Notice2021-21485
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change to the Exchange's 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
October 4, 2021
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 86 Issue 189 (Monday, October 4, 2021)</title>
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[Federal Register Volume 86, Number 189 (Monday, October 4, 2021)]
[Notices]
[Pages 54775-54777]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2021-21485]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-93149; File No. SR-CboeBZX-2021-064]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to the
Exchange's Fee Schedule
September 28, 2021.
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 September 21, 2021, Cboe BZX Exchange, Inc. (``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I and
II below, which Items have been prepared by the self-regulatory
organization. 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'') 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/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.
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 applicable to its
equities trading platform (``BZX Equities'') to modify the rebate
associated with a certain routing fee code and eliminate certain
routing fee codes.\3\
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\3\ The Exchange initially filed the proposed fee changes
September 1, 2021 (SR-CboeBZX-2021-061). On September 13, 2021, the
Exchange withdrew that filing and re-submitted the proposed fee
changes (SR-CboeBZX-2021-062). On September 21, 2021, the Exchange
withdrew that filing and re-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 14% 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 believes that the ever-shifting market share among
the exchanges from month to month demonstrates that market participants
can shift order flow, discontinue, or 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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\4\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (August 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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The Exchange assesses fees and provides rebates in connection with
orders routed away to various exchanges. Now, the Exchange proposes to
modify a particular routing fee code currently under the Fee Codes and
Associated Fees section of the Fee Schedule. First, the Exchange
proposes to modify fee code NX, which is appended to orders routed to
NYSE National, Inc. (``NYSE National'') using the TRIM or SLIM routing
strategy, and currently provides a rebate of $0.00200 per share. The
Exchange proposes to reduce the rebate to $0.00050 per share.
Additionally, as a result of minimal use in the last months, the
Exchange proposes to eliminate fee codes BO and SX in their entirety.
Fee code BO is appended to orders routed using a destination specific
routing strategy unless otherwise specified, and currently assesses a
fee of $0.00300 per share. Fee code SX is appended to orders routed
using the SLIM routing strategy (except to Cboe BYX Exchange, Inc.
(``BYX Equities''), Cboe EDGA Exchange, Inc. (``EDGA Equities'') Nasdaq
BX, Inc. (``Nasdaq BX''), NYSE American LLC (``NYSE American'') or NYSE
National), and currently assesses a fee of $0.00290 per share. The
Exchange believes that because so few users elect to route their orders
with specifications to which fee code BO or SX is applicable, the
current demand does not warrant the infrastructure and ongoing Systems
maintenance required to support the separate fee codes. Therefore, the
Exchange now proposes to delete fee code BO and SX in the Fee Schedule.
The Exchange notes that users will continue to be able to choose to
route their orders with the same specifications to which fee codes BO
and SX currently applies --such orders will simply be assessed the fees
currently in place for routed orders generally.\5\ That is, if any of
the routed orders to which fee code BO or SX currently apply fee code X
will be appended to such orders, which assesses a fee of $0.00300 per
share.
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\5\ The Exchange notes that there are other fee codes that apply
to certain other routing specifications, however, those routed
orders not otherwise specified in such other routing fee code
descriptions yield the general routing fee code X.
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with
[[Page 54776]]
the objectives of Section 6 of the Act,\6\ in general, and furthers the
objectives of Section 6(b)(4),\7\ 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) \8\ 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, and, particularly, is not
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers.
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\6\ 15 U.S.C. 78f.
\7\ 15 U.S.C. 78f(b)(4).
\8\ 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 Exchange believes that
its proposal to reduce the rebates applicable to fee code NX is fair,
equitable, and reasonable because the proposed fees and rebate remain
consistent with pricing offered by the Exchange's affiliates and
competitors and does not represent a significant departure from the
Exchange's general pricing structure. Specifically, the proposed
rebates applicable to fee code NX are more than that offered by the
Nasdaq Stock Market LLC (``Nasdaq''), which does not provide a standard
rebate for similar orders.\9\ Therefore, the Exchange believes the
proposed rebates associated with fee code NX remains consistent with
pricing previously offered by the Exchange's affiliates and other
exchanges and does not represent a significant departure from such
pricing.
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\9\ See ``Route Rates'' on the Nasdaq fee schedule at <a href="http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2">http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2</a>.
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The Exchange believes the proposed rule change to remove fee code
BO and SX is reasonable as the Exchange has observed a minimal amount
of volume in orders yielding the fee code and, therefore, the
continuation of these fee codes does not warrant the infrastructure and
ongoing Systems maintenance required to support separate fee codes for
specific routed orders. As such, the Exchange also believes that is
reasonable and equitable to assess routed orders which meet the
specifications to which fee code BO and SX are currently applicable the
standard routing fee currently in place for all other routed orders--
via fee code X. The fee associated with fee code X is $0.00300, which
is the same as the fee currently assessed for orders yielding fee code
BO, and is only slightly higher than the fee currently assessed for fee
code SX. The Exchange believes that the proposed rule change is
equitable and not unfairly discriminatory because Members will continue
to have the option to elect to route their orders in the same manner
and will be automatically and uniformly assessed the applicable
standard rates in place for generally all other routed orders. Further,
if members do not favor the Exchange's pricing for routed orders, they
can send their routable orders directly to away markets instead of
using routing functionality provided by the Exchange. Routing through
the Exchange is optional, and the Exchange operates in a competitive
environment where market participants can readily direct order flow to
competing venues or providers of routing services if they deem fee
levels to be excessive.
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. The Exchange does not believe
that the proposed modifications represent a significant departure from
previous pricing offered by the Exchange or pricing offered by the
Exchange's competitors. Further, while the Exchange is proposing to
eliminate fee codes BO and SX orders that meet specifications of fee
code BO or SX going forward will be assessed the rate for orders routed
generally. 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 change will impair the
ability of Members or competing venues to maintain their competitive
standing in the financial markets.
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
fee and rebate modifications will continue to apply to all Members
equally, and as noted above, orders currently meeting the
specifications of fee code BO or SX will be assessed the rate for
orders routed generally under fee code X. 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. 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 14% of the market share.\10\ 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
investors and listed companies.'' \11\ 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'. . ..''.\12\ Accordingly, the
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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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\10\ Supra note 3.
\11\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\12\ 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 upon filing pursuant
to Section 19(b)(3)(A) \13\ of the Act and paragraph (f)(2) of Rule
19b-4 \14\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange. 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 shall institute proceedings under Section 19(b)(2)(B) \15\
of the Act to determine whether the proposed rule change should be
approved or disapproved.
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\13\ 15 U.S.C. 78s(b)(3)(A).
\14\ 17 CFR 240.19b-4(f).
\15\ 15 U.S.C. 78s(b)(2)(B).
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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#6b191e070e46080406060e051f182b180e08450c041d"><span class="__cf_email__" data-cfemail="2654534a430b45494b4b434852556655434508414950">[email protected]</span></a>. Please include
File Number SR-CboeBZX-2021-064 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-2021-064. 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 will also 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-2021-064 and should be submitted
on or before October 25, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\16\
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\16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21485 Filed 10-1-21; 8:45 am]
BILLING CODE 8011-01-P
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