Notice2021-11406
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
June 1, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 103 (Tuesday, June 1, 2021)</title>
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[Federal Register Volume 86, Number 103 (Tuesday, June 1, 2021)]
[Notices]
[Pages 29312-29314]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-11406]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92013; File No. SR-CboeBZX-2021-040]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule
May 25, 2021.
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 12, 2021, 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'' or ``BZX
Equities'') is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to amend its fee schedule. The
text of the proposed rule change is provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/">http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/</a>), 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 29313]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its fee schedule to eliminate the
standard rebate for liquidity adding orders in securities priced below
$1.00.\3\
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\3\ The Exchange initially filed the proposed fee changes May 3,
2021 (SRCboeBZX-2021-037). On May 12, 2021, the Exchange withdrew
that filing and submitted this proposal.
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The Exchange first notes that it operates in a highly competitive
market in which market participants can readily direct order flow to
competing venues if they deem fee levels at a particular venue to be
excessive or incentives to be insufficient. More specifically, the
Exchange is only one of 16 registered equities exchanges, as well as a
number of alternative trading systems and other off-exchange venues
that do not have similar self-regulatory responsibilities under the
Exchange Act, to which market participants may direct their order flow.
Based on publicly available information,\4\ no single registered
equities exchange has more than 15% of the market share. Thus, in such
a low-concentrated and highly competitive market, no single equities
exchange possesses significant pricing power in the execution of order
flow. The Exchange in particular operates a ``Maker-Taker'' model
whereby it pays credits to Members that add liquidity and assesses fees
to those that remove liquidity. The Exchange's fee schedule sets forth
the standard rebates and rates applied per share for orders that
provide and remove liquidity, respectively.
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\4\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (April 26, 2021), available at <a href="https://markets.cboe.com/us/equities/market_statistics/">https://markets.cboe.com/us/equities/market_statistics/</a>.
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For liquidity adding orders (i.e., yielding fee code B,\5\ V,\6\
and Y \7\), the Exchange provides a standard rebate of $0.0018 per
share for orders in securities priced at or above $1.00, and a standard
rebate of $0.0009 per share for orders in securities priced below
$1.00. For liquidity removing orders (i.e., yielding fee code N,\8\
W,\9\ and BB \10\), the Exchange assesses a fee of $0.0030 per share
for orders in securities at or above $1.00, and assesses a fee of 0.30%
of the total dollar value for orders in securities priced below $1.00.
The Exchange now proposes to eliminate the standard rebate applied to
orders in securities priced below $1.00 and provide that such
executions shall be free as the Exchange no longer wishes to, nor is it
required to, provide such a rebate.
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\5\ Fee code B is appended to displayed orders adding liquidity
to BZX (Tape B).
\6\ Fee code V is appended to displayed orders adding liquidity
to BZX (Tape A).
\7\ Fee code Y is appended to displayed orders adding liquidity
to BZX (Tape C).
\8\ Fee code N is appended to orders removing liquidity from BZX
(Tape C).
\9\ Fee code W is appended to orders removing liquidity from BZX
(Tape A).
\10\ Fee code BB is appended to orders removing liquidity from
BZX (Tape B).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\11\ in general, and
furthers the objectives of Section 6(b)(4) and 6(b)(5),\12\ in
particular, as it is designed to provide for the equitable allocation
of reasonable dues, fees and other charges among its Members, issuers
and other persons using its facilities. 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 changes reflect 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.
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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(4) and (5).
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In particular, the Exchange believes that the proposed eliminating
the rebate and providing free executions for liquidity adding orders in
securities priced below $1.00 is reasonable because the Exchange no
longer wishes to, nor is it required to, provide such a rebate. The
Exchange believes the proposal is equitable and not unfairly
discriminatory because Members still are not paying any fees for such
executions. Further, the Exchange believes the proposal is equitable
and not unfairly discriminatory because it applies equally to all
Members. With the proposed amendments, the Exchange's make-take fee
structure would continue to incentivize liquidity providers to continue
to provide liquidity since such orders remain eligible for better
pricing than orders that remove liquidity and are charged a fee.
Further, the Exchange believes liquidity in securities priced less than
$1.00 is sufficient without a rebate.
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 intramarket or intermarket competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
Particularly, the proposal would apply uniformly to all Members, and
Members may opt to disfavor the Exchange's pricing if they believe that
alternatives offer them better value. Accordingly, the Exchange does
not believe that the proposed changes will impair the ability of
Members or competing venues to maintain their competitive standing in
the financial markets. Excessive fees would serve to impair an
exchange's ability to compete for order flow and Members rather than
burdening competition. Moreover, Members still would not be assessed
fees for liquidity adding orders, which is designed to incentivize
liquidity, which the Exchange believes will benefit all market
participants by encouraging a transparent and competitive market. The
Exchange believes liquidity in securities priced less than $1.00 is
sufficient without a rebate.
As previously discussed, the Exchange operates in a highly
competitive market. In such an environment, the Exchange must
continually review, and consider adjusting, its fees and rebates to
remain competitive with other exchanges. Members have numerous
alternative venues that they may participate on and direct their order
flow, including other equities exchanges, off-exchange venues, and
alternative trading systems. Additionally, the Exchange represents a
small percentage of the overall market. Based on publicly available
information, no single equities exchange has more than 15% of the
market share.\13\ Therefore, no exchange possesses significant pricing
power in the execution of order flow. Indeed, participants can readily
choose to send their orders to other exchange and off-exchange venues
if they deem fee levels at those other venues to be more favorable.
Moreover, the Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. Specifically, in
Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues and, also, recognized
that current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to
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investors and listed companies.'' \14\ 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'. . . .''.\15\ Accordingly, the Exchange
does not believe its proposed fee changes imposes any burden on
competition that is not necessary or appropriate in furtherance of the
purposes of the Act.
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\13\ Supra note 3.
\14\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\15\ 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 \16\ and paragraph (f) of Rule 19b-4 \17\
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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\16\ 15 U.S.C. 78s(b)(3)(A).
\17\ 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
<bullet> Use the Commission's internet comment form (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#3143445d541c525e5c5c545f4542714254521f565e47"><span class="__cf_email__" data-cfemail="97e5e2fbf2baf4f8fafaf2f9e3e4d7e4f2f4b9f0f8e1">[email protected]</span></a>. Please include
File Number SR-CboeBZX-2021-040 on the subject line.
Paper Comments
<bullet> 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-2021-040. 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 (<a href="http://www.sec.gov/rules/sro.shtml">http://www.sec.gov/rules/sro.shtml</a>).
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
20549-1090 on official business days between the hours of 10:00 a.m.
and 3:00 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of the Exchange. All
comments received will be posted without change. Persons submitting
comments are cautioned that we do not redact or edit personal
identifying information from comment submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-CboeBZX-2021-040 and should
be submitted on or before June 22, 2021.
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\18\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\18\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-11406 Filed 5-28-21; 8:45 am]
BILLING CODE 8011-01-P
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