Notice2021-19969
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule
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Published
September 16, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 177 (Thursday, September 16, 2021)</title>
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[Federal Register Volume 86, Number 177 (Thursday, September 16, 2021)]
[Notices]
[Pages 51687-51690]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-19969]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-92933; File No. SR-CboeBYX-2021-018]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule
September 10, 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 September 1, 2021, Cboe BYX Exchange, Inc. (the ``Exchange'' or
``BYX'') 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 BYX Exchange, Inc. (the ``Exchange'' or ``BYX'') proposes to
amend its Fee Schedule. The text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://markets.cboe.com/us/equities/regulation/rule_filings/byx/">http://markets.cboe.com/us/equities/regulation/rule_filings/byx/</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
[[Page 51688]]
the most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend its Fee Schedule to amend the
criteria for Add Volume Tiers 1 through 4, effective September 1, 2021.
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, no single registered equities
exchange has more than 16% of the market share.\3\ 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 ``Taker-Maker'' model whereby it pays
credits to members that remove liquidity and assesses fees to those
that add liquidity. The Exchange's Fee Schedule sets forth the standard
rebates and rates applied per share for orders that remove and provide
liquidity, respectively. Particularly, for securities at or above
$1.00, the Exchange provides a standard rebate of $0.00020 per share
for orders that remove liquidity and assesses a fee of $0.00200 per
share for orders that add liquidity. For orders priced below $1.00, the
Exchange does not assess a fee or provide a rebate for orders that add
liquidity and assesses a fee of 0.10% of total dollar value for orders
that remove liquidity. 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.
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\3\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (August 30, 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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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 various Add/Remove Volume Tiers under footnote 1 of
the Fee Schedule, which offer various enhanced rebates and reduced fees
for reaching certain, incrementally more challenging volume-based
thresholds.
The Exchange proposes to amend the criteria for Add Volume Tiers 1
through 4 under footnote 1 of the Fee Schedule, which tiers currently
provide Members an opportunity to qualify for reduced fees for orders
yielding fee codes B,\4\ V,\5\ and Y \6\ where a Member meets certain
required volume-based criteria. Specifically, Add Volume Tiers 1
through 4 are as follows:
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\4\ Orders yielding Fee Code B are displayed orders that add
liquidity to BYX (Tape B) and are assessed a standard fee of
$0.00200.
\5\ Orders yielding Fee Code V are displayed orders that add
liquidity to BYX (Tape A) and are assessed a standard fee of
$0.00200.
\6\ Orders and orders yielding Fee Code Y are displayed orders
that add liquidity to BYX (Tape C) and are assessed a standard fee
of $0.00200.
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<bullet> Tier 1 provides a reduced fee of $0.0017 per share to a
Member that has an ADAV \7\ as a percentage of TCV \8\ greater than or
equal to 0.25%.
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\7\ ``ADAV'' means average daily added volume calculated as the
number of shares added per day. ADAV is calculated on a monthly
basis.
\8\ ``TCV'' means total consolidated volume calculated as the
volume reported by all exchanges and trade reporting facilities to a
consolidated transaction reporting plan for the month for which the
fees apply.
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<bullet> Tier 2 provides a reduced fee of $0.0014 per share to a
Member that has an ADAV as a percentage of TCV greater than or equal to
0.30%.
<bullet> Tier 3 provides a reduced fee of $0.0013 per share to a
Member that has an ADAV as a percentage of TCV greater than or equal to
0.45%.
<bullet> Tier 4 provides a reduced fee of $0.0012 per share to a
Member that has an ADAV as a percentage of TCV greater than or equal to
1.00%.
Now, the Exchange proposes to modify these tiers to reduce the ADAV
as a percentage of TCV thresholds. The proposed Add Volume Tiers are as
follows:
<bullet> To meet the proposed criteria in Tier 1, a Member must
have an ADAV as a percentage of TCV equal to or greater than 0.20%
(instead of 25%).
<bullet> To meet the proposed criteria in Tier 2, a Member must
have an ADAV as a percentage of TCV equal to or greater than 0.25%
(instead of 30%).
<bullet> To meet the proposed criteria in Tier 3, a Member must
have an ADAV as a percentage of TCV equal to or greater than 0.30%
(instead of 45%).
<bullet> To meet the proposed criteria in Tier 4, a Member must
have an ADAV as a percentage of TCV equal to or greater than 0.60%
(instead of 1.00%).
The proposed changes to these tiers are designed to make each
tier's criteria easier to reach by lowering the volume-based criteria
(i.e., the ADAV as a percentage of TCV thresholds). The Exchange
believes that by easing the tiers' criteria difficulty it will
encourage those Members who could not previously achieve these Tiers to
increase their order flow as a means to receive the Tiers' proffered
fee reductions. The Exchange does not propose any changes to the
corresponding reduced fee under each tier and notes that it believes
the current rates remain commensurate with each tier's criteria, even
as amended. The Exchange also believes the Add Volume Tiers, as
amended, continue to provide liquidity providing Members on the
Exchange additional opportunities to receive discounted rates. The Add
Volume Tiers are designed to provide Members that submit displayed
liquidity on the Exchange incentives to contribute to a deeper, more
liquid market, in turn, providing additional execution opportunities at
transparent prices as a result of such increased, displayed liquidity.
The Exchange believes that this benefits all Members by enhancing
overall market quality and contributing towards a robust and well-
balanced market ecosystem. The Exchange notes the modified tiers are
available to all Members.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\9\ in general, and
furthers the objectives of Section 6(b)(4),\10\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its Members and issuers and other persons
using its facilities. The Exchange also believes that the proposed rule
change is consistent with the objectives of Section 6(b)(5) \11\
requirements that the rules of
[[Page 51689]]
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,
and, particularly, is not designed to permit unfair discrimination
between customers, issuers, brokers, or dealers.
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\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(4).
\11\ 15 U.S.C. 78f(b)(5).
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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 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. Also, as described above, the Exchange notes that relative
volume-based incentives and discounts have been widely adopted by
exchanges,\12\ including the Exchange,\13\ and are reasonable,
equitable and non-discriminatory because they are open to all members
on an equal basis and provide additional benefits or discounts that are
reasonably related to (i) the value to an exchange's market quality and
(ii) associated higher levels of market activity, such as higher levels
of liquidity provision and/or growth patterns. Competing equity
exchanges offer similar tiered pricing structures, including schedules
of rebates and fees that apply based upon members achieving certain
volume and/or growth thresholds, as well as assess similar fees or
rebates for similar types of orders, to that of the Exchange.
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\12\ See e.g., Nasdaq BX, Equity 7 Pricing Schedule, Section
118.
\13\ See BYX Equities Fee Schedule, Footnote 1, Add/Remove
Volume Tiers.
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In particular, the Exchange believes the proposed changes to ease
the volume-based criteria under Add Volume Tiers 1 through 4 is a
reasonable means to encourage Members to increase their add liquidity
on the Exchange. Further, the Exchange believes that the proposed
changes are reasonable as the proposed criteria does not represent a
significant departure from the criteria currently required of each
tier. Additionally, the Exchange believes Add Volume Tiers 1 through 4
will continue to provide Members additional opportunities to meet
criteria to receive a reduced fee, even as modified. The Exchange also
believes that the proposed reduced fees under Add Volume Tiers 1
through 4, which are not being changed, continue to be commensurate
with the new criteria.
As noted above, the Exchange believes the proposed changes
incentivize Members to increase their overall add volume order flow,
which may provide for deeper, more liquid markets and execution
opportunities at improved prices, which the Exchange believes signals
an increase in activity from other market participants. This overall
increase in activity deepens the Exchange's liquidity pool, offers
additional cost savings, supports the quality of price discovery,
promotes market transparency and improves market quality, for all
investors.
The Exchange believes that the proposed rule change represents an
equitable allocation of fees and rebates and is not unfairly
discriminatory because all Members are eligible for the Add Volume
Tiers and have the opportunity to meet the tiers' criteria and receive
the corresponding reduced fees if such criteria, even as amended, is
met. The Exchange notes that currently one Member is satisfying the
current criteria under Add Volume Tier 2 and no Members are satisfying
the current criteria under Add Volume Tiers 1, 3 or 4. Without having a
view of activity on other markets and off-exchange venues, the Exchange
has no way of predicting with certainty how the proposed changes will
impact Member activity. However, the Exchange anticipates that at least
one Member will be able to satisfy the criteria proposed under Add
Volume Tier 3 and does not anticipate any firms immediately satisfying
Add Volume Tiers 1, 2 or 4. The Exchange also notes that the proposed
changes will not adversely impact any Member's ability to qualify for
reduced fees or enhanced rebate offered under other tiers. Should a
Member not meet the proposed new criteria, the Member will merely not
receive the corresponding reduced fees.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes will
impose any burden on competition not necessary or appropriate in
furtherance of the purposes of the Act. Rather, as discussed above, the
Exchange believes that the proposed changes would encourage the
submission of additional order flow to a public exchange, thereby
promoting market depth, execution incentives and enhanced execution
opportunities, as well as price discovery and transparency for all
Members. As a result, the Exchange believes that the proposed changes
further the Commission's goal in adopting Regulation NMS of fostering
competition among orders, which promotes ``more efficient pricing of
individual stocks for all types of orders, large and small.''
The Exchange believes the proposed rule change does not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Particularly, the proposed
changes to Add Volume Tiers 1 through 4 applies to all Members equally
in that all Members are eligible for these tiers, have a reasonable
opportunity to meet the tiers' criteria and will receive the reduced
fee on their qualifying orders if such criteria is met. The Exchange
does not believe the proposed changes burdens competition, but rather,
enhances competition as it is intended to increase the competitiveness
of BYX by amending existing pricing incentives in order to attract
order flow and incentivize participants to increase their participation
on the Exchange, providing for additional execution opportunities for
market participants and improved price transparency. Greater overall
order flow, trading opportunities, and pricing transparency benefits
all market participants on the Exchange by enhancing market quality and
continuing to encourage Members to send orders, thereby contributing
towards a robust and well-balanced market ecosystem.
Next, the Exchange believes the proposed rule change does not
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. As previously
discussed, the Exchange operates in a highly competitive market. 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 16% of the market share.\14\ Therefore, no
exchange possesses significant pricing power in the execution of order
flow. Indeed,
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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.'' \15\ 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'. . . .''.\16\ 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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\14\ See supra note 3.
\15\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\16\ 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 \17\ and paragraph (f) of Rule 19b-4 \18\
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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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 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#d7a5a2bbb2fab4b8babab2b9a3a497a4b2b4f9b0b8a1"><span class="__cf_email__" data-cfemail="5220273e377f313d3f3f373c2621122137317c353d24">[email protected]</span></a>. Please include
File Number SR-CboeBYX-2021-018 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-CboeBYX-2021-018. 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, 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-CboeBYX-2021-018 and should be submitted
on or before October 7, 2021.
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\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-19969 Filed 9-15-21; 8:45 am]
BILLING CODE 8011-01-P
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