Notice2024-13417
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
June 20, 2024
Issuing agencies
Securities and Exchange Commission
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<title>Federal Register, Volume 89 Issue 119 (Thursday, June 20, 2024)</title>
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[Federal Register Volume 89, Number 119 (Thursday, June 20, 2024)]
[Notices]
[Pages 51923-51926]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2024-13417]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100326; File No. SR-CboeBZX-2024-046]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule
June 13, 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 June 3, 2024, Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
Cboe BZX Exchange, Inc. (the ``Exchange'' or ``BZX'') proposes to
amend its Fee Schedule. The text of the proposed rule change is
provided in Exhibit 5.
The text of the proposed rule change is also available on the
Exchange's website (<a href="http://markets.cboe.com/us/equities/regulation/rule_filings/BZX/">http://markets.cboe.com/us/equities/regulation/rule_filings/BZX/</a>), at the Exchange's Office of the Secretary, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
[[Page 51924]]
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 the Add
Volume Tier. The Exchange proposes to implement these changes effective
June 3, 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
15% 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 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.\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.
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\3\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, Month-to-Date (May 21, 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 eight 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 8. The proposed criteria for the new, proposed 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\ >=0.40%; and (2) Member has a Tape C
ADV \11\ >=1.20% of the Tape C TCV; and (3) Member has a Remove ADV
>=0.40% 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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In conjunction with the new, proposed Add Volume Tier 8, the
Exchange proposes to renumber the current Add Volume Tier 8 as Add
Volume Tier 9. Additionally, the Exchange proposes to amend the third
prong of criteria associated with proposed Add Volume Tier 9 (current
Add Volume Tier 8) and increase the rebate associated with the tier
from $0.0031 per share in securities priced at or above $1.00 to
$0.0032 per share. The current criteria for proposed Add Volume Tier 9
(current Add Volume Tier 8) is as follows:
<bullet> Proposed Add Volume Tier 9 (current 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.
The proposed criteria for proposed Add Volume Tier 9 is as follows:
<bullet> Proposed Add Volume Tier 9 provides a rebate of $0.0032
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 92) Member has a Tape B ADV
>=1.50% of the Tape B TCV; and (3) Member has a Remove ADV >=0.20% of
the TCV.
The proposed, new Add Volume Tier 8 and the proposed Add Volume
Tier 9 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. The Exchange believes that the proposed, new Add
Volume Tier 8 and proposed Add Volume Tier 9 continue to offer an
enhanced rebate that is commensurate with the proposed criteria, which
is not significantly more difficult nor significantly easier than the
current criteria found in the Add Volume Tiers. 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.\12\ Specifically, the Exchange believes the proposed rule change
is consistent with the Section 6(b)(5) \13\ 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
[[Page 51925]]
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) \14\ 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) \15\
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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\12\ 15 U.S.C. 78f(b).
\13\ 15 U.S.C. 78f(b)(5).
\14\ Id.
\15\ 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 the Add Volume Tiers 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 proposed, new Add Volume Tier 8 and proposed Add Volume Tier
9 are not a significant departure from existing criteria, are
reasonably correlated to the enhanced rebate offered by the Exchange
and other competing exchanges,\16\ 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,\17\ including the Exchange,\18\ 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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\16\ 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>.
\17\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
\18\ 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 a
new Add Volume Tier 8 and renumber current Add Volume Tier 8 as
proposed Add Volume Tier 9 with amended criteria is reasonable because
the proposed 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 a new Add Volume Tier 8 and
renumber current Add Volume Tier 8 as proposed Add Volume Tier 9 with
amended criteria 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 a new Add
Volume Tier 8 and renumber current Add Volume Tier 8 as proposed Add
Volume Tier 9 with amended criteria is reasonable as the proposed
criteria does 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 proposed a new Add Volume Tier 8 and proposed Add Volume Tier 9 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 proposed Add Volume Tier 9. 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 one Member will be able to satisfy proposed Add
Volume Tier 9. 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 new Add Volume Tier 8 and renumber current Add
Volume Tier 8 as proposed Add Volume Tier 9 with amended criteria will
apply to all Members equally in that all Members are eligible for the
proposed 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
[[Page 51926]]
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 15% of the
market share.\19\ 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.'' \20\ 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'. . . .''.\21\
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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\19\ Supra note 3.
\20\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\21\ 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 \22\ and paragraph (f) of Rule 19b-4 \23\
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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\22\ 15 U.S.C. 78s(b)(3)(A).
\23\ 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#0270776e672f616d6f6f676c7671427167612c656d74"><span class="__cf_email__" data-cfemail="93e1e6fff6bef0fcfefef6fde7e0d3e0f6f0bdf4fce5">[email protected]</span></a>. Please include
file number SR-CboeBZX-2024-046 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-2024-046. 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-2024-046 and should
be submitted on or before July 11, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-13417 Filed 6-18-24; 8:45 am]
BILLING CODE 8011-01-P
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