Notice2024-00845
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule To Modify Historical Depth Data Fees
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Published
January 18, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 12 (Thursday, January 18, 2024)</title>
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[Federal Register Volume 89, Number 12 (Thursday, January 18, 2024)]
[Notices]
[Pages 3444-3447]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-00845]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99321; File No. SR-CboeBZX-2024-002]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule To Modify Historical Depth Data Fees
January 11, 2024.
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 January 2, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') 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 BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') 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, effective January
2, 2024.
By way of background, the Exchange currently makes available for
purchase Depth Data, which is a daily archive of the Exchange's depth
of book real-time feed, which provides depth-of-book quotations and
execution information based on equity orders entered into the
System.\3\ The Exchange also offers Historical Depth Data, which offers
such data on a historical basis, i.e., T+1 or later, dating back to
September 2019. The Depth Data and Historical Depth Data are available
for purchase to Members and Non-Members on the Cboe LiveVol, LLC
(``LiveVol'') website,\4\ for internal use only; LiveVol is a wholly
owned subsidiary of the Exchange's parent company, Cboe Global Markets,
Inc.
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\3\ See BZX Fee Schedule and BZX Rule 11.22. Daily end-of-day
delivery is provided via the DataShop SFTP. Files will typically
become available after 10 p.m. ET; see also BZX Rule 1.5, which
defines ``System.''
\4\ See <a href="https://datashop.cboe.com/cboe-us-equities-pitch">https://datashop.cboe.com/cboe-us-equities-pitch</a>.
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The Exchange's options platform (``BZX Options'') and affiliated
equities and options exchanges (i.e., Cboe Exchange, Inc. (``Cboe
Options''), Cboe C2 Exchange, Inc. (``C2 Options''), Cboe EDGX
Exchange, Inc. (``EDGX''), Cboe BYX Exchange, Inc. (``BYX''), and Cboe
EDGA Exchange, Inc. (``EDGA'') (collectively, ``Affiliates'') also
offer similar data products.\5\ Particularly, each of the Exchange's
Affiliates offer a daily and historical archive of their depth of book
real-time feed with execution information based on their trading
activity that is substantially similar to the information provided by
the Exchange through its Depth Data products.
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\5\ See, for example, EDGX Fee Schedule, BYX Fee Schedule, EDGA
Fee Schedule.
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Currently, the Exchange charges a fee of $500 per month of
Historical Depth Data accessed by a user. This fee has been in place,
without change, since April 2010 when the Exchange first began charging
for access to historical quotation and transactions data from the
Exchange's PITCH data feed (``Historical PITCH Data'').\6\ In the time
since, the
[[Page 3445]]
Exchange has made a number of significant enhancements to its platform,
including, among other things, a significant expansion of its listing
program for exchange-traded products, that have resulted in improved
trading opportunities for investors and, consequently, more valuable
market data. Further, the Exchange has implemented a more efficient
means of data delivery (via SFTP rather than shipment of hard drives),
which consequently increases the value of the market data product.
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\6\ See Securities Exchange Act Release No. 61885 (April 9,
2010), 75 FR 20018 (April 16, 2010) (SR-BATS-2010-002); see also
Securities Exchange Act Release No. 74285 (February 18, 2015), 80 FR
9828 (February 24, 2015) (SR-BATS-2015-11), pursuant to which
``Historical PITCH'' was renamed ``Historical Depth.''
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The Exchange now proposes to increase the fee from $500 to $1,000
per month of Historical Depth Data accessed by a user.\7\ As is
currently the case, the data will be provided to data recipients for
internal use only, and thus, no redistribution will be permitted.
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\7\ As part of the proposed rule change, the Exchange proposes
to establish a separate ``Historical Depth'' table in its Fee
Schedule, and rename the current ``BZX Historical Top, Historical
Depth or Historical Last Sale Data'' to ``BZX Historical Top or
Historical Last Sale Data.'' The Exchange also proposes to remove
the fee related to delivery per 1TB drive of data as the Exchange
does not provide 1TB drives anymore.
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The Exchange notes that the Depth Data products, including the
Historical Depth Data, are completely voluntary products, 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.\8\
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\8\ See, e.g., <a href="https://www.nasdaqtrader.com/Trader.aspx?id=DPPriceListOptions#nom">https://www.nasdaqtrader.com/Trader.aspx?id=DPPriceListOptions#nom</a>; and <a href="https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Fee_Schedule.pdf">https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Fee_Schedule.pdf</a>.
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\9\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \10\ 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. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \11\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. The Exchange also believes the proposed rule
change is consistent with Section 6(b)(4) of the Act,\12\ which
requires that Exchange rules provide for the equitable allocation of
reasonable dues, fees, and other charges among its Members and other
persons using its facilities.
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\9\ 15 U.S.C. 78f(b).
\10\ 15 U.S.C. 78f(b)(5).
\11\ Id.
\12\ 15 U.S.C. 78f(b)(4).
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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. 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.'' \13\
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\13\ 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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With respect to market data, the decision of the United States
Court of Appeals for the District of Columbia Circuit in NetCoalition
v. SEC upheld the Commission's reliance on the existence of competitive
market mechanisms to evaluate the reasonableness and fairness of fees
for proprietary market data:
In fact, the legislative history indicates that the Congress
intended that the market system `evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed' and that the SEC wield its regulatory power `in those
situations where competition may not be sufficient,' such as in the
creation of a `consolidated transactional reporting system.' \14\
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\14\ See NetCoalition v. SEC, 615 F.3d 525, 535 (D.C. Cir. 2010)
(``NetCoalition I'') (quoting H.R. Rep. No. 94-229 at 92 (1975), as
reprinted in 1975 U.S.C.C.A.N. 323).
The court agreed with the Commission's conclusion that ``Congress
intended that `competitive forces should dictate the services and
practices that constitute the U.S. national market system for trading
equity securities.' '' \15\
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\15\ Id. at 535.
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More recently, the Commission confirmed that it applies a ``market-
based'' test in its assessment of market data fees, and that under that
test:
the Commission considers whether the exchange was subject to
significant competitive forces in setting the terms of its proposal
for [market data], including the level of any fees. If an exchange
meets this burden, the Commission will find that its fee rule is
consistent with the Act unless there is a substantial countervailing
basis to find that the terms of the rule violate the Act or the
rules thereunder.\16\
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\16\ See Securities Exchange Act Release No. 34-90217 (October
16, 2020), 85 FR 67392 (October 22, 2020) (SR-NYSENAT-2020-05)
(Order Approving a Proposed Rule Change to Establish Fees for the
NYSE National Integrated Feed) (internal quotation marks omitted),
quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74781 (December 9, 2008) (NYSE ArcaBook Approval
Order).
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 13% of the equity market share.\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 increase fees for Historical Depth Data, while continuing to
attract purchasers.
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\17\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (December 8, 2023), available at <a href="https://www.cboe.com/us/equities/market_statistics/">https://www.cboe.com/us/equities/market_statistics/</a>.
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The Exchange's Historical Depth Data is a competitively priced
alternative to historical depth of book data disseminated by other
national securities exchanges. The Exchange's Depth Data products,
including Historical Depth Data, benefits a wide range of investors
that participate in the national market system. As noted above, Nasdaq
and NYSE have a similar Depth Data offerings for a charge.\18\ 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.
[[Page 3446]]
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. 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 Historical Depth Data offering and instead
purchase another exchange's similar data product, which offers similar
data points, albeit based on other market's trading activity.
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\18\ See supra note 8.
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Further, the Exchange believes the fees are reasonable, as even
with the proposed fee increase, they continue to represent a relatively
modest fee for historical depth of book data that has proven valuable
for investors. The Exchange believes the fee, as proposed, remains
reasonable, as the moderate increase is the first increase to the fee
since its introduction in 2010.
The Exchange also believes that the proposed fee is reasonable
because it is reasonably aligned with the value and benefits provided
to users that choose to purchase Historical Depth Data from the
Exchange. As discussed above, Historical Depth Data 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. As noted above,
since first introducing the Historical Depth Data product offering, the
Exchange has made a number of significant enhancements to its platform,
including, among other things, a significant expansion of its listing
program for exchange-traded products, that have resulted in improved
trading opportunities for investors and, consequently, more valuable
market data.
In addition, the Exchange believes that the proposed fees are
equitable and not unfairly discriminatory because they will apply to
all similarly situated Members and non-Members that choose to purchase
Historical Depth Data equally. As stated, Historical Depth Data is
completely optional and not necessary for trading. Rather, the Exchange
voluntarily makes Historical Depth Data available, and users may choose
to purchase the data based on their own individual business needs.
Potential purchasers may purchase Historical Depth Data at any time if
they believe it to be valuable or may decline to purchase it. Moreover,
several other exchanges offer a similar data product which offer the
same type of data content through similar reports.\19\
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\19\ See supra note 8.
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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. The Exchange operates in a
highly competitive environment in which the Exchange must continually
adjust its fees to remain competitive. Because competitors are free to
modify their own fees in response, the Exchange believes that the
degree to which fee changes in this market may impose any burden on
competition is extremely limited. As discussed above, the Exchange's
Historical Depth Data offering is subject to direct competition from
several other exchanges that offer similar data products. The proposed
rule changes are grounded in the Exchange's efforts to compete more
effectively. In this competitive environment, potential purchasers are
free to choose which, if any, similar product to purchase to satisfy
their need for market information. As a result, the Exchange believes
this proposed rule change permits fair competition among national
securities exchanges.
Additionally, 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. The proposed
Historical Depth Data fees will apply equally to Members and non-
Members who purchase Historical Depth Data. Moreover, purchase of
Historical Depth Data is optional.
Finally, 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 are offered by Nasdaq and NYSE. 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 intermarket
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 \20\ and paragraph (f) of Rule 19b-4 \21\
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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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 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:
[[Page 3447]]
Electronic Comments
<bullet> Use the Commission's internet comment form (<a href="https://www.sec.gov/rules/sro.shtml">https://www.sec.gov/rules/sro.shtml</a>); or
<bullet> Send an email to <a href="/cdn-cgi/l/email-protection#7705021b125a14181a1a121903043704121459101801"><span class="__cf_email__" data-cfemail="8cfef9e0e9a1efe3e1e1e9e2f8ffccffe9efa2ebe3fa">[email protected]</span></a>. Please include
file number SR-CboeBZX-2024-002 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-2024-002. 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="https://www.sec.gov/rules/sro.shtml">https://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
a.m. and 3 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-CboeBZX-2024-002 and should
be submitted on or before February 8, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-00845 Filed 1-17-24; 8:45 am]
BILLING CODE 8011-01-P
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