Notice2024-11568
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
May 28, 2024
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 89 Issue 103 (Tuesday, May 28, 2024)</title>
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[Federal Register Volume 89, Number 103 (Tuesday, May 28, 2024)]
[Notices]
[Pages 46214-46218]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-11568]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100193; File No. SR-CboeBZX-2024-039]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule
May 21, 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 May 13, 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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[[Page 46215]]
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 modifying certain Add/
Remove Volume Tiers. The Exchange proposes to implement these changes
effective May 13, 2024.\3\
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\3\ The Exchange initially filed the proposed fee change on May
1, 2024 (SR-CboeBZX-2024-033). On May 9, 2024, the Exchange withdrew
that filing and submitted SR-CboeBZX-2024-036. On May 13, 2024, the
Exchange withdrew that filing and submitted this proposal.
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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,\4\ 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 ``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.\5\ For orders in securities
priced below $1.00, the Exchange does not provide a rebate for orders
that add liquidity and assesses a fee of 0.30% of the total dollar
value for orders that remove liquidity.\6\ 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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\4\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (April 23, 2024), available at <a href="https://www.cboe.com/us/equities/market_statistics/">https://www.cboe.com/us/equities/market_statistics/</a>.
\5\ See BZX Equities Fee Schedule, Standard Rates.
\6\ 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 eight Add
Volume Tiers that provide enhanced rebates for orders yielding fee
codes B,\7\ V \8\ and Y \9\ where a Member reaches certain add volume-
based criteria. The Exchange now proposes to modify Add Volume Tier 8
by lowering the requirement in the first prong of criteria. The current
criteria for Add Volume Tier 8 is as follows:
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\7\ Fee code B is appended to displayed orders that add
liquidity to BZX in Tape B securities.
\8\ Fee code V is appended to displayed orders that add
liquidity to BZX in Tape A securities.
\9\ 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
\10\ as a percentage of TCV \11\ >=0.50%; and (2) Member has a Tape B
ADV \12\ >=1.50% of the Tape B TCV; and (3) Member has a Remove ADV
>=0.30% of the TCV.
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\10\ ``ADAV'' means average daily added volume calculated as the
number of shares added per day. ADAV 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\ ``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 criteria for Add Volume Tier 8 is as follows:
<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
as a percentage of TCV >=0.42%; and (2) Member has a Tape B ADV >=1.50%
of the Tape B TCV; and (3) Member has a Remove ADV >=0.30% of the TCV.
In addition to the Add/Remove Volume Tiers offered under footnote
1, the Exchange also offers four Non-Displayed Add Volume Tiers that
each provide an enhanced rebate for Members' qualifying orders yielding
fee codes HB,\13\ HV,\14\ or HY,\15\ where a Member reaches certain
volume-based criteria offered in each tier. The Exchange now proposes
to modify Non-Displayed Add Volume Tier 1. The current criteria for
Non-Displayed Add Volume Tier 1 is as follows:
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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 HV is appended to non-displayed orders that add
liquidity to BZX in Tape A securities.
\15\ Fee code HY is appended to non-displayed orders that add
liquidity to BZX in Tape C securities.
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<bullet> Non-Displayed Add Volume Tier 1 provides a rebate of
$0.0018 per share in securities priced at or above $1.00 to qualifying
orders (i.e., orders yielding fee codes HB, HV, or HY) where a Member
adds an ADV >=0.05% of the TCV as Non-Displayed orders that yield fee
codes HB, HI,\16\ HV or HY.
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\16\ Fee code HI is appended to non-displayed orders that add
liquidity to BZX and receive price improvement.
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The proposed criteria for Non-Displayed Add Volume Tier 1 is as
follows:
<bullet> Non-Displayed Add Volume Tier 1 provides a rebate of
$0.0018 per share in securities priced at or above $1.00 to qualifying
orders (i.e., orders yielding fee codes HB, HV, or HY) where a Member
adds an ADV >=0.06% of the TCV as Non-Displayed orders that yield fee
codes HB, HI, HV or HY.
[[Page 46216]]
The proposed, modified Add Volume Tier 8 and Non-Displayed Add
Volume Tier 1 are intended to continue to provide an additional
opportunity to incentivize Members to earn an enhanced rebate by
increasing their order flow to the Exchange, which further contributes
to a deeper, more liquid market and provides even more execution
opportunities for active market participants. While the proposed
criteria for Add Volume Tier 8 is slightly less difficult than existing
criteria and the proposed criteria for Non-Displayed Add Volume Tier 1
is slightly more difficult than existing criteria, the Exchange
believes that both tiers continue to offer an enhanced rebate that is
commensurate with the proposed criteria. Incentivizing an increase in
liquidity adding volume through enhanced rebate opportunities
encourages liquidity-adding Members on the Exchange to increase
transactions and take execution opportunities provided by such
increased liquidity, 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 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 modify Add Volume Tier 8 and Non-Displayed Add Volume
Tier 1 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. Specifically, the Exchange's proposal to introduce
slightly different criteria to Add Volume Tier 8 and Non-Displayed Add
Volume Tier 1 is not a significant departure from existing criteria, is
reasonably correlated to the enhanced rebate offered by the Exchange
and other competing exchanges,\21\ and will continue to incentivize
Members to submit order flow to the Exchange. Additionally, the
Exchange notes that relative volume-based incentives and discounts have
been widely adopted by exchanges,\22\ including the Exchange,\23\ 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 Nasdaq Price List, Add and Remove Rates, Rebate to Add
Displayed Liquidity, Shares Executed at or Above $1.00, available at
<a href="https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2">https://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2</a>; see also
MEMX Equities Fee Schedule, Non-Display Add Tiers, available at
<a href="https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/">https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/</a>.
\22\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
\23\ 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 modify Add
Volume Tier 8 and Non-Displayed Add Volume Tier 1 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 modify Add Volume Tier 8 and Non-
Displayed Add Volume Tier 1 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 modify Add Volume Tier 8
and Non-Displayed Add Volume Tier 1 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 the proposed Add Volume Tier 8 and Non-Displayed Add
Volume Tier 1 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 Non-Displayed Add Volume Tier 1. 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 and at least three Members will be
able to satisfy proposed Non-Displayed Add Volume Tier 1. 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
[[Page 46217]]
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 modify Add Volume Tier 8 and Non-Displayed Add Volume Tier
1 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 16% of the market share.\24\ 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.'' \25\ 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'. . . .''.\26\ 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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\24\ Supra note 4.
\25\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\26\ 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 \27\ and paragraph (f) of Rule 19b-4 \28\
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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\27\ 15 U.S.C. 78s(b)(3)(A).
\28\ 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#0371766f662e606c6e6e666d7770437066602d646c75"><span class="__cf_email__" data-cfemail="bfcdcad3da92dcd0d2d2dad1cbccffccdadc91d8d0c9">[email protected]</span></a>. Please include
file number SR-CboeBZX-2024-039 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-2024-039.
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
[[Page 46218]]
submitted material that is obscene or subject to copyright protection.
All submissions should refer to file number SR-CboeBZX-2024-039 and
should be submitted on or before June 18, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\29\
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\29\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-11568 Filed 5-24-24; 8:45 am]
BILLING CODE 8011-01-P
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