Notice2022-05246
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule
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Published
March 14, 2022
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 87 Issue 49 (Monday, March 14, 2022)</title>
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[Federal Register Volume 87, Number 49 (Monday, March 14, 2022)]
[Notices]
[Pages 14310-14312]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-05246]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94377; File No. SR-CboeBZX-2022-011]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule
March 8, 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 March 1, 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.
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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.
I. 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 to modify the Add/
Remove Volume Tiers 1 and 2, and to eliminate the Single MPID Investor
Tier 1. The Exchange proposes to implement the proposed change to its
fee schedule on March 1, 2022.
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,\3\ no single registered equities exchange has more than
16% 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 $0.0016 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.
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\3\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (February 22, 2022), 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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Under footnote 1 of the Fee Schedule, the Exchange currently offers
various Add/Remove Volume Tiers. In particular, the Exchange offers six
displayed add volume tiers that each provide an enhanced rebate for
Members' qualifying orders yielding fee codes B,\4\ V,\5\ or Y,\6\
where a Member reaches certain add volume-based criteria. Currently
Tiers 1 and 2 are as follows:
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\4\ Orders yielding Fee Code ``B'' are orders adding liquidity
to BZX (Tape B).
\5\ Orders yielding Fee Code ``V'' are orders adding liquidity
to BZX (Tape A).
\6\ Orders yielding Fee Code ``Y'' are orders adding liquidity
to BZX (Tape C).
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<bullet> Tier 1 provides a rebate of $0.0020 per share to
qualifying orders (i.e., orders yielding fee codes B, V, or Y) where
the Member has an ADAV \7\ as a percentage of TCV \8\ equal to or
greater than 0.10%, or the Member has an ADAV equal to or greater than
10 million shares.
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\7\ ``ADAV'' means average daily added volume calculated as the
number of shares added per day and ``ADV'' means average daily
volume calculated as the number of shares added or removed,
combined, per day. ADAV and ADV are 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 rebate of $0.0025 per share to
qualifying orders (i.e., orders yielding fee codes B, V, or Y) where
the Member has an ADAV as a percentage of TCV equal to or greater than
0.20%, or the Member has an ADAV equal to or greater than 20 million
shares.
Now, the Exchange proposes to amend the criteria of Tier 1 and
reduce the rebate applicable to Tier 2. Specifically, the Exchange
proposes to amend Tiers 1 and 2 as follows:
<bullet> Proposed Tier 1 will provide a rebate of $0.0020 per share
to qualifying orders (i.e., orders yielding fee codes B, V, or Y) where
the Member has an ADAV as a percentage of TCV equal to or greater than
0.15%, or the Member has an ADAV equal to or greater than 15 million
shares.
<bullet> Tier 2 provides a rebate of $0.23 per share to qualifying
orders (i.e., orders yielding fee codes B, V, or Y) where the Member
has an ADAV as a percentage of TCV equal to or greater than 0.20%, or
the Member has an ADAV equal to or greater than 20 million shares.
Under footnote 4 of the Fee Schedule, the Exchange currently offers
two Single MPID Investor Tiers. In particular, the Single MPID Investor
Tier 1 provides an enhanced rebate of $0.0030 per share for
[[Page 14311]]
Members qualifying orders yielding fee codes B, V, or Y where (1) an
MPID has a Step-Up ADV \9\ from May 2021 equal to or greater than 0.10%
of TCV or a Step-Up ADV from May 2021 equal to or greater than 8
million shares; and (2) the MPID adds a Step-Up ADAV \10\ from May 2021
equal to or greater than 0.05% of TCV. Now, the Exchange proposes to
eliminate the Single MPID Investor Tier 1 as 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. Based on the proposed
elimination of Single MPID Investor Tier 1, the Exchange also proposes
to renumber existing Single MPID Investor Tier 2 to Single MPID
Investor Tier 1.
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\9\ ``Step-Up ADV'' means ADV in the relevant baseline month
subtracted from current day ADV.
\10\ ``Step-Up ADAV'' means ADAV in the relevant baseline month
subtracted from current ADAV.
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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, and thus is in the public interest.
Additionally, the Exchange notes that relative volume-based incentives
and discounts have been widely adopted by exchanges,\13\ including the
Exchange,\14\ 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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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(4) and (5).
\13\ See EDGX Equities Fee Schedule, Footnote 1, Add/Remove
Volume Tiers.
\14\ See BZX Equities Fee Schedule, Footnote 1, Add/Remove
Volume Tiers.
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While the proposed changes to the criteria of the displayed add
volume Tier 1 is more stringent than the current criteria, the Exchange
believes that the change is reasonable as it continues to incentivize
Members to increase their displayed liquidity adding volume on the
Exchange. Additionally, while the displayed add volume Tier 2 provides
a lesser rebate than that currently offered under the same criteria,
the Exchange similarly believes that the change is reasonable as it
continues to incentivize Members to increase their displayed liquidity
adding volume on the Exchange. Furthermore, the Exchange believes that
the existing and proposed enhanced rebates under Tiers 1 and 2,
respectively, are commensurate with the proposed and existing criteria,
respectively. Proposed Tiers 1 and 2 will continue to be available to
all Members and provide all Members with an additional opportunity to
receive an enhanced rebate. An overall increase in activity would
deepen the Exchange's liquidity pool, offers additional cost savings,
support the quality of price discovery, promote market transparency and
improve market quality, for all investors.
The Exchange also believes that the proposal represents an
equitable allocation of fees and rebates and is not unfairly
discriminatory because all Members will be eligible for the displayed
add volume Tiers 1 and 2 and have the opportunity to meet the Tiers'
criteria and receive the corresponding enhanced rebate if such criteria
is met. Without having a view of activity on other markets and off-
exchange venues, the Exchange has no way of knowing whether these
proposed changes would definitely result in any Members qualifying for
Tiers 1 and 2. While the Exchange has no way of predicting with
certainty how the proposed changes will impact Member activity, based
on trading activity from the prior month, the Exchange anticipates that
no Member will achieve proposed Tier 1 and two Members will satisfy the
criteria under proposed Tier 2. The Exchange also notes that proposed
changes will not adversely impact any Member's ability to qualify for
reduced fees or enhanced rebates offered under other tiers. Should a
Member not meet the proposed new criteria, the Member will merely not
receive that corresponding enhanced rebate.
The Exchange believes the proposed amendment to remove Single MPID
Investor Tier 1 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 rebate under the proposed Single MPID Investor
Tier 1. The Exchange believes the proposal to eliminate this tier is
also equitable and not unfairly discriminatory because it applies to
all Members.
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 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 16% of the market share.\15\ 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
[[Page 14312]]
investors and listed companies.'' \16\ 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'. . . .''.\17\ 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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\15\ Supra note 3.
\16\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\17\ 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 \18\ and paragraph (f) of Rule 19b-4 \19\
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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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 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#3d4f485158105e5250505853494e7d4e585e135a524b"><span class="__cf_email__" data-cfemail="047671686129676b6969616a7077447761672a636b72">[email protected]</span></a>. Please include
File Number SR-CboeBZX-2022-011 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-2022-011. 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-CboeBZX-2022-011 and should be submitted
on or before April 4, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
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\20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-05246 Filed 3-11-22; 8:45 am]
BILLING CODE 8011-01-P
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