Notice2024-03098
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend its Fee Schedule Regarding Periodic Auctions
Primary source
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Published
February 15, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 32 (Thursday, February 15, 2024)</title>
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[Federal Register Volume 89, Number 32 (Thursday, February 15, 2024)]
[Notices]
[Pages 11891-11893]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-03098]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99508; File No. SR-CboeBYX-2024-005]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
its Fee Schedule Regarding Periodic Auctions
February 9, 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 February 1, 2024, Cboe BYX Exchange, Inc. (the ``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'') 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/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 applicable to its
equities trading platform (``BYX Equities'') by modifying the rate
associated with fee code AU in securities priced at or above $1.00. The
Exchange proposes to implement these changes effective February 1,
2024.
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
13% 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 ``Taker-Maker'' model whereby it pays credits to
members that remove liquidity and assesses fees to those that add
liquidity. The Exchange's Fee Schedule sets forth the standard rebates
and rates applied per share for orders that remove and provide
liquidity, respectively. Currently, for orders in securities priced at
or above $1.00, the Exchange provides a standard rebate of $0.00200 per
share for orders that remove liquidity and assesses a fee of $0.00200
per share for orders that add liquidity.\4\ For orders in securities
priced below $1.00, the Exchange does not assess any fees for orders
that add liquidity, and provides a rebate in the amount of 0.10% of the
total dollar value for orders that remove liquidity.\5\
[[Page 11892]]
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 (January 26, 2024), available at <a href="https://www.cboe.com/us/equities/market_statistics/">https://www.cboe.com/us/equities/market_statistics/</a>.
\4\ See BYX Equities Fee Schedule, Standard Rates.
\5\ Id.
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Fee Code AU
The Exchange currently offers fee code AU, which is appended to
Periodic Auction Only \6\ or Periodic Auction Eligible \7\ orders that
are executed in a Periodic Auction.\8\ Currently, the Exchange does not
assess a fee or provide a rebate for any orders appended with fee code
AU. Now, the Exchange proposes to modify the rate associated with fee
code AU in securities priced at or above $1.00. The Exchange proposes
to assess a fee of $0.00040 per share in securities priced at or above
$1.00 for orders appended with fee code AU. The Exchange does not
propose to implement a fee for securities appended with fee code AU in
securities priced below $1.00. The purpose of introducing a fee
associated with fee code AU in securities priced at or above $1.00 is
for business and competitive reasons, as the Exchange has seen
increased participation in Periodic Auctions and now seeks to implement
a fee for Members \9\ who choose to add liquidity designed to
participate in a Periodic Auction. The Exchange notes that while it is
adding a modest fee for securities priced at or above $1.00 appended
with fee code AU, the fee remains lower than many of the fees assessed
to liquidity-adding orders on the Exchange.\10\
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\6\ See Rule 11.25(b)(1). A ``Periodic Auction Only Order'' is a
non-displayed limit order entered with an instruction to participate
solely in Periodic Auctions pursuant to Rule 11.25. Periodic Auction
Only Orders are not eligible for execution on the Continuous Book.
\7\ See Rule 11.25(b)(2). A ``Periodic Auction Eligible Order''
is a non-displayed limit order eligible to trade on the Continuous
Book that is entered with an instruction to also initiate a Periodic
Auction, if possible, pursuant to Rule 11.25.
\8\ A Periodic Auction is a price forming auction that is
executed at the price level which maximizes the total number of
shares in both the auction book and the continuous market that are
executed in the auction and does not interrupt trading on the
continuous market. See Securities Exchange Act Release No. 91423
(March 26, 2021), 86 FR 17230 (April 1, 2021) (SR-CboeBYX-2020-021)
(``Periodic Auction Filing''). See also Securities Exchange Act
Release No. 94012 (January 20, 2022), 87 FR 4060 (January 26, 2022)
(SR-CboeBYX-2021-024) (``Periodic Auction Amendment'').
\9\ See Rule 1.5(n). The term ``Member'' shall mean any
registered broker or dealer that has been admitted to membership in
the Exchange.
\10\ See BYX Equities Fee Schedule, Standard Rates. See also BYX
Equities Fee Schedule, Fee Codes and Associated Fees.
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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.\11\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \12\ 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) \13\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \14\
as it is designed to 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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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
\13\ Id.
\14\ 15 U.S.C. 78f(b)(4)
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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 the
proposed amendment to the fee associated with fee code AU is reasonable
as it does not represent a significant departure from the Exchange's
general pricing structure. The Exchange notes that the proposed
amendment to the fee associated with fee code AU represents a modest
increase over existing prices and yet the proposed fee is lower than
other similar fees assessed to orders that add liquidity to the BYX
Book.\15\ In addition, the Exchange believes the proposed amendment
represents an equitable allocation of fees and rebates and is not
unfairly discriminatory because the fees will apply to all Members who
add liquidity by submitting Periodic Auction Only or Periodic Auction
Eligible orders, equally.
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\15\ See, e.g. EDGA Equity Fee Schedule, Fee Codes B, V, and Y.
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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. Rather, as discussed above,
the Exchange believes that the proposed change would encourage the
submission of additional order flow to a public exchange, thereby
promoting market depth, execution incentives and enhanced execution
opportunities, as well as price discovery and transparency for all
Members. As a result, the Exchange believes that the proposed changes
further the Commission's goal in adopting Regulation NMS of fostering
competition among orders, which promotes ``more efficient pricing of
individual stocks for all types of orders, large and small.''
The Exchange believes the proposed rule changes do not impose any
burden on intramarket competition that is not necessary or appropriate
in furtherance of the purposes of the Act. The proposed fees associated
with fee code AU would apply to all Members equally in that all Members
would be subject to the same fee for the execution of a Periodic
Auction Only or Periodic Auction Eligible order during a Periodic
Auction on the Exchange. Each of the Periodic Auction Only and Periodic
Auction Eligible order types are available to all Members on an equal
and non-discriminatory basis. As a result, any Member can decide to use
(or not use) the Periodic Auction Only or Periodic Auction Eligible
order type based on the benefits provided by such order types in
potentially avoiding unfavorable executions, and the associated charge
that the Exchange proposes to amend.
Next, the Exchange believes the proposed rule changes 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
[[Page 11893]]
than 13% 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 change imposes any burden on competition that is not
necessary or appropriate in furtherance of the purposes of the Act.
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\16\ Supra note 1.
\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)).
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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 \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.
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\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 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="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#94e6e1f8f1b9f7fbf9f9f1fae0e7d4e7f1f7baf3fbe2"><span class="__cf_email__" data-cfemail="ddafa8b1b8f0beb2b0b0b8b3a9ae9daeb8bef3bab2ab">[email protected]</span></a>. Please include
file number SR-CboeBYX-2024-005 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-2024-005. 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-CboeBYX-2024-005 and should
be submitted on or before March 7, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
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\21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-03098 Filed 2-14-24; 8:45 am]
BILLING CODE 8011-01-P
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