Notice2022-03649
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
February 22, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 87 Issue 35 (Tuesday, February 22, 2022)</title>
</head>
<body><pre>
[Federal Register Volume 87, Number 35 (Tuesday, February 22, 2022)]
[Notices]
[Pages 9780-9783]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-03649]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94252; File No. SR-CboeBZX-2022-008]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule
February 15, 2022.
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 February 7, 2022, 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.
---------------------------------------------------------------------------
\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'' 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.
[[Page 9781]]
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 decrease the
standard liquidity adding rebate for orders in securities at or above
$1.00 and to eliminate Tier 3 of the Single MPID Investor Tiers. The
Exchange proposes to implement the proposed change to its fee schedule
on February 1, 2022.\3\
---------------------------------------------------------------------------
\3\ The Exchange initially filed the proposed fee changes on
February 1, 2022 (SR-BZX-2022-007). On February 7, 2022, the
Exchange withdrew that filing and submitted this proposal.
---------------------------------------------------------------------------
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
Securities Exchange Act of 1934 (the ``Act''), to which market
participants may direct their order flow. Based on publicly available
information,\4\ no single registered equities exchange has more than
18% 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. Particularly, for securities at or above
$1.00, the Exchange provides a standard rebate of $0.0018 per share for
orders that add liquidity and assesses a fee of $0.0030 per share for
orders that remove liquidity. 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.
---------------------------------------------------------------------------
\4\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (January 23, 2022), available at <a href="https://markets.cboe.com/us/equities/market_statistics/">https://markets.cboe.com/us/equities/market_statistics/</a>.
---------------------------------------------------------------------------
Standard Liquidity Rebate
As stated above, the Exchange currently provides a standard rebate
of $0.0018 per share for liquidity adding orders (i.e., those yielding
fee codes B,\5\ V,\6\ and Y \7\) in securities priced at or above
$1.00. Orders in securities priced below $1.00 that add liquidity are
free. The Exchange now proposes to decrease the current standard rebate
of $0.0018 per share to $0.0016 per share for orders that add liquidity
for securities priced at or above $1.00. Orders that add liquidity in
securities priced below $1.00 would continue to be free. Although this
proposed standard rebate for liquidity adding orders is lower than the
current base rate for such orders, the proposed rebate is in line with
similar rebates for liquidity adding orders in place on other
exchanges.\8\
---------------------------------------------------------------------------
\5\ Orders yielding Fee Code ``B'' are displayed orders adding
liquidity to BZX (Tape B).
\6\ Orders yielding Fee Code ``V'' are displayed orders adding
liquidity to BZX (Tape A).
\7\ Orders yielding Fee Code ``Y'' are displayed orders adding
liquidity to BZX (Tape C).
\8\ E.g., the Nasdaq base rebate ranges from $0.0015 to $0.00305
for liquidity adding orders in securities priced at or above $1.00.
See <a href="http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2">http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2</a>.
---------------------------------------------------------------------------
Single MPID Investor Tiers
The Exchange also proposes to eliminate the Single MPID Investor
Tier 3, which is currently described under footnote 4 of the fee
schedule. Particularly, this tier applies to orders yielding fee code
B, V, or Y and provides a $0.0034 per share rebate to MPIDs that have a
Step-Up ADAV \9\ as a percentage of TCV \10\ greater than or equal to
0.20% from September 2021 or MPIDs that have a Step-Up ADAV from
September 2021 greater than or equal to 20 million shares. No Member
has reached this tier in several months and the Exchange therefore no
longer wishes to, nor is it required to, maintain such a tier.
---------------------------------------------------------------------------
\9\ ``Step-Up ADAV'' means ADAV in the relevant baseline month
subtracted from current ADAV.
\10\ ``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.
---------------------------------------------------------------------------
Fee Schedule Clean Up
The Exchange proposes to update Footnote 19 of the Fee Schedule,
which is appended to fee codes B, V, and Y, to reflect that orders that
add liquidity to BZX for securities priced below $1.00 are free instead
of a rebate of $0.00009 per share. The Exchange notes that it amended
this rebate in May 2021 and that the ``Free'' rate is accurately
reflected in the Standard Rates table.\11\ However, the Exchange
inadvertently at that time omitted updating corresponding Footnote 19
of the Fees Schedule and seeks to do so now.
---------------------------------------------------------------------------
\11\ See Securities Exchange Release No. 92013 (May 25, 2021) 86
FR 29312 (June 1, 2021) (SR-CboeBZX-2021-040).
---------------------------------------------------------------------------
Additionally, the Exchange notes that it removed the Total Volume
tier from its Fee Code Schedule in December 2021,\12\ but did not
eliminate references to footnote 3 from fee codes B, V, and Y in Fee
Code table. Accordingly, the Exchange now proposes to remove references
to Footnote 3 from fee codes B, V, and Y, of the Fee Schedule.
---------------------------------------------------------------------------
\12\ See Securities Exchange Release No. 34-93829 (December 20,
2021) 86 FR 73402 (December 20, 2021) [sic] (SRCboeBZX-2021-084).
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\13\ in general, and
furthers the objectives of Section 6(b)(4) and 6(b)(5),\14\ 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, and thus is in the public interest.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f.
\14\ 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
In particular, the Exchange believes that the proposed amendment to
reduce the standard liquidity adding rebate is reasonable because the
proposed change represents a modest rebate decrease and Members will
continue to receive a rebate on liquidity adding orders, albeit at a
lower amount. The Exchange believes the proposed amendment is also
equitable and not unfairly discriminatory because the proposed change
is equally applicable to all Members of the Exchange. Additionally, the
proposed rebate for liquidity adding orders is in-line with rebates
offered at other exchanges for similar transactions.\15\
---------------------------------------------------------------------------
\15\ Supra note 7 [sic].
---------------------------------------------------------------------------
The Exchange believes the proposed amendment to remove Single MPID
[[Page 9782]]
Investor Tier 3 is reasonable because no Member has achieved this tier
in several months. Moreover, the Exchange is not required to maintain
this tier and Members still have a number of other opportunities and a
variety of ways to receive enhanced rebates for displayed liquidity,
including the enhanced rebates under the Single MPID Investor Tiers 1
and 2. The Exchange believes the proposal to eliminate this tier is
also equitable and not unfairly discriminatory because it applies to
all Members.
Lastly, the Exchange believes that the proposed change to update
Footnote 19 is reasonable, equitable and not unfairly discriminatory as
it does not change the fees or rebates assessed by the Exchange, but
rather updates the rate applicable to liquidity adding orders in
securities priced below $1.00 to accurately reflect the rate it adopted
in the rule filing submitted in May 2021. As such, the proposed rule
change is merely a clarification in the Fees Schedule which increases
transparency in the Fees Schedule and reduces potential confusion
regarding the appropriate rates for such orders. Similarly, the
proposal to remove references to footnote three from fee codes B, V,
and Y is reasonable, equitable and not unfairly discriminatory as it
merely eliminates a reference to a reserved footnote.
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 proposed changes apply to all liquidity adding orders
equally, and thus applies to all Members equally. Additionally, 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 purpose 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 18% of the market share.\16\ 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.'' \17\ 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' . . . .''.\18\ 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.
---------------------------------------------------------------------------
\16\ Supra note 3 [sic].
\17\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\18\ 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)).
---------------------------------------------------------------------------
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 \19\ and paragraph (f) of Rule 19b-4 \20\
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.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------
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#6e1c1b020b430d0103030b001a1d2e1d0b0d40090118"><span class="__cf_email__" data-cfemail="f98b8c959cd49a9694949c978d8ab98a9c9ad79e968f">[email protected]</span></a>. Please include
File Number SR-CboeBZX-2022-008 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-2022-008. 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
[[Page 9783]]
comment submissions. You should submit only information that you wish
to make available publicly. All submissions should refer to File Number
SR-CboeBZX-2022-008 and should be submitted on or before March 15,
2022.
---------------------------------------------------------------------------
\21\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-03649 Filed 2-18-22; 8:45 am]
BILLING CODE 8011-01-P
</pre><script data-cfasync="false" src="/cdn-cgi/scripts/5c5dd728/cloudflare-static/email-decode.min.js"></script></body>
</html>Indexed from Federal Register on February 22, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.