is, in a manner that
approximates the cost of routing
Customer orders to other away options
exchanges, based on the general cost of
transaction fees assessed by the sub9 See e.g., MIAX Options Exchange Fee Schedule,
Section 1(c), ‘‘Fees for Customer Orders Routed to
Another Options Exchange.’’
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Federal Register / Vol. 89, No. 156 / Tuesday, August 13, 2024 / Notices
category of away options exchanges for
such orders (as well as the Exchange’s
Routing Costs).10 The Exchange notes
that routing through the Exchange is
optional and that Members will
continue to be able to choose where to
route applicable Customer orders.
2. Statutory Basis
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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.11 Specifically,
the Exchange believes the proposed rule
change is consistent with the Section
6(b)(5) 12 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) 13 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,14 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.
In particular, the Exchange believes
the proposed changes to the MM Penny
Add Tiers are reasonable because they
provide additional opportunities for
Members to receive a rebate by
providing alternative criteria for which
they can reach. The Exchange notes that
volume-based incentives and discounts
have been widely adopted by
10 See Securities Exchange Act Release No. 97800
(June 26, 2023), 88 FR 42409 (June 30, 2023) (SR–
MRX–2023–11).
11 15 U.S.C. 78f(b).
12 15 U.S.C. 78f(b)(5).
13 Id.
14 15 U.S.C. 78f(b)(4).
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exchanges,15 including the Exchange,16
and are reasonable, equitable and nondiscriminatory because they are open to
all Members on an equal basis and
provide additional benefits or discounts
that are reasonably related to (i) the
value to an exchange’s market quality
and (ii) associated higher levels of
market activity, such as higher levels of
liquidity provision and/or growth
patterns. Additionally, as noted above,
the Exchange operates in a highly
competitive market. 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.
Competing options exchanges offer
similar tiered pricing structures to that
of the Exchange, including schedules of
rebates and fees that apply based upon
Members achieving certain volume and/
or growth thresholds. These competing
pricing schedules, moreover, are
presently comparable to those that the
Exchange provides.
Moreover, the Exchange believes the
proposed MM Penny Add Tier, namely
Market Maker Cross-Asset Tier 2, is a
reasonable means to encourage
Members to increase their liquidity on
the Exchange and also their
participation on BZX Equities. The
Exchange believes that adopting tiers
with alternative criteria to the existing
MM Penny Add Tiers may encourage
Members to increase their order flow on
BZX Options and Equities.
For example, the proposed MarketMaker Cross-Asset Tier 2 would provide
an opportunity for Members who have
an ADAV in Market Maker orders in
SPY, QQQ of at least 0.25% of average
SPY, QQQ OCV, but less than an ADAV
of Market Maker orders of at least 0.45%
of average OCV (the requirement under
current Tier 3), to receive a higher
rebate than they may currently receive
but equal or slightly lower than the
rebate they would receive for reaching
the more stringent criteria under current
Tiers 3 through 4, if they also meet the
threshold requirements based on BZX
Equities participation. Similarly, for
Market Makers that participate on both
BZX Options and Equities, and do not
currently meet the 0.35% ADAV
threshold under current MM Penny Add
Tier 2, but can or do meet the proposed
15 See e.g., Cboe EDGX U.S. Options Exchange
Fee Schedule, Footnote 2, Market Maker Volume
Tiers, which provide reduced fees between $0.02
and $0.17 per contract for Market Maker Penny and
Non-Penny orders where Members meet certain
volume thresholds.
16 See e.g., Cboe BZX U.S. Options Exchange Fee
Schedule, Footnotes 6 and 7, Market Maker Penny
and Non-Penny Volume Tiers which provide
enhanced rebates for Market Maker orders where
Members meet certain volume thresholds.
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65943
equities thresholds, the proposed tier
may incentivize those participants to
grow their options volume in order to
receive enhanced rebates. Increased
liquidity benefits all investors by
deepening the Exchange’s liquidity
pool, 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 also believes
that proposed enhanced rebate is
reasonable based on the difficulty of
satisfying the tier’s criteria and ensures
the proposed rebate and thresholds
appropriately reflect the incremental
difficulty to achieve the existing MM
Penny Add Tiers.
The proposed enhanced rebate
amounts also do not represent a
significant departure from the enhanced
rebates currently offered under the
Exchange’s existing MM Penny Add
Tiers. Indeed, the proposed enhanced
rebate amount under the proposed
Cross-Asset Add Tier 2 ($0.39) is
incrementally higher than current Tiers
1 and 2 ($0.31 and $0.38, respectively),
which the Exchange believes offer
slightly less stringent criteria than the
proposed Cross-Asset Add Tier 2, but is
incrementally lower than the rebate
offered under existing Tier 4 ($0.43),
which the Exchange believes is more
stringent than the proposed criteria
under the proposed Cross-Asset Tier 2.
Similarly, the proposed enhanced rebate
amount under the proposed Cross-Asset
Tier 2 ($0.39) is the same as current Tier
3 ($0.39), which the Exchange believes
reflects a similar level of difficulty but
using alternative types of criteria.
Finally, the proposed enhanced rebate
amount under the proposed Cross-Asset
Tier 2 ($0.39) is incrementally higher
than the rebate offered under existing
Cross-Asset Add Tier 1, which the
Exchange believes is less stringent than
the proposed criteria than the proposed
Cross-Asset Add Tier 2. The Exchange
also notes that the proposed rebates
remain within the range of the enhanced
rebates offered under the current MM
Penny Add Tiers (i.e., $0.31–$0.43).
Further, the Exchange believes that
the amended fee for Market Maker
Cross-Asset Tier 1, considered with the
proposed criteria and fee for proposed
Market Maker Cross-Asset Tier 2, 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 Market Maker
Cross-Asset Tier 1 or to achieve the
rebate offered under proposed Market
Maker Cross-Asset Tier 2. The Exchange
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Federal Register / Vol. 89, No. 156 / Tuesday, August 13, 2024 / Notices
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 increase 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 1, which the Exchange
believes is less stringent than existing
MM Penny Add Tier 2, and proposed
Cross-Asset Add Tier 2, which the
Exchange believes is less stringent than
the existing MM Penny Add Tiers 3 and
4. While the Exchange has no way of
knowing whether this proposed rule
change would definitively result in any
particular Market Maker qualifying for
the proposed tiers, the Exchange
anticipates that approximately two
Market Makers will be able to compete
for and achieve the criteria of CrossAsset Add Tier 1 and approximately
two Market Makers will be able to
compete for and achieve the proposed
criteria of the proposed Cross-Asset Add
Tier 2; however, the proposed tiers are
open to any Market Maker that satisfies
the applicable tiers’ criteria. The
Exchange believes the proposed tiers
could provide an incentive for other
Members to submit additional liquidity
on BZX Options and Equities to qualify
for the proposed enhanced rebates. 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
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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, 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 proposed enhanced rebates 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 proposed
enhanced rebate, and has five
alternative choices to aim to achieve
under the MM Penny Add Tiers.
Furthermore, the proposed enhanced
rebate would apply to all Members that
meet the required criteria under
proposed tier.
Additionally, the Exchange believes
the proposed rule change to amend fee
code RD to account for SPHR’s expected
assessment of fees for Customer orders
is reasonable because it is reasonably
designed to assess routing fees in line
with the Exchange’s current approach to
routing fees. That is, the proposed rule
change is intended to include Customer
orders routed to SPHR in the most
appropriate sub-category of fees that
approximates the cost of routing to a
group of away options exchanges based
on the cost of transaction fees assessed
by each venue as well as Routing Costs
to the Exchange. As noted above, the
Exchange operates in a highly
competitive market in which market
participants can readily direct order
flow to competing venues if they deem
fee levels at a particular venue to be
excessive or incentives to be
insufficient. The Exchange notes that
routing through the Exchange is
optional and that Members will
continue to be able to choose where to
route their Customer orders in the same
sub-category group of away exchanges
as they currently may choose to route.
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 Members. The Exchange further
notes that another options exchange
currently approximates routing fees in a
similar manner as the Exchange’s
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current approach.17 The Exchange
believes that the proposed rule change
is equitable and not unfairly
discriminatory because all Members’
applicable Customer orders routed to
SPHR will be automatically and
uniformly assessed the applicable
routing charge.
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. As discussed above, to the
extent a Member participates on the
Exchange but not on BZX Equities, the
Exchange notes that the proposed
changes 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.’’ 18
Further, the Exchange does not
believe the proposed rule change to
amend fee code RP will impose any
burden on intramarket competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
All Members’ applicable Customer
orders routed to SPHR will
automatically yield fee code RP and
17 See e.g., MIAX Options Exchange Fee
Schedule, Section 1(c), ‘‘Fees for Customer Orders
Routed to Another Options Exchange.’’
18 Securities Exchange Act Release No. 51808, 70
FR 37495, 37498–99 (June 29, 2005) (S7–10–04)
(Final Rule).
E:\FR\FM\13AUN1.SGM
13AUN1
lotter on DSK11XQN23PROD with NOTICES1
Federal Register / Vol. 89, No. 156 / Tuesday, August 13, 2024 / Notices
uniformly be assessed the
corresponding fee. The Exchange notes
that another options exchange
approximates routing costs in a similar
manner as the Exchange’s current
approach.19
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 12% of the
market share.20 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
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.’’ 21 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’ . . . .’’.22 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.
19 See e.g., MIAX Options Exchange Fee
Schedule, Section 1(c), ‘‘Fees for Customer Orders
Routed to Another Options Exchange.’’
20 See supra note 1.
21 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005).
22 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)).
23 15 U.S.C. 78s(b)(3)(A).
24 17 CFR 240.19b–4(f).
VerDate Sep<11>2014
17:55 Aug 12, 2024
Jkt 262001
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 23 and paragraph (f) of Rule
19b–4 24 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–2024–074 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–2024–074. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
PO 00000
Frm 00110
Fmt 4703
Sfmt 4703
65945
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–2024–074, and should be
submitted on or before September 3,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–17950 Filed 8–12–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
35292; File No. 812–15451]
Felicitas Private Markets Fund, et al.
August 8, 2024.
Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’).
ACTION: Notice.
AGENCY:
Notice of application for an order
pursuant to sections 17(d) and 57(i) of
the Investment Company Act of 1940
(the ‘‘Act’’) and rule 17d–1 under the
Act to permit certain joint transactions
otherwise prohibited by sections 17(d)
and 57(a)(4) of the Act and rule 17d–1
under the Act.
25 17
E:\FR\FM\13AUN1.SGM
CFR 200.30–3(a)(12).
13AUN1
]]>Agencies
[Federal Register Volume 89, Number 156 (Tuesday, August 13, 2024)]
[Notices]
[Pages 65941-65945]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-17950]
=======================================================================
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100669; File No. SR-CboeBZX-2024-074]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fees Schedule
August 7, 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 August 1, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission (``SEC'' or
``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'') 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.
[[Page 65942]]
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 August
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 12% of the market share.\3\
Thus, in such a low-concentrated and highly competitive market, no
single options 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.
---------------------------------------------------------------------------
\3\ See Cboe Global Markets U.S. Options Monthly Market Volume
Summary (July 30, 2024), available at https://markets.cboe.com/us/options/market_statistics/.
---------------------------------------------------------------------------
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. For
example, the Exchange currently offers four Market Maker Penny Add
Volume Tiers (``MM Penny Add Tier'') under footnote 6 of the Fee
Schedule which provide rebates between $0.31 and $0.43 per contract for
qualifying Market Maker orders which meet certain add liquidity
thresholds and yield fee code PM.
Currently, the MM Penny Add Tiers includes one Market Maker Cross-
Asset Add Tier, which requires participation on the Exchange's equities
platform (``BZX Equities''). Under the Market Maker Cross-Asset Add
Tier, the Exchange provides a rebate of $0.39 per contract where a
Member (1) has an ADAV \4\ in Market Maker orders in SPY, QQQ >= 0.20%
of average SPY, QQQ OCV \5\; (2) has on BZX Equities an ADAV greater
than or equal to 0.45% of average TCV \6\ or an ADAV >= 45,000,000,000;
and (3) is the Lead Market Maker (``LMM'') \7\ on BZX Equities in at
least 50 equity symbols. The Exchange proposes to amend the rebate for
the Market Maker Cross-Asset Add Tier,\8\ from $0.39 per contract to
$0.38 per contract.
---------------------------------------------------------------------------
\4\ ``ADAV'' means average daily added volume calculated as the
number of contracts added.
\5\ ``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.
\6\ ``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.
\7\ ``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).
\8\ As part of this proposed rule change, the Exchange proposes
to rename this Market Maker Cross-Asset Tier as Market Maker Cross-
Asset Tier 1
---------------------------------------------------------------------------
Further, the Exchange proposes to adopt a new MM Penny Add Tier,
specifically Market Maker Cross-Asset Add Tier 2, which requires
participation on BZX Equities. Under the proposed tier, the Exchange
would provide a rebate of $0.39 per contract where a Member (1) has an
ADAV in Market Maker orders in SPY, QQQ >=0.25% of average SPY, QQQ
OCV; (2) has on BZX Equities an ADAV >= 0.45% of average TCV or an ADAV
>=47,500,000; and (3) is the LMM on BZX Equities in at least 50 equity
symbols.
The Exchange believes the amended rebate for Market Maker Cross-
Asset Tier 1 and the proposed Market Maker Cross-Asset Tier 2, 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 Tiers (current and proposed) 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.
Additionally, the Exchange assesses fees in connection with orders
routed away to various exchanges. The Exchange notes that its current
approach to routing fees is to set forth in a simple manner certain
sub-categories of fees that approximate the cost of routing to other
options exchanges based on the cost of transaction fees assessed by
each venue as well as costs to the Exchange for routing (i.e., clearing
fees, connectivity and other infrastructure costs, membership fees,
etc.) (collectively, ``Routing Costs''). The Exchange then monitors the
fees charged as compared to the costs of its routing services and
adjusts its routing fees and/or sub-categories to ensure that the
Exchange's fees do indeed result in a rough approximation of overall
Routing Costs, and are not significantly higher or lower in any area.
The Exchange notes that another options exchange currently assesses
routing fees in a similar manner as the Exchange's current approach to
assessing approximate routing fees.\9\
---------------------------------------------------------------------------
\9\ See e.g., MIAX Options Exchange Fee Schedule, Section 1(c),
``Fees for Customer Orders Routed to Another Options Exchange.''
---------------------------------------------------------------------------
Currently, under the Fee Codes and Associated Fees section of the
Fees Schedule, fee code RP is appended to routed Customer orders to
NYSE American (``AMEX''), BOX Options Exchange (``BOX''), Cboe
Exchange, Inc. (``Cboe''), Cboe EDGX Exchange, Inc. (``EDGX''), MIAX
Options Exchange (``MIAX'') or Nasdaq PHLX LLC (``PHLX'') (excluding
orders in SPY options to PHLX) and assesses a charge of $0.25 per
contract. The Exchange proposes to amend fee code RP to add applicable
Customer orders routed to MIAX Sapphire, LLC (``SPHR''), in
anticipation of the launch of the new options exchange. The charge
assessed per contract for fee code RP remain the same under the
proposed rule change.
The proposed changes result in an assessment of fees that, in
anticipation of the launch of another options exchange, is more in line
with the Exchange's current approach to routing fees, that is, in a
manner that approximates the cost of routing Customer orders to other
away options exchanges, based on the general cost of transaction fees
assessed by the sub-
[[Page 65943]]
category of away options exchanges for such orders (as well as the
Exchange's Routing Costs).\10\ The Exchange notes that routing through
the Exchange is optional and that Members will continue to be able to
choose where to route applicable Customer orders.
---------------------------------------------------------------------------
\10\ See Securities Exchange Act Release No. 97800 (June 26,
2023), 88 FR 42409 (June 30, 2023) (SR-MRX-2023-11).
---------------------------------------------------------------------------
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.\11\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \12\ 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) \13\ 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,\14\ 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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
\13\ Id.
\14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
In particular, the Exchange believes the proposed changes to the MM
Penny Add Tiers are reasonable because they provide additional
opportunities for Members to receive a rebate by providing alternative
criteria for which they can reach. The Exchange notes that volume-based
incentives and discounts have been widely adopted by exchanges,\15\
including the Exchange,\16\ and are reasonable, equitable and non-
discriminatory because they are open to all Members on an equal basis
and provide additional benefits or discounts that are reasonably
related to (i) the value to an exchange's market quality and (ii)
associated higher levels of market activity, such as higher levels of
liquidity provision and/or growth patterns. Additionally, as noted
above, the Exchange operates in a highly competitive market. 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. Competing options exchanges offer
similar tiered pricing structures to that of the Exchange, including
schedules of rebates and fees that apply based upon Members achieving
certain volume and/or growth thresholds. These competing pricing
schedules, moreover, are presently comparable to those that the
Exchange provides.
---------------------------------------------------------------------------
\15\ See e.g., Cboe EDGX U.S. Options Exchange Fee Schedule,
Footnote 2, Market Maker Volume Tiers, which provide reduced fees
between $0.02 and $0.17 per contract for Market Maker Penny and Non-
Penny orders where Members meet certain volume thresholds.
\16\ See e.g., Cboe BZX U.S. Options Exchange Fee Schedule,
Footnotes 6 and 7, Market Maker Penny and Non-Penny Volume Tiers
which provide enhanced rebates for Market Maker orders where Members
meet certain volume thresholds.
---------------------------------------------------------------------------
Moreover, the Exchange believes the proposed MM Penny Add Tier,
namely Market Maker Cross-Asset Tier 2, is a reasonable means to
encourage Members to increase their liquidity on the Exchange and also
their participation on BZX Equities. The Exchange believes that
adopting tiers with alternative criteria to the existing MM Penny Add
Tiers may encourage Members to increase their order flow on BZX Options
and Equities.
For example, the proposed Market-Maker Cross-Asset Tier 2 would
provide an opportunity for Members who have an ADAV in Market Maker
orders in SPY, QQQ of at least 0.25% of average SPY, QQQ OCV, but less
than an ADAV of Market Maker orders of at least 0.45% of average OCV
(the requirement under current Tier 3), to receive a higher rebate than
they may currently receive but equal or slightly lower than the rebate
they would receive for reaching the more stringent criteria under
current Tiers 3 through 4, if they also meet the threshold requirements
based on BZX Equities participation. Similarly, for Market Makers that
participate on both BZX Options and Equities, and do not currently meet
the 0.35% ADAV threshold under current MM Penny Add Tier 2, but can or
do meet the proposed equities thresholds, the proposed tier may
incentivize those participants to grow their options volume in order to
receive enhanced rebates. Increased liquidity benefits all investors by
deepening the Exchange's liquidity pool, 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 also believes that proposed enhanced
rebate is reasonable based on the difficulty of satisfying the tier's
criteria and ensures the proposed rebate and thresholds appropriately
reflect the incremental difficulty to achieve the existing MM Penny Add
Tiers.
The proposed enhanced rebate amounts also do not represent a
significant departure from the enhanced rebates currently offered under
the Exchange's existing MM Penny Add Tiers. Indeed, the proposed
enhanced rebate amount under the proposed Cross-Asset Add Tier 2
($0.39) is incrementally higher than current Tiers 1 and 2 ($0.31 and
$0.38, respectively), which the Exchange believes offer slightly less
stringent criteria than the proposed Cross-Asset Add Tier 2, but is
incrementally lower than the rebate offered under existing Tier 4
($0.43), which the Exchange believes is more stringent than the
proposed criteria under the proposed Cross-Asset Tier 2. Similarly, the
proposed enhanced rebate amount under the proposed Cross-Asset Tier 2
($0.39) is the same as current Tier 3 ($0.39), which the Exchange
believes reflects a similar level of difficulty but using alternative
types of criteria. Finally, the proposed enhanced rebate amount under
the proposed Cross-Asset Tier 2 ($0.39) is incrementally higher than
the rebate offered under existing Cross-Asset Add Tier 1, which the
Exchange believes is less stringent than the proposed criteria than the
proposed Cross-Asset Add Tier 2. The Exchange also notes that the
proposed rebates remain within the range of the enhanced rebates
offered under the current MM Penny Add Tiers (i.e., $0.31-$0.43).
Further, the Exchange believes that the amended fee for Market
Maker Cross-Asset Tier 1, considered with the proposed criteria and fee
for proposed Market Maker Cross-Asset Tier 2, 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 Market Maker Cross-Asset
Tier 1 or to achieve the rebate offered under proposed Market Maker
Cross-Asset Tier 2. The Exchange
[[Page 65944]]
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 increase 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 1, which the Exchange believes is less
stringent than existing MM Penny Add Tier 2, and proposed Cross-Asset
Add Tier 2, which the Exchange believes is less stringent than the
existing MM Penny Add Tiers 3 and 4. While the Exchange has no way of
knowing whether this proposed rule change would definitively result in
any particular Market Maker qualifying for the proposed tiers, the
Exchange anticipates that approximately two Market Makers will be able
to compete for and achieve the criteria of Cross-Asset Add Tier 1 and
approximately two Market Makers will be able to compete for and achieve
the proposed criteria of the proposed Cross-Asset Add Tier 2; however,
the proposed tiers are open to any Market Maker that satisfies the
applicable tiers' criteria. The Exchange believes the proposed tiers
could provide an incentive for other Members to submit additional
liquidity on BZX Options and Equities to qualify for the proposed
enhanced rebates. 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 pricing program 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 proposed enhanced
rebates 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 proposed enhanced
rebate, and has five alternative choices to aim to achieve under the MM
Penny Add Tiers. Furthermore, the proposed enhanced rebate would apply
to all Members that meet the required criteria under proposed tier.
Additionally, the Exchange believes the proposed rule change to
amend fee code RD to account for SPHR's expected assessment of fees for
Customer orders is reasonable because it is reasonably designed to
assess routing fees in line with the Exchange's current approach to
routing fees. That is, the proposed rule change is intended to include
Customer orders routed to SPHR in the most appropriate sub-category of
fees that approximates the cost of routing to a group of away options
exchanges based on the cost of transaction fees assessed by each venue
as well as Routing Costs to the Exchange. As noted above, the Exchange
operates in a highly competitive market in which market participants
can readily direct order flow to competing venues if they deem fee
levels at a particular venue to be excessive or incentives to be
insufficient. The Exchange notes that routing through the Exchange is
optional and that Members will continue to be able to choose where to
route their Customer orders in the same sub-category group of away
exchanges as they currently may choose to route. 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 Members. The Exchange further notes that another options exchange
currently approximates routing fees in a similar manner as the
Exchange's current approach.\17\ The Exchange believes that the
proposed rule change is equitable and not unfairly discriminatory
because all Members' applicable Customer orders routed to SPHR will be
automatically and uniformly assessed the applicable routing charge.
---------------------------------------------------------------------------
\17\ See e.g., MIAX Options Exchange Fee Schedule, Section 1(c),
``Fees for Customer Orders Routed to Another Options Exchange.''
---------------------------------------------------------------------------
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. 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. As discussed above, to the
extent a Member participates on the Exchange but not on BZX Equities,
the Exchange notes that the proposed changes 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.'' \18\
---------------------------------------------------------------------------
\18\ Securities Exchange Act Release No. 51808, 70 FR 37495,
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
---------------------------------------------------------------------------
Further, the Exchange does not believe the proposed rule change to
amend fee code RP will impose any burden on intramarket competition
that is not necessary or appropriate in furtherance of the purposes of
the Act. All Members' applicable Customer orders routed to SPHR will
automatically yield fee code RP and
[[Page 65945]]
uniformly be assessed the corresponding fee. The Exchange notes that
another options exchange approximates routing costs in a similar manner
as the Exchange's current approach.\19\
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\19\ See e.g., MIAX Options Exchange Fee Schedule, Section 1(c),
``Fees for Customer Orders Routed to Another Options Exchange.''
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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 12% of the market
share.\20\ 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
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.'' \21\ 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' . . . .''.\22\
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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\20\ See supra note 1.
\21\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\22\ 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 \23\ and paragraph (f) of Rule 19b-4 \24\
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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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 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-2024-074 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-2024-074. 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-2024-074, and should
be submitted on or before September 3, 2024.
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\25\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-17950 Filed 8-12-24; 8:45 am]
BILLING CODE 8011-01-P
