Notice2024-07963
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule
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Published
April 16, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 74 (Tuesday, April 16, 2024)</title>
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[Federal Register Volume 89, Number 74 (Tuesday, April 16, 2024)]
[Notices]
[Pages 26977-26980]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-07963]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-99931; File No. SR-CboeBZX-2024-024]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule
April 10, 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 April 1, 2024, Cboe BZX Exchange, Inc. (``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 applicable to its
equities trading platform (``BZX Equities'') by: (1) introducing a new
Add Volume Tier; and (2) modifying the Single MPID Investor Tiers. The
Exchange proposes to implement these changes effective April 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
17% of the market share. Thus, in such a low-concentrated and highly
competitive market, no single equities exchange possesses significant
pricing power in the execution of order flow. The Exchange in
particular operates a ``Maker-Taker'' model whereby it pays rebates to
members that add liquidity and assesses fees to those that remove
liquidity. The Exchange's Fee Schedule sets forth the standard rebates
and rates applied per share for orders that provide and remove
liquidity, respectively. Currently, for orders in securities priced at
or above $1.00, the Exchange provides a standard rebate of $0.00160 per
share for orders that add liquidity and assesses a fee of $0.0030 per
share for orders that remove liquidity.\4\ For orders in securities
priced below $1.00, the Exchange provides a standard rebate of $0.00009
per share for orders that add liquidity and assesses a fee of 0.30% 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.
[[Page 26978]]
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 (March 22, 2024), available at <a href="https://www.cboe.com/us/equities/market_statistics/">https://www.cboe.com/us/equities/market_statistics/</a>.
\4\ See BZX Equities Fee Schedule, Standard Rates.
\5\ Id.
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Add/Remove Volume Tiers
Under footnote 1 of the Fee Schedule, the Exchange offers various
Add/Remove Volume Tiers. In particular, the Exchange offers seven Add
Volume Tiers that provide enhanced rebates for orders yielding fee
codes B,\6\ V \7\ and Y \8\ where a Member reaches certain add volume-
based criteria. The Exchange now proposes to introduce a new Add Volume
Tier. The proposed criteria for Add Volume Tier 8 is as follows:
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\6\ Fee code B is appended to displayed orders that add
liquidity to BZX in Tape B securities.
\7\ Fee code V is appended to displayed orders that add
liquidity to BZX in Tape A securities.
\8\ Fee code Y is appended to displayed orders that add
liquidity to BZX in Tape C securities.
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<bullet> Add Volume Tier 8 provides a rebate of $0.0031 per share
in securities priced at or above $1.00 to qualifying orders (i.e.,
orders yielding fee codes B, V, or Y) where a Member: (1) has an ADAV
\9\ as a percentage of TCV \10\ >= 0.50%; and (2) Member has a Tape B
ADV \11\ >= 1.50% of the Tape B TCV; and (3) Member has a Remove ADV >=
0.30% of the TCV.
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\9\ ``ADAV' means average daily added volume calculated as the
number of shares added per day. ADAV is calculated on a monthly
basis.
\10\ ``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.
\11\ ``ADV'' means average daily volume calculated as the number
of shares added or removed, combined, per day, calculated on a
monthly basis.
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The proposed Add Volume Tier 8 is intended to provide an additional
opportunity to incentivize Members to add displayed liquidity on the
Exchange. Like other Add Volume Tiers on the Exchange, Add Volume Tier
8 is designed to give members an additional opportunity to receive an
enhanced rebate for orders meeting the applicable criteria. The
Exchange believes the addition of Add Volume Tier 8 will encourage
Members to grow their volume on the Exchange, thereby contributing to a
deeper and more liquid market, which benefits all market participants
and provides greater execution opportunities on the Exchange.
Single MPID Investor Tiers
Under footnote 4 of the Fee Schedule, the Exchange offers Single
MPID Investor Tiers. In particular, the Exchange offers one Single MPID
Investor Tier that provides enhanced rebates for orders yielding fee
codes B, V and Y where an MPID reaches certain add volume-based
criteria. Now, the Exchange proposes to modify the criteria of Single
MPID Investor Tier 1 and introduce a new Single MPID Investor Tier. The
current criteria of Single MPID Investor Tier 1 is as follows:
<bullet> Single MPID Investor Tier 1 provides an enhanced rebate of
$0.0032 per share in Tape B securities priced at or above $1.00 and an
enhanced rebate of $0.0033 per share in Tapes A and C securities priced
at or above $1.00 to qualifying orders (i.e., orders yielding fee codes
B, V, or Y) where: (1) MPID has a Step-Up ADV \12\ as a percentage of
TCV >= 0.10% from May 2021; or MPID has a Step-Up ADV >= 10,000,000
from May 2021; and (2) MPID has an ADAV as a percentage of TCV >=
0.50%; or MPID has an ADAV >= 45,000,000.
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\12\ ``Step-Up ADV'' means ADV in the relevant baseline month
subtracted from current day ADV.
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The proposed criteria of Single MPID Investor Tier 1 is as follows:
<bullet> Single MPID Investor Tier 1 provides an enhanced rebate of
$0.0032 per share in Tape B securities priced at or above $1.00 and an
enhanced rebate of $0.0033 per share in Tapes A and C securities priced
at or above $1.00 to qualifying orders (i.e., orders yielding fee codes
B, V, or Y) where: (1) MPID has an ADAV as a percentage of TCV >= 0.45%
or MPID has an ADAV >= 45,000,000; and (2) MPID has an ADAV >= 0.05% of
the TCV as Non-Displayed orders that yield fee codes HB,\13\ HI,\14\ HV
\15\ or HY.\16\
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\13\ Fee code HB is appended to non-displayed orders that add
liquidity to BZX in Tape B securities.
\14\ Fee code HI is appended to non-displayed orders that
receive price improvement while adding liquidity to BZX.
\15\ Fee code HV is appended to non-displayed orders that add
liquidity to BZX in Tape A securities.
\16\ Fee code HY is appended to non-displayed orders that add
liquidity to BZX in Tape C securities.
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The Exchange also proposes to introduce Single MPID Investor Tier
2. The proposed criteria for proposed Single MPID Investor Tier 2 is as
follows:
<bullet> Proposed Single MPID Investor Tier 2 provides an enhanced
rebate of $0.0032 per share in Tape B securities priced at or above
$1.00 and an enhanced rebate of $0.0033 per share in Tapes A and C
securities priced at or above $1.00 to qualifying orders (i.e., orders
yielding fee codes B, V, or Y) where: (1) MPID removes an ADV >= 0.60%
of the TCV; and (2) MPID has an ADAV >= 0.05% of the TCV as Non-
Displayed orders that yield fee codes HB, HI, HV or HY.
The Exchange believes that the proposed modification to Single MPID
Investor Tier 1 and the introduction of proposed Single MPID Investor
Tier 2 will incentivize Members to increase their overall order flow,
both add and remove 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.
Incentivizing an increase in both liquidity adding volume and liquidity
removing volume, through both revised and new criteria and enhanced
rebate opportunities, encourages liquidity adding Members on the
Exchange to contribute to a deeper, more liquid market and encourages
liquidity removing Members on the Exchange to increase transactions and
take execution opportunities provided by such activity, together
providing for overall enhanced price discovery and price improvement
opportunities on the Exchange. As such, increased overall order flow
benefits all Members by contributing towards a robust and well-balanced
market ecosystem.
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
[[Page 26979]]
allocation of reasonable dues, fees and other charges among its Members
and other persons using its facilities.
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\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).
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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 that
its proposal to introduce Add Volume Tier 8, modify Single MPID
Investor Tier 1, and introduce Single MPID Investor Tier 2 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.
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\21\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
\22\ See e.g., BZX Equities Fee Schedule, Footnote 1, Add/Remove
Volume Tiers.
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In particular, the Exchange believes its proposal to introduce Add
Volume Tier 8, modify Single MPID Investor Tier 1, and introduce Single
MPID Investor Tier 2 is reasonable because the revised tiers will be
available to all Members and provide all Members with an opportunity to
receive an enhanced rebate. The Exchange further believes its proposal
to introduce Add Volume Tier 8, modify Single MPID Investor Tier 1, and
introduce Single MPID Investor Tier 2 will provide a reasonable means
to encourage liquidity adding displayed orders in Members' order flow
to the Exchange and to incentivize Members to continue to provide
liquidity adding and liquidity removing volume to the Exchange by
offering them an opportunity to receive an enhanced rebate on
qualifying orders. An overall increase in activity would deepen the
Exchange's liquidity pool, offer additional cost savings, support the
quality of price discovery, promote market transparency and improve
market quality, for all investors.
The Exchange believes that its proposal to introduce Add Volume
Tier 8, modify Single MPID Investor Tier 1, and introduce Single MPID
Investor Tier 2 is reasonable as the proposed criteria 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 continue to be eligible for proposed
Add Volume Tier 8 and the Single MPID Investor Tiers and have the
opportunity to meet the tiers' criteria and receive the corresponding
enhanced rebate if such criteria is met. Without having a view of
activity on other markets and off-exchange venues, the Exchange has no
way of knowing whether this proposed rule change would definitely
result in any Members qualifying for proposed Add Volume Tier 8 and the
Single MPID Investor Tiers. While the Exchange has no way of predicting
with certainty how the proposed changes will impact Member activity,
based on the prior month's volume, the Exchange anticipates that at
least one Member will be able to satisfy proposed Add Volume Tier 8, at
least three Members will be able to satisfy proposed Single MPID
Investor Tier 1, and at least two Members will be able to satisfy
proposed Single MPID Investor Tier 2. The Exchange also notes that
proposed changes will not adversely impact any Member's ability to
qualify for 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.
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. Particularly, the Exchange's
proposal to introduce Add Volume Tier 8, modify Single MPID Investor
Tier 1, and introduce Single MPID Investor Tier 2 will apply to all
Members equally in that all Members are eligible for the new and
modified tiers, 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 BZX
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.
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 17% 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
[[Page 26980]]
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.
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\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)).
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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 \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.
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\26\ 15 U.S.C. 78s(b)(3)(A).
\27\ 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#aedcdbc2cb83cdc1c3c3cbc0daddeeddcbcd80c9c1d8"><span class="__cf_email__" data-cfemail="2654534a430b45494b4b434852556655434508414950">[email protected]</span></a>. Please include
file number SR-CboeBZX-2024-024 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-2024-024. 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-2024-024 and should
be submitted on or before May 7, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-07963 Filed 4-15-24; 8:45 am]
BILLING CODE 8011-01-P
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