Notice2023-09901
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
May 10, 2023
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 88 Issue 90 (Wednesday, May 10, 2023)</title>
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[Federal Register Volume 88, Number 90 (Wednesday, May 10, 2023)]
[Notices]
[Pages 30197-30200]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2023-09901]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-97434; File No. SR-CboeBYX-2023-007]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
its Fee Schedule
May 4, 2023.
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 April 21, 2023, Cboe BYX Exchange, Inc. (``Exchange'' or ``BYX'')
filed with the Securities and Exchange Commission (``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'' or ``BYX
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/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 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 adopt monthly
fees assessed to Users \3\ that elect to subscribe to the US Equity
Short Volume & Trades Report, effective, April 21, 2023.
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\3\ A ``User'' of an Exchange Market Data product is a natural
person, a proprietorship, corporation, partnership, or entity, or
device (computer or other automated service), that is entitled to
receive Exchange data. See the BYX Equities Exchange Fee Schedule at
<a href="https://www.cboe.com/us/equities/membership/fee_schedule/byx/">https://www.cboe.com/us/equities/membership/fee_schedule/byx/</a>.
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The Exchange recently adopted a new data product known as the US
Equity Short Volume & Trades Report (the, ``Report'').\4\ The Report,
which will be available on April 21, 2023, contains (i) an end-of-day
report that provides certain equity trading activity on the Exchange,
and includes trade date, total volume, sell short volume, and sell
short exempt volume, by symbol; \5\ and (ii) an end-of-month report
that provides a record of all short sale transactions for the month,
and includes trade date and time, trade size, trade price, and type of
short sale execution, by symbol and exchange.\6\ In addition to a
monthly or annual subscription, a Member \7\ or non-Member may purchase
the Report on a historical monthly basis, which provides the end-of-day
reports for each day and the corresponding end-of-month report for a
given calendar month.
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\4\ See Securities and Exchange Act No. 97303 (April 13, 2023)
(SR-CboeBYX-2023-006).
\5\ The end-of-day report was originally titled ``Short Volume
Report'' and was displayed as an individual product on the
Exchange's Fee Schedule. The end-of-day report is now being
incorporated into the Report and as such, the Exchange seeks to
amend its Fee Schedule to display the applicable fees for the
Report, which will contain both the end-of-day report and an end-of-
month report.
\6\ See Exchange Rule 11.22(f).
\7\ See Exchange Rule 1.5(n).
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The Exchange proposes to adopt fees applicable to Users that
subscribe to the Report. As proposed, the Exchange would assess a
monthly \8\ fee of $750 per month to an Internal Distributor \9\ of the
Report, and a fee of $1250 per month to an External Distributor \10\ of
the Report. These fees may be paid on a monthly basis or on an annual
basis.\11\ External Distributors, unlike Internal Distributors, are
typically compensated for the distribution of short sale data through
subscription fees or other mechanisms. Some External Distributors
incorporate short sale data into their own proprietary products, which
they sell to downstream users. These distributors may not charge
separately for data included in the Report, but nevertheless gain value
from the data by incorporating it into their product. The higher price
for External Distributors reflects the additional value these
distributors gain from the product.
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\8\ The monthly fees for the Report are assessed on a rolling
period based on the original subscription date. For example, if a
User subscribes to the Report on April 24, 2023, the monthly fee
will cover the period of April 24, 2023, through May 23, 2023. If
the User cancels its subscription prior to May 23, 2023, and no
refund is issued, the User will continue to receive both the end-of-
day and end-of-month components of the Report for the subscription
period.
\9\ An ``Internal Distributor'' of an Exchange Market Data
product is a Distributor that receives the Exchange Market Data
product and then distributes that data to one or more Users within
the Distributor's own entity. Supra note 3.
\10\ An ``External Distributor'' of an Exchange Market Data
product is a Distributor that receives the Exchange Market Data
product and then distributes that data to a third party or one or
more Users outside the Distributor's own entity. Supra note 3.
\11\ Users who subscribe to the US Equity Short Volume & Trades
Report during the middle of a month will receive the end-of-day
report for each day beginning on the date of subscription.
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The Exchange also proposes to adopt fees for the Report provided on
a historical basis. The Report will be available for each calendar
month
[[Page 30198]]
dating back to January 2015, and Users of such data will be assessed a
fee of $500 per historical monthly Report for which they subscribe.\12\
Data provided via the historical Report is only for display use
redistribution (e.g., the data may be provided on the User's platform).
Therefore, Users of the historical data may not charge separately for
data included in the Report or incorporate such data into their
product. Nonetheless, the Exchange believes it is reasonable, equitable
and not unfairly discriminatory to charge a fee for display use
redistribution that reflects the value these distributors gain from the
historical product.
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\12\ Users who purchase the US Equity Short Volume & Trades
report on an annual basis will receive 12 months of historical data
free of charge, beginning with the month immediately prior to the
date of subscription. Users who purchase the US Equity Short Volume
& Trades report on a monthly basis would have the option of
purchasing historical data on a per month basis.
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The Exchange anticipates that a wide variety of market participants
will purchase the Report, including, but not limited to, active equity
trading firms and academic institutions. For example, the Exchange
notes that academic institutions may utilize the Report data and as a
result promote research and studies of the equities industry to the
benefit of all market participants. The Exchange further believes the
Report may provide helpful trading information regarding investor
sentiment that may allow market participants to make more informed
trading decisions and may be used to create and test trading models and
analytical strategies and provide comprehensive insight into trading on
the Exchange.
The Exchange further notes that the Report is a completely
voluntary product, in that the Exchange is not required by any rule or
regulation to make the reports or services available and that potential
subscribers may purchase it only if they voluntarily choose to do so.
Further, the Exchange notes that other exchanges offer similar products
for a fee.\13\
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\13\ See the ``Nasdaq Short Sale Volume Reports'' portion of the
Nasdaq Fee Schedule at <a href="http://www.nasdaqtrader.com/TraderB.aspx?id=MDDPricingALLN">http://www.nasdaqtrader.com/TraderB.aspx?id=MDDPricingALLN</a>. See also the ``NYSE Group Summary
Data Products'' portion of the NYSE Historical Proprietary Market
Data Pricing at <a href="https://www.nyse.com/publicdocs/nyse//NYSE_Historical_Market_Data_Pricing.pdf">https://www.nyse.com/publicdocs/nyse//NYSE_Historical_Market_Data_Pricing.pdf</a>.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Act and the rules and regulations thereunder applicable to the
Exchange and, in particular, the requirements of Section 6(b) of the
Act.\14\ Specifically, the Exchange believes the proposed rule change
is consistent with Sections 6(b)(4) and 6(b)(5) of the Act,\15\ in
particular, in that it provides for the equitable allocation of
reasonable dues, fees and other charges among members and issuers and
other persons using any facility, and is not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
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\14\ 15 U.S.C. 78f(b).
\15\ 15 U.S.C. 78f(b)(4) and (5).
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In adopting Regulation NMS, the Commission granted self-regulatory
organizations (``SROs'') and broker-dealers increased authority and
flexibility to offer new and unique market data to the public. It was
believed that this authority would expand the amount of data available
to consumers, and also spur innovation and competition for the
provision of market data. The Exchange believes that the US Equity
Short Volume & Trades Report further broadens the availability of U.S.
equity market data to investors consistent with the principles of
Regulation NMS. The Report also promotes increased transparency through
the dissemination of short volume data. The Report benefits investors
by providing access to the US Equity Short Volume & Trades Report data,
which may promote better informed trading, as well as research and
studies of the equities industry.
The Exchange operates in a highly competitive environment. Indeed,
there are currently 16 registered equities exchanges that trade
equities. Based on publicly available information, no single equities
exchange has more than 16% of the equity market share.\16\ The
Commission has repeatedly expressed its preference for competition over
regulatory intervention in determining prices, products, and services
in the securities markets. Particularly, 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\ Making similar data products
available to market participants fosters competition in the
marketplace, and constrains the ability of exchanges to charge
supercompetitive fees. In the event that a market participant views one
exchange's data product as more attractive than the competition, that
market participant can, and often does, switch between similar
products. The proposed fees are a result of the competitive environment
of the U.S. equities industry as the Exchange seeks to adopt fees to
attract purchasers of the recently introduced US Equity Short Volume &
Trades Report.
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\16\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (April 17, 2023), available at <a href="https://www.cboe.com/us/equities/market_/">https://www.cboe.com/us/equities/market_/</a>.
\17\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting
Release'').
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The Exchange believes that the proposed fee for the Report is
consistent with the Act in that it is reasonable, equitable, and not
unfairly discriminatory. In particular, the Exchange believes that the
proposed fee is reasonable because it is reasonably aligned with the
value and benefits provided to Users that choose to subscribe to the
Report on the Exchange. As discussed above, the Report may be
beneficial to Members and non-Members as it may provide helpful trading
information regarding investor sentiment that may allow market
participants to make more informed trading decisions and may be used to
create and test trading models and analytical strategies and provide
comprehensive insight into trading on the Exchange. Therefore, the
Exchange believes that it is reasonable to assess a modest fee to Users
that subscribe to the Report.
The Exchange further believes the proposed fee is reasonable
because the amount assessed is equal to or comparable to the analogous
fees charged by competitor exchanges. For example, the Nasdaq Stock
Market LLC (``Nasdaq'') charges $750 to Internal Distributors and
$1,250 to External Distributors of the Nasdaq Short Sale Volume Reports
provided on both a daily and historical monthly basis,\18\ which is
identical to the proposed subscription fees for the US Equity Short
Volume & Trades Report. Additionally, the New York Stock Exchange LLC
(``NYSE'') and its affiliated equity markets (the ``NYSE Group'') also
charge for the TAQ NYSE Group Short Sales (Monthly File) and TAQ NYSE
Group Short Volume (Daily File). Specifically, NYSE Group charges an
access fee of $1,000 per month for an ongoing subscription that
includes 12 months of back history, then additional back history
charged at $500 per data content month. NYSE Group also charges a back
history fee, of $1,000 per data content month for the first 12 months
of history, then additional back history charged at $500 per data
content
[[Page 30199]]
month.\19\ The Exchange therefore believes that the proposed fees are
reasonable and set at a level to compete with other equity exchanges
that offer similar reports. Indeed, proposing fees that are excessively
higher than established fees for similar data products would simply
serve to reduce demand for the Exchange's data product, which as noted,
is entirely optional. Although each of these similar data products
provide only proprietary trade data and not trade data from other
exchanges, it is possible investors are still able to gauge overall
investor sentiment across different equities based on the included data
points on any one exchange. As such, if a market participant views
another exchange's potential report as more attractive, then such
market participant can merely choose not to purchase the Exchange's
Report and instead purchase another exchange's similar data product,
which offers similar data points, albeit based on that other market's
trading activity.
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\18\ See <a href="http://www.nasdaqtrader.com/Trader.aspx?id=DPUSdata#short">http://www.nasdaqtrader.com/Trader.aspx?id=DPUSdata#short</a>
\19\ See <a href="https://www.nyse.com/publicdocs/nyse/data/NYSE_Historical_Market_Data_.pdf">https://www.nyse.com/publicdocs/nyse/data/NYSE_Historical_Market_Data_.pdf</a>.
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In addition, the Exchange believes that the proposed fees are
equitable and not unfairly discriminatory because they will apply
equally to all Members and non-Members that choose to subscribe to the
Report. As stated, the Report is completely optional and not necessary
for trading. Rather, the Exchange voluntarily makes the Report
available, and Users may choose to subscribe (and pay for) the report
based on their own individual business needs. Potential subscribers may
subscribe to the Report at any time if they believe it to be valuable
or may decline to purchase it.
The Exchange also believes it is reasonable, equitable and not
unfairly discriminatory to charge an External Distributor of the Report
a higher fee than an Internal Distributor as an External Distributor
will ordinarily charge a fee to its downstream customers for this
service, and, even if the vendor is not charging a specific fee for
this particular service, the Exchange expects products from the Report
to be part of a suite of offerings from distributors that generally
promote sales. External distribution is also fundamentally different
than internal use, in that the former generates revenue from external
sales while the latter does not. Therefore, the Exchange believes it is
reasonable, equitable and not unfairly discriminatory to charge a
higher fee for a product that generates downstream revenue. Further,
the proposed fee will apply equally to Internal and External
Distributors, respectively, that choose to distribute data from the
Report. Moreover, as described above, another Exchange similarly
charges External Distributors higher fees as compared to Internal
Distributors for a similar data product.\20\
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\20\ See Nasdaq Rule 7 Section 152.
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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 competition that is not necessary or appropriate
in furtherance of the purposes of the Act because the Report will be
available equally to all Members and non-Members that choose to
subscribe to the report. As stated, the Report is optional and Members
and non-Members may choose to subscribe to such report, or not, based
on their view of the additional benefits and added value provided by
utilizing the Report. As such, the Exchange believes the proposed rule
change imposes no burden on intramarket competition. 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,
similar products offered by Nasdaq and the NYSE Group are priced
equally or comparable to the Report. 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.'' 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'. . . .''. Accordingly, the Exchange does not believe its
proposal imposes any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
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 \21\ and paragraph (f) of Rule 19b-4 \22\
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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\21\ 15 U.S.C. 78s(b)(3)(A).
\22\ 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#0371766f662e606c6e6e666d7770437066602d646c75"><span class="__cf_email__" data-cfemail="97e5e2fbf2baf4f8fafaf2f9e3e4d7e4f2f4b9f0f8e1">[email protected]</span></a>. Please include
File Number SR-CboeBYX-2023-007 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-2023-007. 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
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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. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to File Number SR-CboeBYX-2023-007, and should be
submitted on or before May 31, 2023.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\23\
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\23\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2023-09901 Filed 5-9-23; 8:45 am]
BILLING CODE 8011-01-P
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