Notice2024-05634
Self-Regulatory Organizations; Cboe BYX 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
March 18, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
<html>
<head>
<title>Federal Register, Volume 89 Issue 53 (Monday, March 18, 2024)</title>
</head>
<body><pre>
[Federal Register Volume 89, Number 53 (Monday, March 18, 2024)]
[Notices]
[Pages 19375-19379]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-05634]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99722; File No. SR-CboeBYX-2024-007]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule
March 12, 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 March 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.
---------------------------------------------------------------------------
\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 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
[[Page 19376]]
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: (1) modifying the
Remove Volume Tiers; and (2) deleting the Step-Up Tier. The Exchange
proposes to implement these changes effective March 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
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 ``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\ 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.
---------------------------------------------------------------------------
\3\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (February 23, 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.
---------------------------------------------------------------------------
Remove Volume Tiers
Under footnote 1 of the Fee Schedule, the Exchange currently offers
various Add/Remove Volume Tiers. In particular, the Exchange offers
three Remove Volume Tiers that each provide an enhanced rebate for
Members' qualifying orders yielding fee codes BB,\6\ N \7\ and W \8\
where a Member reaches certain add volume-based criteria. The Exchange
first proposes to delete Remove Volume Tiers 7 and 8 as the Exchange
does not wish to, nor is required to, maintain such tiers. More
specifically, the proposed change removes these tiers as the Exchange
would rather redirect future resources and funding into other programs
and tiers intended to incentivize increased order flow.
---------------------------------------------------------------------------
\6\ Fee code BB is appended to orders that remove liquidity from
BYX in Tape B securities.
\7\ Fee code N is appended to orders that remove liquidity from
BYX in Tape C securities.
\8\ Fee code W is appended to orders that remove liquidity from
BYX in Tape A securities.
---------------------------------------------------------------------------
Next, the Exchange proposes to introduce a new Remove Volume Tier
6, and re-number current Remove Volume Tier 6 to Remove Volume Tier 7.
In addition, the Exchange proposes to amend the criteria of current
Remove Volume Tier 6 (proposed Remove Volume Tier 7). The criteria for
proposed Remove Volume Tier 6 is as follows:
<bullet> Proposed Remove Volume Tier 6 provides a rebate of $0.0013
per share in securities priced at or above $1.00 to qualifying orders
(i.e., orders yielding fee codes BB, N, or W) where (1) Member has a
combined Auction ADV \9\ and ADV \10\ >=0.08% of the TCV; \11\ and (2)
Member has a combined Auction ADV and ADAV \12\ >=5,000,000 shares.
---------------------------------------------------------------------------
\9\ ``Auction ADV'' means average daily auction volume
calculated as the number of shares executed in an auction per day.
\10\ ``ADV'' means average daily volume calculated as the number
of shares added ore removed, combined, per day. ADV is calculated on
a monthly basis.
\11\ ``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.
\12\ ``ADAV'' means average daily added volume calculated as the
number of shares added per day. ADAV is calculated on a monthly
basis.
---------------------------------------------------------------------------
The criteria for current Remove Volume Tier 6 (proposed Remove
Volume Tier 7) is as follows:
<bullet> Remove Volume Tier 6 provides a rebate of $0.0015 per
share in securities priced at or above $1.00 to qualifying orders
(i.e., orders yielding fee codes BB, N, or W) where (1) Member has a
combined Auction ADV and ADV >=0.08% of the TCV; and (2) Member has a
combined Auction ADV and ADAV >=500,000 shares.
The proposed criteria for current Remove Volume Tier 6 (proposed
Remove Volume Tier 7) is as follows:
<bullet> Proposed Remove Volume Tier 7 provides a rebate of $0.0015
per share in securities priced at or above $1.00 to qualifying orders
(i.e., orders yielding fee codes BB, N, or W) where (1) Member has a
combined Auction ADV and ADV >=0.10% of the TCV; and (2) Member has a
combined Auction ADV and ADAV >=7,000,000 shares.
The Exchange believes that the proposed modification to current
Remove Volume Tier 6 (proposed Remove Volume Tier 7) and the
introduction of proposed Remove Volume Tier 6 will incentivize Members
to add volume to the Exchange, thereby contributing to a deeper and
more liquid market, which benefits all market participants and provides
greater execution opportunities on the Exchange. While the proposed
criteria in current Remove Volume Tier 6 (proposed Remove Volume Tier
7) is more difficult to achieve than the current criteria, the revised
criteria continue to remain commensurate with the rebate that will be
received upon a Member satisfying the proposed criteria.
Step-Up Tier
Under footnote 2 of the Fee Schedule, the Exchange currently offers
a Step-Up Tier that assesses a reduced fee for Members' qualifying
orders yielding fee codes B,\13\ V,\14\ Y,\15\ and AD \16\ where
certain add volume-based criteria is met, including ``growing'' volume
over a certain baseline month. The Exchange now proposes to delete the
Step-Up Tier as the Exchange does not wish to, nor is required to,
maintain such tier. More
[[Page 19377]]
specifically, the proposed change removes this tier as the Exchange
would rather redirect future resources and funding into other programs
and tiers intended to incentivize increased order flow.
---------------------------------------------------------------------------
\13\ Fee code B is appended to displayed orders that add
liquidity to BYX in Tape B securities.
\14\ Fee code V is appended to displayed orders that add
liquidity to BYX in Tape A securities.
\15\ Fee code Y is appended to displayed orders that add
liquidity to BYX in Tape C securities.
\16\ Fee code AD is appended to displayed orders executed in a
Periodic Auction.
---------------------------------------------------------------------------
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.\17\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \18\ 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) \19\ 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) \20\
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.
---------------------------------------------------------------------------
\17\ 15 U.S.C. 78f(b).
\18\ 15 U.S.C. 78f(b)(5).
\19\ Id.
\20\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
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 that
its proposal to modify current Remove Volume Tier 6 (proposed Remove
Volume Tier 7) and introduce proposed Remove Volume Tier 6 reflects 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. Additionally, the Exchange notes that relative volume-based
incentives and discounts have been widely adopted by exchanges,\21\
including the Exchange,\22\ 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 or 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.
---------------------------------------------------------------------------
\21\ See e.g., EDGA Equities Fee Schedule, Footnote 7, Add/
Remove Volume Tiers.
\22\ See e.g., BYX Equities Fee Schedule, Footnote 1, Add/Remove
Volume Tiers.
---------------------------------------------------------------------------
In particular, the Exchange believes its proposal to modify current
Remove Volume Tier 6 (proposed Remove Volume Tier 7) and introduce
proposed Remove Volume Tier 6 is reasonable because the tiers will be
available to all Members and provide all Members with an opportunity to
receive a higher enhanced rebate. The Exchange further believes that
modified Remove Volume Tier 6 (proposed Remove Volume Tier 7) and
proposed Remove Volume Tier 6 will provide a reasonable means to
encourage adding displayed orders in Members' order flow to the
Exchange and to incentivize Members to continue to provide volume to
the Exchange by offering them an additional opportunity to receive a
higher enhanced rebate on qualifying orders. 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 believes proposed modified Remove Volume Tier 6
(proposed Remove Volume Tier 7) and proposed Remove Volume Tier 6 are
reasonable as they do not represent a significant departure from the
criteria currently offered in the Fee Schedule. 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 new and revised tiers and have the opportunity to
meet the tiers' criteria and receive the corresponding reduced fee if
such criteria are met. Without having a view of activity on other
markets and off-exchange venues, the Exchange has no way of knowing
whether these proposed rule changes would definitely result in any
Members qualifying for the new proposed tiers. While the Exchange has
no way of predicting with certainty how the proposed changes will
impact Member activity, based on the prior months volume, the Exchange
anticipates that at least three Members will be able to satisfy
proposed Remove Volume Tier 6, and at least four Members will be able
to satisfy proposed Remove Volume Tier 7. The Exchange also notes that
the 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 that its proposal to eliminate current Remove
Volume Tiers 7-8 and the Step-Up Tier is reasonable because the
Exchange is not required to maintain these tiers nor is it required to
provide Members an opportunity to receive enhanced rebates or reduced
fees. The Exchange believes its proposal to eliminate the tiers is also
equitable and not unfairly discriminatory because it applies to all
Members (i.e., the tiers will not be available for any Member). The
Exchange also notes that the proposed rule change to remove these tiers
merely results in Members not receiving an enhanced rebate or reduced
fee, which, as noted above, the Exchange is not required to offer or
maintain. Furthermore, the proposed rule change to eliminate the tiers
enables the Exchange to redirect resources and funding into other
programs and tiers intended to incentivize increased order flow.
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.''
[[Page 19378]]
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. Particularly, the proposed
modified current Remove Volume Tier 6 (proposed Remove Volume Tier 7)
and proposed Remove Volume Tier 6 will apply to all Members equally in
that all Members are eligible for the tiers and enhanced rebates, have
a reasonable opportunity to meet the proposed tiers' criteria and will
receive the enhanced rebate on their qualifying orders if such criteria
is met. The Exchange does not believe the proposed changes burden
competition, but rather, enhance competition as they are intended to
increase the competitiveness of BYX by amending existing pricing
incentives in order to attract order flow and incentivize participants
to increase their participation on the Exchange, providing for
additional execution opportunities for market participants and improved
price transparency. Greater overall order flow, trading opportunities,
and pricing transparency benefits all market participants on the
Exchange by enhancing market quality and continuing to encourage
Members to send orders, thereby contributing towards a robust and well-
balanced market ecosystem.
Additionally, the Exchange believes the proposed elimination of
current Remove Volume Tiers 7-8 and the Step-Up Tier does not impose
any burden on intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Specifically,
the proposed change to eliminate current Remove Volume Tiers 7-8 and
the Step-Up Tier will not impose any burden on intramarket competition
because the changes apply to all Members uniformly, as in, the tiers
will no longer be available to any Member.
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
than 16% of the market share.\23\ 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.'' \24\ 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'. . . .''.\25\ 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.
---------------------------------------------------------------------------
\23\ Supra note 3.
\24\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\25\ 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 \26\ and paragraph (f) of Rule 19b-4 \27\
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.
---------------------------------------------------------------------------
\26\ 15 U.S.C. 78s(b)(3)(A).
\27\ 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="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#295b5c454c044a4644444c475d5a695a4c4a074e465f"><span class="__cf_email__" data-cfemail="493b3c252c642a2624242c273d3a093a2c2a672e263f">[email protected]</span></a>. Please include
file number SR-CboeBYX-2024-007 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-2024-007. 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="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
[[Page 19379]]
withhold entirely from publication submitted material that is obscene
or subject to copyright protection. All submissions should refer to
file number SR-CboeBYX-2024-007 and should be submitted on or before
April 8, 2024.
---------------------------------------------------------------------------
\28\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-05634 Filed 3-15-24; 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 March 18, 2024.
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.