[Federal Register Volume 83, Number 1 (Tuesday, January 2, 2018)]
[Notices]
[Pages 184-186]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-28228]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-82401; File No. SR-CboeBZX-2017-014]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Fees for Use on the Cboe BZX Exchange, Inc. Equity Options Platform

December 26, 2017.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given 
that on December 12, 2017, Cboe BZX Exchange, Inc. (``BZX'' or the 
``Exchange'') 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 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. 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.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend its fees and rebates 
applicable to Members \5\ and non-Members of the Exchange pursuant to 
BZX Rule 15.1(a) and (c).
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    \5\ The term ``Member'' is defined as ``any registered broker or 
dealer that has been admitted to membership in the Exchange.'' See 
Exchange Rule 1.5(n).
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    The text of the proposed rule change is available at the Exchange's 
website at www.markets.cboe.com, at the principal office of the 
Exchange, 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 parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its fee schedule for its equity 
options platform (``BZX Options'') to adopt a new Firm,\6\ Broker 
Dealer \7\ and Joint Back Office \8\ Penny Pilot \9\ Add Volume Tier 
under footnote 2, effective immediately.\10\
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    \6\ ``Firm'' applies to any transaction identified by a Member 
for clearing in the Firm range at the OCC, excluding any Joint Back 
Office transaction. See the Exchange's fee schedule available at 
http://markets.cboe.com/us/options/membership/fee_schedule/bzx/.
    \7\ ``Broker Dealer'' applies to any order for the account of a 
broker dealer, including a foreign broker dealer, that clears in the 
Customer range at the Options Clearing Corporation (``OCC''). See 
id.
    \8\ ``Joint Back Office'' applies to any transaction identified 
by a Member for clearing in the Firm range at the OCC that is 
identified with an origin code as Joint Back Office. A Joint Back 
Office participant is a Member that maintains a Joint Back Office 
arrangement with a clearing broker-dealer. See id.
    \9\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01.
    \10\ The Exchange initially filed the proposed rule changes on 
December 1, 2017 (SR-CboeBZX-2017-10). On December 12, 2017 the 
Exchange withdrew SR-CboeBZX-2017-10 and then subsequently submitted 
this filing (SR-CboeBZX-2017-14).
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    The Exchange currently offers one Firm, Broker Dealer and Joint 
Back Office Penny Add Volume Tier under footnote 2, which provides an 
enhanced rebate of $0.46 per contract for qualifying orders that add 
liquidity in Penny Pilot Securities and yield fee code PF.\11\ The 
Exchange now proposes to add a new Tier 1 and to re-number current Tier 
1 as Tier 2.
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    \11\ Fee code PF is appended to Firm, Broker Dealer and Joint 
Back Office orders in Penny Pilot Securities that add liquidity. 
Orders that yield fee code PF are provided a standard rebate of 
$0.25 per contract. See the Exchange's fee schedule available at 
http://markets.cboe.com/us/options/membership/fee_schedule/bzx/.
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    Currently under Tier 1, to be re-numbered as Tier 2, a Member's 
orders that yield fee code PF receive an enhanced rebate of $0.46 per 
contract where the Member has an: (i) ADAV \12\ in Away Market Maker 
\13\, Firm, Broker Dealer and Joint Back Office orders greater than or 
equal to 1.05% of average OCV \14\; and (ii) ADV \15\ equal to or 
greater than 1.95% of average OCV. The Exchange proposes to adopt new 
Tier 1, which would be similar to re-numbered Tier 2 but would have 
lower criteria (but with different qualifying volume, as described 
below) and a lower rebate. In order to provide an incentive to 
encourage additional participation by Members that do not participate 
on the Exchange as Market Makers or Away Market Makers, new Tier 1 
would not take Away Market Maker volume into account for purposes of 
the Tier calculation. Specifically, pursuant to new Tier 1 a Member's 
orders that yield fee code PF would receive an enhanced rebate of $0.38 
per contract where the Member has an ADAV in Firm, Broker Dealer and 
Joint Back Office orders greater than or equal to 0.20% of average OCV.
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    \12\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added per day. See id.
    \13\ ``Away Market Maker'' applies to any transaction identified 
by a Member for clearing in the Market Maker range at the OCC, where 
such Member is not registered with the Exchange as a Market Maker, 
but is registered as a market maker on another options exchange. See 
id.
    \14\ ``OCV'' means the total equity and ETF options volume that 
clears in the Customer range at the Options Clearing Corporation 
(``OCC'') for the month for which the fees apply, excluding volume 
on any day that the Exchange experiences an Exchange System 
Disruption and on any day with a scheduled early market close. See 
id.
    \15\ ``ADV'' means average daily volume calculated as the number 
of contracts added or removed, combined, per day. See id.
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Implementation Date
    The Exchange proposes to implement the above changes to its fee 
schedule immediately.
2. Statutory Basis
    The Exchange believes that the proposed rule changes are consistent 
with the objectives of Section 6 of the Act,\16\ in general, and 
furthers the objectives of Section 6(b)(4),\17\ in particular, 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. The Exchange believes that the proposed modification to the 
Exchange's tiered pricing structure is reasonable, fair and equitable, 
and non-discriminatory. The Exchange operates in a highly competitive 
market in which

[[Page 185]]

market participants may readily send order flow to many competing 
venues if they deem fees at the Exchange to be excessive or incentives 
provided to be insufficient. The proposed structure remains intended to 
attract order flow to the Exchange by offering market participants a 
competitive pricing structure. The Exchange believes it is reasonable 
to offer and incrementally modify incentives intended to help to 
contribute to the growth of the Exchange.
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    \16\ 15 U.S.C. 78f.
    \17\ 15 U.S.C. 78f(b)(4).
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    Volume-based pricing structures such as that maintained by the 
Exchange have been widely adopted by exchanges, including the Exchange, 
and are equitable 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; (ii) 
associated higher levels of market activity, such as higher levels of 
liquidity provisions and/or growth patterns; and (iii) introduction of 
higher volumes of orders into the price and volume discovery processes. 
In particular, the proposed change to footnote 2 is a minor change 
intended to provide an incentive similar to an existing incentive. The 
proposed incentive, in turn, is intended to incentivize Members to send 
increased order flow to the Exchange in an effort to qualify for the 
enhanced rebates made available by the tier. This increased order flow, 
in turn, contributes to the growth of the Exchange. The Exchange also 
believes the rebate associated with the tier is reasonable as it 
reflects the difficulty in achieving the tier, requiring less 
participation than existing Tier 1 but also providing a lower rebate. 
The Exchange again notes that the proposed tier also does not include 
the same volume as is included when determining whether a Member has 
qualified for existing Tier 1, specifically, the new tier would not 
take Away Market Maker volume into account, whereas existing Tier 1 
does. The Exchange believes that the proposal to only count Firm, 
Broker Dealer and Joint Back Office volume for purposes of Tier 1 is 
reasonable, fair and equitable and not unreasonably discriminatory 
because it is intended to encourage participants that do not 
participate as Market Makers or Away Market Makers on the Exchange to 
increase their participation on the Exchange. The Exchange also 
believes the proposal is reasonable, equitably allocated and not 
unreasonably discriminatory because there are other existing incentives 
offered by the Exchange that are provided to Market Makers and Away 
Market Makers, and because a participant with Away Market Maker volume 
could still qualify for the new tier to the extent they also have Firm, 
Broker Dealer and Joint Back Office volume that reaches the required 
level, it is just that their Away Market Maker Volume will not be 
included in the calculation. The Exchange believes that the incentives 
it provides remain reasonably related to the value to the Exchange's 
market quality associated with higher levels of market activity, 
including liquidity provision and the introduction of higher volumes of 
orders into the price and volume discovery processes. The proposed 
change to the tiered pricing structure is not unfairly discriminatory 
because it will apply equally to all Members.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange believes the proposed amendment to its fee schedule 
would not impose any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
does not believe that the proposed change represents a significant 
departure from previous pricing offered by the Exchange or pricing 
offered by the Exchange's competitors. Additionally, Members may opt to 
disfavor the Exchange's pricing if they believe that alternatives offer 
them better value. Accordingly, the Exchange does not believe that the 
proposed change will impair the ability of Members or competing venues 
to maintain their competitive standing in the financial markets. The 
Exchange does not believe that the proposed change to the Exchange's 
tiered pricing structure burdens competition, but instead, enhances 
competition, as it is intended to increase the competitiveness of the 
Exchange.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has not solicited, and does not intend to solicit, 
comments on this proposed rule change. The Exchange has not received 
any written comments from members or other interested parties.

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 \18\ and paragraph (f) of Rule 19b-4 
thereunder.\19\ 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.
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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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

     Use the Commission's internet comment form (http://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
File Number SR-CboeBZX-2017-014 on the subject line.

Paper Comments

     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-2017-014. 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 (http://www.sec.gov/rules/sro.shtml). 
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 10:00 a.m. and 
3:00 p.m. Copies of this filing will also be available for inspection 
and copying at the principal office of the Exchange. All comments 
received will be posted without change. Persons submitting comments are 
cautioned that we do not redact or edit personal identifying 
information from comment submissions. You should

[[Page 186]]

submit only information that you wish to make available publicly. All 
submissions should refer to File Number SR-CboeBZX-2017-014 and should 
be submitted on or before January 23, 2018.
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    \20\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
Brent J. Fields,
Secretary.
[FR Doc. 2017-28228 Filed 12-29-17; 8:45 am]
 BILLING CODE 8011-01-P