[Federal Register Volume 84, Number 54 (Wednesday, March 20, 2019)]
[Notices]
[Pages 10361-10363]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-05219]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-85320; File No. SR-CboeBZX-2019-014]
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)
March 14, 2019.
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 March 1, 2019, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I, II, and III below, which
Items have been prepared by the Exchange. The Commission is publishing
this notice to solicit comments on the proposed rule change from
interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
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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 [sic].
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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 (1) add a fourth Step-
Up Tier under footnote 2, and (2) amend the second Single MPID Investor
Tier under footnote 4.
Step-Up Tier 4
The Exchange currently offers three 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 (Tier 1) or $0.0031 (Tier 2 and Tier 3) per share for
qualifying orders which yield fee codes B,\4\ V,\5\ or Y \6\ if the
corresponding required criteria per tier is met.
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\4\ Fee code B is appended to displayed orders which add
liquidity to Tape B and is provided a rebate of $0.0025 per share.
\5\ Fee code V is appended to displayed orders which add
liquidity to Tape A and is provided a rebate of $0.0020 per share.
\6\ 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 fourth Step-
Up Tier. Under the proposed Step-Up Tier 4, a Member would receive a
rebate of $0.0032 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 0.50%. As currently defined in the BZX
Equities fee schedule, Step-Up Add TCV means ADAV \7\ as a percentage
of TCV \8\ in the relevant baseline month subtracted from current ADAV
as a percentage of TCV.\9\ Members that achieve the proposed Step-Up
Tier 4 must therefore increase the amount of liquidity that they
provide on BZX by .50% relative to their ADAV as a percentage of TCV in
December 2018, thereby contributing to a deeper and more liquid market.
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\7\ ``ADAV'' means average daily volume calculated as the number
of shares added per day. ADAV is calculated on a monthly basis.
\8\ ``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.
\9\ 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 46,826,572 and average daily TCV was 7,093,306,325,
resulting in an ADAV as a percentage of TCV of 0.66%. Member A's
Step-Up Add TCV from December 2018 was therefore 0.52% which makes
Member A eligible for the Tier 3 rebate. (i.e., 0.66% (Feb 2019) -
0.14% (Dec 2018), which is greater than 0.50% as required by Tier
3).
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Single MPID Investor Tier 2
The Exchange currently offers two Single MPID Investor Tier under
Footnote 4 of the fee schedule that provides Members with an additional
way to qualify for an enhanced rebate for orders yielding fee codes
B,\10\ V,\11\ or Y.\12\ The distinction between the Single MPID
Investor Tiers and other tiers offered by the Exchange, is that the
volume measured to determine whether a Member qualifies is performed on
a Member Participant Identifier (``MPID'') basis. Currently, a Member
receives a $0.0031 (Tier 1) or $0.0036 (Tier 2) per share rebate for
qualifying orders per MPID which yield the applicable fee codes if the
corresponding required criteria per tier is met. Specifically, the
current Tier 2 provides Members an opportunity to receive an enhanced
rebate of $0.0036 per share where the Member's MPID has an ADAV \13\ as
a percentage of TCV \14\ greater than or equal to 2.25% on orders
yielding the applicable fee codes.
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\10\ See supra note 5.
\11\ See supra note 6.
\12\ See supra note 7.
\13\ See supra note 8.
\14\ See supra note 9.
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The Exchange now proposes to amend Tier 2 of the Single MPID
Investor Tiers so that a Member would receive a rebate of $0.0032 per
share for qualifying orders on an MPID basis which yield fee codes B,
V, or Y where the MPID has an ADAV as a percentage of TCV greater or
equal to .75% on orders yielding the applicable fee codes, and where
the MPID has an ADAV as a percentage of ADV \15\ greater than or equal
to 80% on
[[Page 10362]]
orders yielding the applicable fee codes. The proposed change intends
to ease Tier 2's current criteria and encourage entry of additional
orders to the Exchange.
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\15\ ``ADV'' means average daily volume calculated as the number
of shares added or removed, combined, per day. ADV is calculated on
a monthly basis.
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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,\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 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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\16\ 15 U.S.C. 78f.
\17\ 15 U.S.C. 78f(b)(4).
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The Exchange notes that rebates such as those proposed herein have
been widely adopted by exchanges,\18\ including the Exchange,\19\ 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 fourth Step-Up Tier and the proposed amendments to the
second Single MPID Investor Tier are a reasonable, fair and equitable,
and not unfairly discriminatory allocation of fees and rebates because
the proposed changes will continue to provide Members with an incentive
to reach certain thresholds on the Exchange.
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\18\ See e.g., NYSE Arca Equities, Fees and Charges, Step Up
Tiers; NASDAQ Rule 7018(a) & Rule 7014(j).
\19\ See Cboe BZX U.S. Equities Exchange Fee Schedule, Footnote
2, Step-Up Tiers 1-3 & Footnote 4, Single MPID Investor Tiers 1-2.
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In particular, the Exchange believes the proposed Step-Up Tier 4 is
a reasonable means to encourage Members to increase their liquidity on
the Exchange based on increasing their relative volume above a
predetermined baseline. The proposed fourth tier creates an additional
opportunity for Members to receive an enhanced rebate for contributing
increased liquidity as compared to the end of the previous year (2018).
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, using December 2018 as
the predetermined baseline. Furthermore, the Exchange believes that the
proposed Step-Up Tier 4 is not unfairly discriminatory as it applies to
all Members that meet the required criteria.
Similarly, the Exchange believes the proposed modification
decreasing the ADAV as a percentage of TCV criteria while implementing
a percentage of ADV criteria that a Member must meet per MPID to
receive the rebate under the second Single MPID Investor Tier is a
reasonable means to further incentive Members to send a higher level of
orders to the Exchange. The Exchange believes that decreasing the
tier's criteria, although modestly, will encourage those Members who
could not achieve the tier previously to increase their order flow as a
means to receive the tier's enhanced rebate on an MPID basis. The
Exchange also believes that the proposed lesser rebate than offered
before is reasonable as it is commensurate with the proposed decreased
criteria. In addition to this, the Exchange believes that the proposed
supplementary ADAV as a percentage of ADV criteria to achieve Tier 2 is
reasonable because it is related to the current criteria in Tier 1 and
proposed criteria (as described above) in Tier 2, and reasonably
reflects the scaled difficulty from achieving Tier 1 to achieving Tier
2. As a result, the Exchange believes that the proposed Tier 2
modifications and the additional criteria are reasonable and equitable
because they will provide Members who viewed the current criteria as
too high and did not previously attempt to achieve the tier's criteria
with an incentive (albeit a lesser rebate than before) to add order
flow to reach the new lower threshold, while ensuring that the Tier 2
threshold appropriately reflects a scaled difficulty from that of
achieving Tier 1. Furthermore, the Exchange believes that the proposed
criteria to Tier 2 is non-discriminatory because it applies and is
available to all Members.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule changes 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 incentives and modifying existing
pricing incentives 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.
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 also
notes that the proposed change is intended to enhance the rebate for
liquidity added to the Exchange, which is intended to draw additional
liquidity to the Exchange to the benefit of all market participants.
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 \20\ and paragraph (f) of Rule 19b-4 \21\
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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\20\ 15 U.S.C. 78s(b)(3)(A).
\21\ 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,
[[Page 10363]]
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-2019-014 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-2019-014. 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 the filing also will 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 submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-CboeBZX-2019-014 and should be submitted
on or before April 10, 2019.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\22\
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\22\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-05219 Filed 3-19-19; 8:45 am]
BILLING CODE 8011-01-P