Notice2025-13897
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend Its Fee Schedule Regarding Dedicated Cores
Primary source
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Published
July 24, 2025
Issuing agencies
Securities and Exchange Commission
Full Text
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<title>Federal Register, Volume 90 Issue 140 (Thursday, July 24, 2025)</title>
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[Federal Register Volume 90, Number 140 (Thursday, July 24, 2025)]
[Notices]
[Pages 34933-34938]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-13897]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-103511; File No. SR-CboeBYX-2025-020]
Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule Regarding Dedicated Cores
July 21, 2025.
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 July 16, 2025, Cboe BYX Exchange, Inc. (``Exchange'' or ``BYX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items 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
The Exchange proposes to amend its fee schedule to adopt fees for
Dedicated Cores. 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>).
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 to adopt fees for
Dedicated Cores.\3\
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\3\ The Exchange initially adopted pricing for Dedicated Cores
on May 6, 2024 (SR-CboeBYX-2024-014). On July 1, 2024, the Exchange
withdrew that filing and submitted SR-CboeBYX-2024-024. On August 1,
2024, the Exchange withdrew that filing and submitted SR-CboeBYX-
2024-028. On business date September 30, 2024, the Exchange withdrew
that filing and submitted SR-CboeBYX-2024-036. On November 26, 2024,
the Exchange withdrew that filing and submitted SR-CboeBYX-2024-043
and subsequently withdrew that filing and submitted SR-CboeBYX-2024-
044. On November 27, 2024, the Exchange withdraw that filing and
submitted SR-CboeBYX-2024-045. On December 4, 2024, the Exchange
withdrew that filing and submitted SR-CboeBYX-2024-047. On January
24, 2025, the Exchange withdrew that filing and submitted SR-
CboeBYX-2025-001. On March 13, 2025, the Exchange withdrew that
filing and submitted SR-CboeBYX-2025-005. On May 7, 2025, the
Exchange withdrew that filing and submitted SR-CboeBYX-2025-010. On
July 2, 2025, the Exchange withdrew that filing and submitted SR-
CboeBYX-2025-018. On July 16, 2025, the Exchange withdrew that
filing and submitted this filing.
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By way of background, the Exchange recently began to allow Users
\4\ to assign
[[Page 34934]]
a Single Binary Order Entry (``BOE'') logical order entry port \5\ to a
single dedicated Central Processing Unit (CPU Core) (``Dedicated
Core''). Historically, CPU Cores had been shared by logical order entry
ports (i.e., multiple logical ports from multiple firms may connect to
a single CPU Core). Use of Dedicated Cores however, can provide reduced
latency, enhanced throughput, and improved performance since a firm
using a Dedicated Core is utilizing the full processing power of a CPU
Core instead of sharing that power with other firms. This offering is
completely voluntary and is available to all Users that wish to
purchase Dedicated Cores. Users may utilize BOE logical order entry
ports on shared CPU Cores, either in lieu of, or in addition to, their
use of Dedicated Core(s). As such, Users are able to operate across a
mix of shared and dedicated CPU Cores which the Exchange believes
provides additional risk and capacity management. Further, Dedicated
Cores are not required nor necessary to participate on the Exchange and
as such Users may opt not to use Dedicated Cores at all.
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\4\ A User may be either a Member or Sponsored Participant. The
term ``Member'' shall mean any registered broker or dealer that has
been admitted to membership in the Exchange, limited liability
company or other organization which is a registered broker or dealer
pursuant to Section 15 of the Act, and which has been approved by
the Exchange. A Sponsored Participant may be a Member or non-Member
of the Exchange whose direct electronic access to the Exchange is
authorized by a Sponsoring Member subject to certain conditions. See
Exchange Rule 11.3.
\5\ Users may currently connect to the Exchange using a logical
port available through an application programming interface
(``API''), such as the Binary Order Entry (``BOE'') protocol. A BOE
logical order entry port is used for order entry.
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The Exchange proposes to assess the following monthly fees for
Users that wish to use Dedicated Cores and adopt a maximum limit.
First, the Exchange proposes to provide up to two Dedicated Cores to
all Users who wish to use Dedicated Cores, at no additional cost. In
the event that a User voluntarily chooses to use more than two
Dedicated Cores, only then would the Exchange assess the following
fees: $650 per Dedicated Core for 3-10 Dedicated Cores; $850 per
Dedicated Core for 11-15 Dedicated Cores; and $1,050 per Dedicated Core
for 16 or more Dedicated Cores. The proposed fees are progressive and
the Exchange proposes to include the following example in the Fees
Schedule to provide clarity as to how the fees will be applied.
Particularly, the Exchange will provide the following example: if a
User were to purchase 11 Dedicated Cores, it will be charged a total of
$6,050 per month ($0 * 2) + ($650 * 8) + ($850 * 1). The Exchange also
proposes to make clear in the Fees Schedule that the monthly fees are
assessed and applied in their entirety and are not prorated. The
Exchange notes the current standard fees assessed for BOE Logical
Ports, whether used with Dedicated or shared CPU cores, will remain
applicable and unchanged.\6\
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\6\ The Exchange currently assesses $550 per port per month.
Port fees will also continue to be assessed on the first two
Dedicated Cores that Users receive at no additional cost. See Cboe
BYX Equities Fee Schedule.
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Since the Exchange currently has a finite amount of physical space
in its data centers in which its servers (and therefore corresponding
CPU Cores) are located, the Exchange also proposes to prescribe a
maximum limit on the number of Dedicated Cores that Users may purchase
each month. The purpose of establishing these limits is to manage the
allotment of Dedicated Cores in a fair manner and to prevent the
Exchange from being required to expend large amounts of limited
resources in order to provide an unlimited number of Dedicated Cores.
The Exchange previously established a limit for Members of a maximum
number of 60 Dedicated Cores and Sponsoring Members a limit of a
maximum number of 25 Dedicated Cores for each of their Sponsored Access
relationships.\7\ The Exchange has since been able to procure
additional servers with CPU Cores and also has a better understanding
of User demand relative to its available space since the initial launch
of Dedicated Cores. After seeing increased User demand, the Exchange
proposed to increase that cap and provided that Members will be limited
to a maximum number of 80 Dedicated Cores and Sponsoring Members will
be limited to a maximum number of 35 Dedicated Cores for each of their
Sponsored Access relationships.\8\ The Exchange noted at that time that
it would continue monitoring Dedicated Core interest by all Users and
allotment availability with the goal of increasing these limits to meet
Users' needs if and when the demand is there and/or the Exchange is
able to accommodate additional Dedicated Cores. Since then, the
Exchange has determined that it is able to accommodate an increased cap
relative to current demand. As such, the Exchange proposed to increase
the cap to 120 Dedicated Cores for Members, effective December 1,
2024.\9\ Sponsoring Members will continue to be limited to a maximum of
35 Dedicated Cores for each of their Sponsored Access
relationships.\10\
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\7\ See Securities Exchange Act Release No. 100476 (July 9,
2024), 89 FR 57482 (July 15, 2024) (SR-CboeBYX-2024-024).
\8\ See Securities Exchange Act Release No. 101303 (October 10,
2024), 89 FR 83740 (October 17, 2024) (SR-CboeBYX-2024-036).
\9\ The prescribed maximum quantity of Dedicated Cores for
Members applies regardless of whether that Member purchases the
Dedicated Cores directly from the Exchange and/or through a Service
Bureau. In a Service Bureau relationship, a customer allows its MPID
to be used on the ports of a technology provider, or Service Bureau.
One MPID may be allowed on several different Service Bureaus.
\10\ The fee tier(s) applicable to Sponsoring Members are
determined on a per Sponsored Access relationship basis and not on
the combined total of Dedicated Cores across Sponsored Users. For
example, under the proposed changes, a Sponsoring Member that has
three Sponsored Access relationships is entitled to a total of 105
Dedicated Cores for those 3 Sponsored Access relationships but would
be assessed fees separately based on the 35 Dedicated Cores for each
Sponsored User (instead of combined total of 105 Dedicated Cores).
For example, a Sponsoring Member with 3 Sponsored Access
relationships would pay $30,450 per month if each Sponsored Access
relationship purchased the maximum 35 Dedicated Cores. More
specifically, the Sponsoring Member would be provided 2 Dedicated
Cores at no additional cost for each Sponsored User under Tier 1
(total of 6 Dedicated Cores at no additional cost) and provided an
additional 8 Dedicated Cores at $650 each for each Sponsored User, 5
Dedicated Cores at $850 each for each Sponsored User and 20
Dedicated Cores at $1,050 each for each Sponsored User (combined
total of 99 additional Dedicated Cores).
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2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\11\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \12\ requirements that the rules of an exchange be
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, to remove impediments to and perfect the
mechanism of a free and open market and a national market system, and,
in general, to protect investors and the public interest. Additionally,
the Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \13\ requirement that the rules of an exchange not be
designed to permit unfair discrimination between customers, issuers,
brokers, or dealers. The Exchange also believes the proposed rule
change is consistent with Section 6(b)(4) \14\ of the Act, which
requires that Exchange rules provide for the equitable allocation of
reasonable dues, fees, and other charges among its
[[Page 34935]]
Members and other persons using its facilities.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
\13\ Id.
\14\ 15 U.S.C. 78f(b)(4).
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The Exchange believes the proposal is reasonable because the
Exchange is offering all Users who voluntarily choose to utilize
Dedicated Cores up to two Dedicated Cores at no additional cost.
Notably, as of the beginning of May, of the Members that currently
maintain Dedicated Cores, 43% maintain only 1 or 2 Dedicated Cores and
therefore pay no additional fees.\15\ The Exchange believes the
proposed fees are reasonable because Dedicated Cores provide a valuable
service in that it can provide reduced latency, enhanced throughput,
and improved performance compared to use of a shared CPU Core since a
firm using a Dedicated Core is utilizing the full processing power of a
CPU Core. The Exchange also emphasizes however, that the use of
Dedicated Cores is not necessary for trading and as noted above, is
entirely optional. Users can also continue to access the Exchange
through shared CPU Cores at no additional cost. Indeed, as of the
beginning of May, only 35% of the Exchange's Members currently use
Dedicated Cores and as noted above, of those who do, only 43% take only
1 or 2 Dedicated Cores at no additional cost. Depending on a firm's
specific business needs, the proposal enables Users to choose to use
Dedicated Cores in lieu of, or in addition to, shared CPU Cores (or as
emphasized, not use Dedicated Cores at all). If a User finds little
benefit in having Dedicated Cores based on its business model and
trading strategies, or determines Dedicated Cores are not cost-
efficient for its needs or does not provide sufficient value to the
firm, such User may continue its use of the shared CPU Cores,
unchanged. The Exchange is not aware of any specific reason
(operational or otherwise) why a firm would not partake in the use of
the one to two free Dedicated Cores the Exchange offers. Indeed the
Exchange does not believe that the set up a firm would undertake to use
free Dedicated Cores offered by the Exchange is prohibitively difficult
or burdensome; ultimately, whether or not a firm avails itself of the
free Dedicated Cores is a business decision, and some firms may decide
that the impact that Dedicated Cores may have is simply not beneficial
or necessary to how that firm operates. The Exchange also has no plans
to eliminate shared CPU Cores nor to require Users to purchase
Dedicated Cores.
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\15\ The Exchange notes that its numbers only include Members
since it does not have the same level of insight into customer
segments for Sponsored Access.
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The Exchange has seen general interest in Dedicated Cores from a
variety of market participants, with varying size and business models.
Such market participants include proprietary trading firms (who tend to
be more latency sensitive), as well as sell-side market participants
and buy-side market participants (who tend to be less latency
sensitive). For background, proprietary trading firms utilize their own
capital to trade without taking outside money from clients. Due to the
nature of their respective businesses, the Exchange has classified
proprietary trading firms as latency sensitive, and other groups, such
as buy-side hedge funds, sell-side banks and sell-side non-banks (such
as agency brokers) as non-latency sensitive. Proprietary trading firms'
strategies may range from, market making, to relative value trading and
arbitrage--these all rely on profiting from general market activity
and, generally, requires faster entry and exit into trades and
positions making proprietary trading firms more latency sensitive than
other market segments. Buy-side hedge funds, banks and agency brokers
are not as latency sensitive as generally the strategy for hedge funds
is based on overall long-term positioning in the market, and banks and
agency brokers may profit from commissions of customer order flow; both
are generally strategies that are not reliant on speed to the same
extent proprietary trading firms are. Further, Users have various
reasons for obtaining Dedicated Cores. Some Users for example, may be
seeking to further reduce latency or increase execution determinism,
whereas others may use Dedicated Cores as a general risk mitigation by
siloing their respective activity. For example, by using the Dedicated
Core(s) to silo its respective activity, a firm may be able to mitigate
risk during periods of heightened volatility as the firm will not need
to compete for a shared resource (i.e., the shared core). Of further
note, as of the beginning of May, only 64% of Members that are
propriety trading firms (who again, generally tend to be more latency
sensitive) utilize Dedicated Cores, and of that 64%, 43% are only
utilizing the 1 to 2 free Dedicated Cores available to all Users. As
mentioned above, some non-latency sensitive firms have chosen to also
adopt Dedicated Cores. As of the beginning of May,19% of Members that
are not latency sensitive utilize Dedicated Cores, and of that 19%, 38%
are only utilizing the 1 to 2 free Dedicated Cores available to all
Users.
The lack of universal, or even widespread, adoption by all such
users therefore demonstrates that purchasing Dedicated Cores is not
effectively a requirement to compete for any one type of market
participant, including latency sensitive market participants. Instead,
Dedicated Cores are an optional and voluntary connectivity offering,
which market participants are free to choose whether or not to utilize
based on whether they meet their unique business needs. Moreover, the
Exchange has received overwhelming positive feedback and support for
Dedicated Cores from the firms that have chosen to utilize these in
furtherance of their respective needs, with some Users even noting that
they have moved more of their order flow to the Exchange and its
affiliated equities exchanges (the ``Equities Exchanges'') as they have
noticed both better fills and greater consistency of order execution at
the Equities Exchanges. This demonstrates that despite any incurred
costs for Users that choose to purchase Dedicated Cores, it is
ultimately a net win for them as they benefit from better execution.
The Exchange believes it also demonstrates that Users find the proposed
fees to be both reasonable and have benefited from purchasing or, are
alternatively benefiting from the proposed one or two free Dedicated
Cores available at no additional cost. The Exchange believes this is
shown by both the level of demand for Dedicated Cores and the feedback
from market participants that have used the Dedicated Cores for its
unique business needs, including as described above. The Exchange also
believes it's notable that no negative comment letters in connection
with the proposed pricing have been received since the Exchange first
filed proposed fees for Dedicated Cores back on May 6, 2024.
Additionally, as noted earlier, Users can (and many have) decide that
utilizing even a free Dedicated Core is not needed for their business.
The Exchange also notes it has not received any feedback for Users that
raise concerns over the barrier to entry to use Dedicated Cores,
including notably the free Dedicated Cores--nor is the Exchange aware
of any reason why a firm would ultimately choose not to use the free
Dedicated Cores, other than it is not necessary for its business.
Ultimately, this is a business decision that each User must make and is
best suited to determine and will ultimately depend on the priorities
and strategies of that User's respective business needs.
The Exchange also notes that at least one other exchange also has a
[[Page 34936]]
comparable offering.\16\ The Nasdaq Stock Market, LLC (``Nasdaq''),
introduced the Dedicated Ouch Port Infrastructure in 2014 \17\ which
allows a member firm to assign up to 30 of its OUCH ports to a
dedicated server infrastructure for its exclusive use.\18\ The
Dedicated OUCH server handles only the subscribing member firm's
message traffic sent through their ports on the Dedicated OUCH to
Nasdaq's system.\19\ Similarly, as previously described, a Dedicated
Core only handles that subscribing firm's messaging activity. Nasdaq
notes that with its Dedicated OUCH offering, member firms can develop a
tailored solution by controlling their message traffic in order to
optimize their trading strategies.\20\ As described above with
Dedicated Cores, one of the benefits is greater execution determinism
as subscribers only need to account for their order flow when using a
Dedicated Core, similar to the existing Nasdaq Dedicated OUCH offering.
In addition to using Dedicated Cores and Dedicated OUCH for the purpose
of greater execution determinism, firms may also use either offering
for greater risk mitigation as, with either offering, the subscribing
firm only needs to take their specific messaging traffic into account.
Nasdaq notes as well that its Dedicated OUCH offering is wholly
optional and therefore member firms are not compelled to subscribe and
that its offering is pro-competitive as it adds an additional
connectivity option available to Nasdaq members.\21\ Similar to the
Dedicated OUCH offering, the Exchange has noted that no User is
required to purchase or to use the two free Dedicated Cores offered to
all Users.
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\16\ See The Nasdaq Stock Market, Equity 7 Pricing Schedule,
Section 115(g)(3), Dedicated Ouch Port Infrastructure.
\17\ See Securities Exchange Act Release No. 70693 (October 16,
2013), 78 FR 62761 (October 22, 2013) (SR-NASDAQ-2013-131).
\18\ See supra note 15.
\19\ See Securities Exchange Act Release No. 70036 (July 25,
2013), 78 FR 45993 (July 30, 2013) (SR-NASDAQ-2013-097).
\20\ Id.
\21\ Id.
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Despite these similarities, there are some differences.
Specifically, with the Nasdaq OUCH offering, a member firm would need
to purchase an entire server, of which, 30 OUCH ports could be utilized
on the Dedicated OUCH server--a participant may purchase up to four
Dedicated OUCH servers based on its needs.\22\ In contrast, the
Exchange's offering allows for a purchase by cores (as opposed to an
entire server), allowing a participant to more efficiently scale its
business by purchasing only the number of cores that it needs.
Ultimately, the Exchange's offering is more akin to a service offering
while the Nasdaq offering is more akin to an infrastructure offering
(and as such, the pricing structure does differ)--both offerings better
enable a firm to utilize the full processing power of a CPU Core.
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\22\ See https://nasdaqtrader.com/
Trader.aspx?id=OUCH#:~:text=Each%20server%20can%20house%20up%20to%20a
%20maximum,Nasdaq%20Market%20Sales%20at%20%2B1%20800%20846%200477.
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A Dedicated OUCH Port Infrastructure subscription is available to a
member firm for a fee of $5,000 per month, which is in addition to the
standard fees assessed for each OUCH port. A one-time installation fee
of $5,000 is assessed to subscribers for each Dedicated OUCH Port
Server subscription.\23\ In contrast, the Exchange offers 1-2 Dedicated
Cores at no cost, making this widely available to any participant who
may find a benefit from using this offering. Additionally, by the
Exchange not charging an installation fee upfront, participants are
able to try the offering at no cost, by receiving up to two Dedicated
Cores at no cost to the User. The Exchange's model allows for
widespread participation by all who wish to use Dedicated Cores--the
steep initial cost of Nasdaq's model of spending, at a minimum, $10,000
for the first month requires a heavy investment, which in the case of
smaller participants, may not be feasible. In contrast, the Exchange's
model of providing up to two Dedicated Cores at no cost, allows
participants to easily utilize this service if they believe it is
helpful for their business needs. Moreover, the Exchange's service
offering also provides more Users with more modest CPU capacity needs a
zero-cost option, as well as the ability to buy only as many Dedicated
Cores that they need, whereas Nasdaq's Dedicated OUCH offering requires
a User to buy all cores offered on a single server (even if a firm does
not have the corresponding full amount of 30 ports), with no discounted
or fee waiver for the first two cores, as well as no ability to buy
fewer cores than necessary.
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\23\ See The Nasdaq Stock Market Rulebook, Equity 7 Pricing
Schedule.
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Lastly, the Exchange emphasizes that order processing itself is not
affected by the introduction of Dedicated Cores. No relevant changes
are intended to the matching engine, which is, and remains, the main
component of the Exchange's infrastructure being responsible for the
actual processing of orders. While Users of Dedicated Cores may notice
a latency reduction, this is an inherent byproduct of introducing
improved technology.\24\
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\24\ Moreover, there has been a longstanding history of
exchanges providing enhanced technology where the latency reduction
that follows is a natural result. For example, other exchanges may
offer a variety of co-location services where subscribers of these
services may benefit from lower latency based on the specific
offering they choose based on their business needs. See e.g., The
Nasdaq Stock Market General 8 Connectivity, Section 1 Co-Location
Services (demonstrating a range of cabinet offerings).
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The Exchange also believes that the proposed Dedicated Core fees
are equitable and not unfairly discriminatory because they continue to
be assessed uniformly to similarly situated Users in that all Users who
choose to purchase Dedicated Cores will be subject to the same proposed
tiered fee schedule. Moreover, all Users are entitled to up to 2
Dedicated Cores at no additional cost and as previously discussed, as
of the beginning of May, 43% of all Members that take Dedicated Cores
(including both latency sensitive and non-latency sensitive Members)
take only 1 or 2 Dedicated Cores at no additional cost. The Exchange
believes the proposed ascending fee structure is also reasonable,
equitable and not unfairly discriminatory as it is designed so that
firms that use a higher allotment of the Exchange's finite number of
Dedicated Cores pay higher rates, rather than placing that burden on
market participants that have more modest needs who will have the
flexibility of obtaining Dedicated Cores at lower price points in the
lower tiers. As such, the proposed fees do not favor certain categories
of market participants in a manner that would impose a burden on
competition; rather, the ascending fee structure reflects the (finite)
resources consumed by the various needs of market participants--that
is, the lowest Dedicated Core consuming Users pay the least, and
highest Dedicated Core consuming Users pay the most. The Exchange
believes that such pricing further creates a lower barrier to entry for
all Users, making this service widely available to all who deem it
helpful for their business, including those with more modest needs.
Other exchanges similarly assess higher fees to those that consume more
Exchange resources.\25\ Moreover, those consuming more Dedicated Cores
do so if they find a benefit in having higher quantities of Dedicated
Cores based on their respective business needs. The proposed tier
structure is also designed to encourage firms to manage their needs in
a fair manner and to prevent
[[Page 34937]]
the Exchange from being required to expend large amounts of limited
resources in order to provide an additional number of Dedicated Cores
or put the Exchange in a position that it cannot accommodate demand.
Moreover, as discussed above and in more detail below, the Exchange
cannot currently offer an unlimited number of Dedicated Cores due in
part to physical space constraints in the third-party data center. The
Exchange believes the proposed ascending fee structure is therefore
another appropriate means, in conjunction with an established cap, to
manage this finite resource and ensure the resource is apportioned more
fairly.
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\25\ See e.g., Cboe U.S. Options Fees Schedule, BZX Options,
Options Logical Port Fees, Ports with Bulk Quoting Capabilities.
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The Exchange believes it is reasonable to limit the number of
Dedicated Cores Users can purchase because the Exchange has a finite
amount of space in its third-party data centers to accommodate CPU
cores, including Dedicated Cores. The Exchange must also take into
account timing and cost considerations in procuring additional
Dedicated Cores and related hardware such as servers, switches, optics
and cables, as well as the readiness of the Exchange's data center
space to accommodate additional Dedicated Cores in the Exchange's
respective Order Handler Cabinets.\26\ Moreover, procuring data center
space has grown to be more challenging than it was five years ago with
the increased demand for data center space. For example, the U.S.
colocation data center market has doubled in size in just four years.
In addition to the Exchange's rollout of Dedicated Cores, the Exchange
is mindful of its other business areas and the need to continue to be
mindful of its existing, external restraints in procuring additional
space in this area. The Exchange has, and will continue to, monitor
market participant demand and space availability and endeavor to adjust
the limit if and when the Exchange is able to acquire additional space
and power within the third-party data centers and/or additional CPU
Cores to accommodate additional Dedicated Cores.\27\ The Exchange
monitors its capacity and data center space and thus is in the best
place to determine these limits and modify them as appropriate in
response to changes to this capacity and space, as well as market
demand. Indeed, the Exchange has already increased the prescribed
maximum since the launch of Dedicated Cores on May 6, 2024 as a result
of evaluating the demand relative to Dedicated Cores availability and
proposes to increase the prescribed maximum again due to the Exchange's
continued ability to support current demand relative to current
availability.\28\ As another example, the Exchange's affiliate Cboe
EDGA Exchange, Inc. has increased the prescribed maximum limit three
times since the launch of Dedicated Cores on its exchange on February
26, 2024 as a result of evaluating the demand relative to Dedicated
Cores availability.\29\ The proposed increased limits continue to apply
uniformly to similarly situated market participants (i.e., all Members
are subject to the same limit and all Sponsored Participants are
subject to the same limit, respectively). The Exchange believes it's
not unfairly discriminatory to provide for different limits for
different types of Users. For example, the Exchange believes it's not
unfairly discriminatory to provide for an initial lower limit to be
allocated for Sponsored Participants because unlike Members, Sponsored
Participants are able to access the Exchange without paying a
Membership Fee. Members also have more regulatory obligations and risk
that Sponsored Participants do not. For example, while Sponsored
Participants must agree to comply with the Rules of the Exchange, it is
the Sponsoring Member of that Sponsored Participant that remains
ultimately responsible for all orders entered on or through the
Exchange by that Sponsored Participant. The industry also has a history
of applying fees differently to Members as compared to Sponsored
Participants.\30\ Lastly, the Exchange believes its proposed maximum
limits, and distinction between Members and Sponsored Participants, is
another appropriate means to help the Exchange manage its allotment of
Dedicated Cores and better ensure this finite resource is apportioned
fairly.
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\26\ The Exchange notes that it cannot currently convert shared
CPU cores into Dedicated Cores.
\27\ As of the beginning of May, the Exchange does not have any
Users that take Dedicated Cores at or near the maximum limits and
the average number of Dedicated Cores used for the Exchange is 12.
\28\ See Securities Exchange Act Release No. 100476 (July 9,
2024), 89 FR 57482 (July 15, 2024) (SR-CboeBYX-2024-024).
\29\ See Securities Exchange Act Release No. 99983 (April 17,
2024), 89 FR 30418 (April 23, 2024) (SR-CboeEDGA-2024-014)
Securities Exchange Act Release No. 100300 (June 10, 2024), 89 FR
50653 (June 14, 2024) (SR-CboeEDGA-2024-020); and Securities
Exchange Act Release No. 100736 (August 21, 2024), 89 FR 67696
(August 15, 2024) (SR-CboeEDGA-2024-032).
\30\ See e.g., Securities Exchange Act Release No. 68342
(December 3, 2012), 77 FR 73096 (December 7, 2012) (SR-CBOE-2012-
114) and Securities Exchange Act Release No. 66082 (January 3,
2012), 77 FR 1101 (January 9, 2012) (SR-C2-2011-041).
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on intramarket competition that is not necessary in
furtherance of the purposes of the Act because the proposed tiered fee
structure will apply equally to all similarly situated Users that
choose to use Dedicated Cores. As discussed above, Dedicated Cores are
optional and Users may choose to utilize Dedicated Cores, or not, based
on their views of the additional benefits and added value provided by
utilizing a Dedicated Core. The Exchange believes the proposed fee will
be assessed proportionately to the potential value or benefit received
by Users with a greater number of Dedicated Cores and notes that Users
may determine at any time to cease using Dedicated Cores. As discussed,
Users can also continue to access the Exchange through shared CPU Cores
at no additional cost. Finally, all Users will be entitled to two
Dedicated Cores at no additional cost.
Next, the Exchange believes the proposed rule change 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,
including competition for exchange memberships. Market Participants
have numerous alternative venues that they may participate on,
including 15 other equities exchanges, as well as off-exchange venues,
where comparable products are available for trading. Indeed,
participants can readily choose to submit their order flow to other
exchange and off-exchange venues if they deem fee levels at those other
venues to be more favorable. Further, as described above, Nasdaq also
already provides a similar offering.\31\
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\31\ See The Nasdaq Stock Market, Equity 7 Pricing Schedule,
Section 115(g)(3), Dedicated Ouch Port Infrastructure.
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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.'' \32\ 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
[[Page 34938]]
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'. . . .''.\33\ Accordingly, the Exchange
does not believe its proposed change imposes any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Act.
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\32\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, 37499 (June 29, 2005).
\33\ 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 \34\ and paragraph (f) of Rule 19b-4 \35\
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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\34\ 15 U.S.C. 78s(b)(3)(A).
\35\ 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#97e5e2fbf2baf4f8fafaf2f9e3e4d7e4f2f4b9f0f8e1"><span class="__cf_email__" data-cfemail="e290978e87cf818d8f8f878c9691a2918781cc858d94">[email protected]</span></a>. Please include
file number SR-CboeBYX-2025-020 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-2025-020. 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 filing will be available for inspection and
copying at the principal office of the Exchange. Do not include
personal identifiable information in submissions; you should submit
only information that you wish to make available publicly. We may
redact in part or withhold entirely from publication submitted material
that is obscene or subject to copyright protection. All submissions
should refer to file number SR-CboeBYX-2025-020 and should be submitted
on or before August 14, 2025.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\36\
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\36\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2025-13897 Filed 7-23-25; 8:45 am]
BILLING CODE 8011-01-P
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