[Federal Register Volume 84, Number 40 (Thursday, February 28, 2019)]
[Notices]
[Pages 6844-6846]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-03472]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85183; File No. SR-CboeBZX-2019-009]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Relating
To Amend the Fee Schedule Applicable to Members and Non-Members of the
Exchange Pursuant to BZX Rules 15.1(a) and (c)
February 22, 2019.
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 February 11, 2019, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') filed with the Securities and Exchange Commission (the
``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'') is filing
with the Securities and Exchange Commission (``Commission'') a proposed
rule change to amend the fee schedule applicable to Members and non-
Members \3\ of the Exchange pursuant to BZX Rules 15.1(a) and (c). The
text of the proposed rule change is attached as Exhibit 5.
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\3\ A 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 also available on the
Exchange's website (http://markets.cboe.com/us/equities/regulation/rule_filings/bzx/), 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 the fee schedule applicable to its
equities trading platform (``BZX Equities'') to add a third Step-Up
Tier under footnote 2.\4\ The Exchange currently offers two Step-Up
Tiers that provide Members with additional ways to qualify for an
enhanced rebate where they increase their relative liquidity each month
over a predetermined baseline. Under the current Step-Up Tiers, a
Member receives a rebate of $0.0030 or $0.0031 per share for qualifying
orders which yield fee codes B,\5\ V,\6\ or Y \7\ if the corresponding
required criteria is met.
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\4\ The Exchange initially filed the proposed fee change on
January 29, 2019 (SR-CboeBZX-2019-003). On business date February
11, 2019, the Exchange withdrew that filing and submitted this
filing.
\5\ Fee code B is appended to displayed orders which add
liquidity to Tape B and is provided a rebate of $0.0025 per share.
\6\ Fee code V is appended to displayed orders which add
liquidity to Tape A and is provided a rebate of $0.0020 per share.
\7\ Fee code Y is appended to displayed orders which add
liquidity to Tape C and is provided a rebate of $0.0020 per share.
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The Exchange now proposes to amend footnote 2 to add a third Step-
Up Tier. Under the proposed Step-Up Tier 3, a Member would receive a
rebate of $0.0031 per share for their qualifying orders which yield fee
codes B, V, or Y where the Member has a Step-Up Add TCV from December
2018 greater or equal to 0.20%. As currently defined in the BZX
Equities fee schedule, Step-Up Add TCV means ADAV \8\ as a percentage
of TCV \9\ in the relevant baseline month
[[Page 6845]]
subtracted from current ADAV as a percentage of TCV.\10\ Members that
achieve the proposed Step-Up Tier must therefore increase the amount of
liquidity that they provide on BZX relative to the TCV each month,
thereby contributing to a deeper and more liquid market.
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\8\ ``ADAV'' means average daily volume calculated as the number
of shares added per day. ADAV is calculated on a monthly basis.
\9\ ``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.
\10\ The following demonstrates how Step-Up Add TCV is
calculated: In December 2018, Member A had an ADAV of 12,947,242
shares and average daily TCV was 9,248,029,751, resulting in an ADAV
as a percentage of TCV of 0.14%; In February 2019, Member A had an
ADAV of 24,826,572 and average daily TCV was 7,093,306,325,
resulting in an ADAV as a percentage of TCV of 0.35%. Member A's
Step-Up Add TCV from December 2018 was therefore 0.21% which makes
Member A eligible for the Tier 3 rebate. (i.e., 0.35% (Feb 2019)--
0.14% (Dec 2018), which is greater than 0.20% as required by Tier
3).
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2. Statutory Basis
The Exchange believes that the proposed rule changes are consistent
with the objectives of Section 6 of the Act,\11\ in general, and
furthers the objectives of Section 6(b)(4),\12\ 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 also 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. The proposed
rule changes reflect a competitive pricing structure designed to
incentivize market participants to direct their order flow to the
Exchange.
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\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(4).
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In particular, the Exchange notes that rebates such as that
proposed herein have been widely adopted by exchanges,\13\ including
the Exchange,\14\ 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 and (ii) associated higher levels of market activity, such as
higher levels of liquidity provision and/or growth patterns. The
Exchange believes that the proposed tier is a reasonable, fair and
equitable, and not unfairly discriminatory allocation of fees and
rebates because it will continue to provide Members with an incentive
to reach certain thresholds on the Exchange. Particularly, the proposed
Tier rewards a Member's growth pattern since the end of the previous
year (2018).
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\13\ See e.g., NYSE Arca Equities, Fees and Charges, Step Up
Tiers.
\14\ See Cboe BZX U.S. Equities Exchange Fee Schedule, Footnote
2, Step-Up Tiers 1 and 2.
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The Exchange believes the proposed Step-Up Tier is a reasonable
means to encourage Members to increase their liquidity on the Exchange
based on increasing their relative volume above a predetermined
baseline. Increased liquidity benefits all investors by deepening the
Exchange's liquidity pool, offering additional flexibility for all
investors to enjoy cost savings, supporting the quality of price
discovery, promoting market transparency and improving investor
protection. The Exchange also believes that proposed rebate is
reasonable based on the difficulty of satisfying the tier's criteria,
including using December 2018 as the predetermined baseline.
Furthermore, the Exchange believes that the proposed Step-Up Tier is
not unfairly discriminatory as it applies to all members that meet the
required criteria.
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 not necessary or appropriate in
furtherance of the purposes of the Act. The Exchange does not believe
the proposed change burdens competition, but rather, enhances
competition as it is intended to increase the competitiveness of BZX by
adopting an additional pricing incentive in order to attract order flow
and incentivize participants to increase their participation on the
Exchange. The Exchange 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 structures to be unreasonable or
excessive. The proposed change is generally intended to enhance the
rebate for liquidity added to the Exchange, which is intended to draw
additional liquidity to the Exchange. The Exchange does not believe the
proposed amendment would burden intramarket competition as it would be
available to all Members uniformly.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
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 \15\ and paragraph (f) of Rule 19b-4\16\
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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\15\ 15 U.S.C. 78s(b)(3)(A).
\16\ 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-2019-009 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-2019-009. 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 the filing also will be available for
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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 submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-CboeBZX-2019-009 and should
be submitted on or before March 21, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\17\
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\17\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-03472 Filed 2-27-19; 8:45 am]
BILLING CODE 8011-01-P