[Federal Register Volume 84, Number 92 (Monday, May 13, 2019)]
[Notices]
[Pages 20937-20939]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09728]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85795; File No. SR-CboeBZX-2019-037]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Amending 
Rule 11.13 (Order Execution and Routing) and the Fee Schedule To Delete 
References to the TRIM2 and SWPB Routing Options

May 7, 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 April 29, 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 and II below, which Items 
have been prepared by the Exchange. The Exchange filed the proposal as 
a ``non-controversial'' proposed rule change pursuant to Section 
19(b)(3)(A)(iii) of the Act \3\ and Rule 19b-4(f)(6) thereunder.\4\ 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)(iii).
    \4\ 17 CFR 240.19b-4(f)(6).
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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 Rule 11.13 (Order Execution and Routing), as well as its Fee 
Schedule, to delete references to the TRIM2 and SWPB routing options. 
The Exchange also proposes to amend Rule 11.13 to update references to 
the TRIM routing strategy. 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 (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 Rule 11.13(b)(3)(G) (Other Routing 
Strategies) to delete the TRIM2 routing option, as well as add language 
codifying User designation of the TRIM routing option. The Exchange 
also proposes to amend its fee schedule to delete references to the 
TRIM2 routing options under fee codes BJ, BY and TV. The Exchange also 
proposes to amend Rule 11.13(b)(3)(I) (SWP) to delete the SWPB routing 
option and to delete references to SWPB in the fee schedule under fee 
code SW and under footnote 9. The Exchange intends to implement the 
proposed rule changes on May 1, 2019.
TRIM Routing Strategies
    Currently, Rule 11.13(b)(3)(G) provides for the routing options 
under which an order checks the System \5\ for available shares if so 
instructed by the entering User \6\ and then is sent to destinations on 
the applicable System routing table. The term ``System routing table'' 
refers to the proprietary process for determining the specific trading 
venues to which the System routes orders and the order in which it 
routes them.\7\ Rule 11.13(b)(3)(G) currently includes TRIM2 as one of 
such routing options.\8\ In addition, current fee code BJ is yielded on 
orders routed to EDGA using TRIM,\9\ TRIM2 or SLIM routing 
strategy,\10\ fee code BY is yielded on orders routed to BYX using 
Destination Specific, TRIM, TRIM2 or SLIM routing strategy,\11\ and fee 
code TV is yielded on orders routed to BX using TRIM, TRIM2, or SLIM 
routing strategy.\12\
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    \5\ The ``System'' is the Exchange's electronic communications 
and trading facility designated by the Board through which 
securities orders of Users are consolidated for ranking, execution 
and, when applicable, routing away. See Exchange Rule 1.5(aa).
    \6\ The term ``User'' is defined as ``any Member or Sponsored 
Participant who is authorized to obtain access to the System 
pursuant to Rule 11.3.'' See Exchange Rule 1.5(cc).
    \7\ The Exchange reserves the right to maintain a different 
System routing table for different routing options and to modify the 
System routing table at any time without notice. See Exchange Rule 
11.13(b)(3).
    \8\ TRIM2 routing strategy currently sends orders to: BZX + BYX 
+ DRT Venues + BX + EDGA + EDGA. See also note 3.
    \9\ TRIM routing strategy currently sends orders to: BZX + BYX + 
EDGA + NYSE National + BX + NYSE American + DRT Venues. See also 
note 3.
    \10\ Orders that yield fee code BJ receive a rebate of $0.0024 
per share.
    \11\ Orders that yield fee code BY receive a rebate of $0.0015 
per share.
    \12\ Orders that yield fee code TV receive a rebate of $0.0010 
per share.
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    The Exchange has determined that because few Users elect the TRIM2 
routing option, the current demand does not warrant the infrastructure 
and ongoing maintenance expenses required to support the product. 
Therefore, the Exchange now proposes to delete TRIM2 as a routing 
option under Rule 11.13(b)(3)(G)(v).\13\ The Exchange also proposes to 
amend its fee schedule to delete references to the TRIM2 routing option 
under fee codes BJ, BY and TV. Users seeking to route to other trading

[[Page 20938]]

centers may use alternative methods, such as utilizing other routing 
strategies offered by the Exchange, or connecting to those venues 
directly or through a third party service provider.
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    \13\ The Exchange also proposes to update the subsequent 
numbering as a result of this proposed deletion.
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    The Exchange also proposes to specify under Rule 11.13(b)(3)(G) 
that in connection with TRIM, \14\ a routing option currently available 
to all Users and provided for under current subparagraph (b)(3)(G)(iv), 
a User may designate that an order first routes to Cboe BYX Exchange, 
Inc. (``BYX''), checks the System for available shares, and then routes 
to other destinations on the System routing table. This proposed rule 
change does not create a new routing strategy, but rather codifies a 
routing strategy that is already offered on the Exchange.\15\ The 
Exchange notes that TRIM also has a variant routing strategy (TRIM-) in 
that a User may designate an order to skip the Exchange and otherwise 
send orders to the same venues as TRIM. The TRIM routing strategy and 
its variation are focused on seeking execution of orders while 
minimizing execution costs by routing to certain low cost execution 
venues on the Exchange's System routing table. TRIM currently offers 
Users more flexibility in routing orders consistent with Regulation 
NMS. No changes to the functionality of the TRIM routing strategy are 
proposed by this filing.\16\
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    \14\ See supra note 9.
    \15\ Available at: https://cdn.cboe.com/resources/features/Cboe_USE_RoutingStrategies.pdf. See also note 3.
    \16\ See supra note 7.
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SWPB Routing Strategy
    Currently, Rule 11.13(b)(3)(I) provides for SWP routing options. 
SWP is a routing option under which an order checks the System for 
available displayed shares and then is sent to destinations on the 
System routing table. SWP orders route only to Protected Quotations and 
only for displayed size. Specifically, the current rule provides for 
two forms of SWP routing, SWPA and SWPB. A SWPA order routes to 
destinations on the System routing table even if at the time of entry 
there is an insufficient share quantity in the SWPA order to fulfill 
the displayed size of all Protected Quotations, whereas an entire SWPB 
order will be cancelled back to a User immediately if at the time of 
entry there is an insufficient share quantity in the SWPB order to 
fulfill the displayed size of all Protected Quotations. Moreover, 
current fee code SW is yielded on orders routed using Parallel T, SWPA 
or SWPB routing strategies,\17\ and current footnote 9 describes the 
fees charged for orders yielding fee code SW that remove liquidity in 
securities priced below $1.00 for Parallel T, SWPA or SWPB routed 
executions.
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    \17\ Orders that yield fee code SW receive a discounted fee of 
$0.0033 per share.
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    Like that of TRIM2, the Exchange has determined that due to 
diminished User election of the SWPB routing option, which often 
experiences no usage for extended periods of time, the current demand 
does not warrant the infrastructure and ongoing maintenance expenses 
required to support the product. Therefore, the Exchange is 
decommissioning SWPB routed orders on the Exchange.\18\ As a result, 
the Exchange now proposes to delete the SWPB routing option under Rule 
11.3(b)(3)(I), amending the language as necessary to provide only for 
SWPA orders. The Exchange also proposes to delete references to SWPB 
under fee code SW and its accompanying footnote 9.
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    \18\ The Exchange notes that its affiliated exchanges, BYX, 
EDGA, and Cboe EDGX Exchange, Inc. (``EDGX''), are simultaneously 
proposing to decommission the SWPB routing option.
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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.\19\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
Section 6(b)(5) \20\ 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) \21\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \19\ 15 U.S.C. 78f(b).
    \20\ 15 U.S.C. 78f(b)(5).
    \21\ Id.
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    In particular, The Exchange does not believe that this proposal 
will permit unfair discrimination among customers, brokers, or dealers 
because the TRIM2 routing option and the SWPB routing option will no 
longer be available to all Users. Also, the Exchange believes the 
proposed rule change to remove references to TRIM2 and SWPB will remove 
impediments to the mechanism of a free and open market, thereby 
protecting investors and the public interest. As stated, the Exchange 
has noted that few Users elect the TRIM2 and SWPB routing options and 
has determined that the current demand does not warrant the 
infrastructure and ongoing maintenance expense required to support 
these products. Therefore, the Exchange is discontinuing these routing 
options. The Exchange notes that routing through the Exchange is 
voluntary and alternative routing options offered by the Exchange as 
well as other methods remain available to Users that wish to route to 
other trading centers. In addition, neither the TRIM2 nor the SWPB 
routing options are core product offerings by the Exchange, nor is the 
Exchange required by the Act to offer such products. By removing 
references to routing options that will no longer be offered by the 
Exchange, the Exchange believes the proposed rule change will remove 
impediments to the mechanism of a free and open market and protect 
investors by providing investors with rules that accurately reflect 
routing options currently available on the Exchange.
    Additionally, the Exchange believes that the amendment to codify 
User designation of the TRIM routing strategy, which is already 
available to Users,\22\ will also benefit investors by providing 
investors with rules reflecting the routing strategies currently 
offered by the Exchange. The Exchange notes that the TRIM routing 
strategy (and its variant strategy) is available to all Users, thereby 
benefitting all Users equally.
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    \22\ See supra note 15.
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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 competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed rule change to 
remove TRIM2 and SWPB is not designed to address any competitive issues 
but rather to delete the TRIM2 and SWPB routing options that are rarely 
used on the Exchange and codify the User designation regarding an 
existing strategy currently provided for on the Exchange.

[[Page 20939]]

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 \23\ and Rule 19b-4(f)(6) \24\ thereunder 
because the proposal does not: (i) Significantly affect the protection 
of investors or the public interest; (ii) impose any significant burden 
on competition; and (iii) by its terms, become operative for 30 days 
from the date on which it was filed, or such shorter time as the 
Commission may designate if consistent with the protection of investors 
and the public interest.\25\
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    \23\ 15 U.S.C. 78s(b)(3)(A).
    \24\ 17 CFR 240.19b-4(f)(6).
    \25\ In addition, Rule 19b-4(f)(6)(iii) requires the Exchange to 
give the Commission written notice of the Exchange's intent to file 
the proposed rule change, along with a brief description and text of 
the proposed rule change, at least five business days prior to the 
date of filing of the proposed rule change, or such shorter time as 
designated by the Commission. The Exchange has satisfied this 
requirement.
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    A proposed rule change filed under Rule 19b-4(f)(6) normally may 
not become operative prior to 30 days after the date of filing. 
However, Rule 19b-4(f)(6)(iii) \26\ permits the Commission to designate 
a shorter time if such action is consistent with the protection of 
investors and the public interest. The Exchange has requested that the 
Commission waive the 30-day operative delay period. The Commission 
believes that waiver of the 30-day operative delay period is consistent 
with the protection of investors and the public interest. Specifically, 
the Commission believes that the proposal would accurately reflect the 
routing options currently available on the Exchange and how those 
routing options would operate. For these reasons, the Commission 
believes that waiving the 30-day operative delay is consistent with the 
protection of investors and the public interest, and designates the 
proposed rule change to be operative upon filing with the 
Commission.\27\
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    \26\ 17 CFR 240.19b-4(f)(6)(iii).
    \27\ For purposes only of waiving the operative delay for this 
proposal, the Commission has considered the proposed rule's impact 
on efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.\28\
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    \28\ 15 U.S.C. 78s(b)(3)(C).
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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-2019-037 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-2019-037. 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-2019-037 and should be submitted 
on or before June 3, 2019.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\29\
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    \29\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Deputy Secretary.
[FR Doc. 2019-09728 Filed 5-10-19; 8:45 am]
 BILLING CODE 8011-01-P