[Federal Register Volume 84, Number 96 (Friday, May 17, 2019)]
[Notices]
[Pages 22546-22549]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-10226]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-85846; File No. SR-CboeBZX-2019-038]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fee Schedule

May 13, 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 April 30, 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 its Fee Schedule. The text of the proposed rule 
change is attached [sic] as 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 the 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to make a number of amendments to its fee 
schedule for its equity options platform (``BZX Options''), effective 
May 1, 2019.
NBBO Setter Tier
    The Exchange currently offers five NBBO Setter Tiers under Footnote 
4 of the fee schedule which provide an additional rebate between $0.01 
and $0.05 per contract for orders that establish a new National Best 
Bid or Offer (``NBBO'') and which are appended with fee code PM and PN. 
The Exchange proposes to amend the required criteria under NBBO Setter 
Tier 3. NBBO Setter Tier 3 currently provides Members an additional 
rebate of $0.03 per contract where the Member (i) has an ADAV \3\ in 
Non-Customer orders greater than or equal to 0.80% of average OCV; \4\ 
and (ii) has an ADAV in Firm/Market Maker/Away MM orders that establish 
a new NBBO greater than or equal to 0.05% of average OCV. The Exchange 
proposes to amend the first prong to reduce the ADAV Non-Customer 
requirement to 0.75% of average OCV (instead of 0.80%). The proposed 
change intends to ease Tier 3's current criteria which the Exchange 
hopes 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.
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    \3\ ``ADAV'' means average daily added volume calculated as the 
number of contracts added per day. See Exchange Fee Schedule.
    \4\ ``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 
Exchange Fee Schedule.
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QIP Tiers
    The Exchange currently offers two QIP Tiers under footnote 5, which 
provide an additional rebate ranging from $0.02 to $0.04 per contract 
for qualifying Market Maker \5\ orders that add liquidity in: (i) Penny 
Pilot Securities that yield fee code PM and; (ii) Non-Penny Pilot 
Securities that yield fee code NM. The additional rebate per contract 
is for an order that adds liquidity to BZX Options in options classes 
in which a Member is a Market Maker registered pursuant to Exchange 
Rule 22.2. The Exchange no longer wishes to maintain these tiers, in 
part due to the increased opportunities for rebates for Market Maker 
orders, discussed more fully below. The Exchange therefore proposes to 
eliminate both tiers from the fee schedule.
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    \5\ A Market Maker must be registered with BZX Options in an 
average of 20% or more of the associated options series in a class 
in order to qualify for QIP rebates for that class.
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Market Maker Penny Add Tiers
    The Exchange currently offers three Market Maker Penny Pilot Add 
Volume Tiers (``MM Penny Add Tiers'') under footnote 6, which provide 
an enhanced rebate between $0.33 and $0.42 per contract for qualifying 
Market Maker orders which add liquidity in Penny Pilot securities \6\ 
and yield fee code PM. The Exchange now proposes to (i) modify the 
required criteria under MM Penny Add Tiers 1 and 2, (ii) adopt six new 
MM Penny Add Tiers and (iii) amend the rebate and required criteria for 
current MM Penny Add Tier 3 (to be renumbered to Tier 9). The Exchange 
believes the additional MM Penny Add Tiers will provide Members 
additional opportunities and alternative means to receive enhanced 
rebates for meeting the corresponding proposed criteria. The Exchange 
believes the proposed tiers, along with the existing tiers, also 
provide an incremental incentive for Members to strive for the highest 
tier levels, which provide increasingly higher enhanced rebates.
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    \6\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01.
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    First the Exchange proposes to modify the existing criteria under 
MM Penny Add Tiers 1 and 2. Currently, MM Penny Add Tier 1 provides 
that a Member will receive an enhanced rebate of $0.33 per contract 
where the Member has an ADAV in Market Maker orders greater or equal to 
0.05% of average OCV. The Exchange proposes to

[[Page 22547]]

increase the ADAV requirement to 0.10% of average OCV (instead of 
0.05%). Under MM Penny Add Tier 2, Members receive an enhanced rebate 
of $0.40 per contract where a Member has an ADAV in Market Maker orders 
greater than or equal to 0.15% of average OCV. The Exchange proposes to 
similarly increase the ADAV requirement under MM Penny Add Tier 2 to 
0.20% of overage OCV (instead of 0.15%). The proposed increases are 
designed to encourage entry of additional options orders to the 
Exchange.
    Next, in connection with its proposal to adopt new MM Penny Add 
Tiers, the Exchange proposes to add language in its Definitions section 
defining ``ADRV''. Specifically, ADRV shall mean average daily removed 
volume calculated as the number of shares removed per day.\7\ As 
discussed below, certain MM Penny Add Tiers will include an ADRV 
requirement as well. The Exchange notes that other exchanges maintain 
incentive tiers for orders that add liquidity that utilize criteria 
requiring Members to reach an ADRV threshold.\8\
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    \7\ Like ADAV (which means average daily volume calculated as 
the number of contracts added to the Exchange) and ADV (which means 
average daily volume calculated as the number of contracts added or 
removed, combined, per day). ADRV will be calculated on a monthly 
basis. Additionally, as with ADAV and ADV, the Exchange will exclude 
from its calculation of ADRV shares added, removed, or routed on any 
day that the Exchange's system experiences a disruption that lasts 
for more than 60 minutes during Regular Trading Hours, on any day 
with a scheduled early market close, and on the last Friday in June. 
A member will be able to aggregate ADRV, ADAV and ADV) with other 
Members that control, are controlled by, or are under common control 
with such Member.
    \8\ See e.g., Cboe EDGA U.S. Equities Exchange Fee Schedule, 
Footnote 1.
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    The Exchange proposes to add new MM Penny Add Tier 3, which would 
provide an enhanced rebate of $0.40 per contract where a Member (i) has 
an ADAV in Market Maker orders greater than or equal to 0.15% OCV and 
(ii) Member has an ADRV in Market Maker orders greater than or equal to 
0.15% OCV.
    The Exchange also proposes to adopt new MM Penny Add Tier 4, which 
would provide an enhanced rebate of $0.40 per contract where a Member 
(i) has an ADAV in Market Maker orders greater than or equal to 0.10% 
OCV and (ii) has on BZX Equities an ADV greater than or equal to 0.60% 
of average TCV.\9\ The Exchange proposes to create an add cross-asset 
tier which is designed to incentivize members to achieve certain levels 
of participation on both the Exchange's options and equities platform 
(``BZX Options''). The Exchange notes that others Exchanges offer tiers 
with cross-asset criteria requirements.\10\
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    \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. See Cboe BZX U.S. Equities Exchange Fee Schedule, 
Definitions.
    \10\ See e.g., Cboe BZX U.S. Equities Exchange Fee Schedule, 
Footnote 1 and Cboe EDGX Options Exchange Fee Schedule, Footnote 4.
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    The Exchange also proposes to adopt new MM Penny Add Tier 5, which 
would provide an enhanced rebate of $0.41 per contract where a Member 
has an ADAV in Market Maker orders greater than or equal to 0.30% OCV.
    The Exchange proposes to add new MM Penny Add Tier 6, which would 
provide an enhanced rebate of $0.41 per contract where a Member (i) has 
an ADAV in Market Maker orders greater than or equal to 0.25% OCV and 
(ii) Member has an ADRV in Market Maker orders greater than or equal to 
0.25% OCV.
    The Exchange proposes to add new MM Penny Add Tier 7, which would 
provide an enhanced rebate of $0.42 per contract where a Member has an 
ADAV in Market Maker orders greater than or equal to 0.50% OCV.
    The Exchange proposes to add new MM Penny Add Tier 8, which would 
provide an enhanced rebate of $0.42 per contract where a Member (i) has 
an ADAV in Market Maker orders greater than or equal to 0.35% OCV and 
(ii) Member has an ADRV in Market Maker orders greater than or equal to 
0.35% OCV.
    Currently, under MM Penny Add Tier 3, a Member may receive an 
enhanced rebate of $0.42 where they have an ADAV in Market Maker orders 
greater than or equal to 1.30% of average OCV and (ii) an ADV \11\ of 
greater than or equal to 2.60% of average OCV. The Exchange first 
proposes to renumber Tier 3, to Tier 9 in light of the new proposed 
tiers (that offer lower rebates and have less stringent criteria). The 
Exchange also proposes increase the rebate provided under Tier 9 from 
$0.42 per contract to $0.46 per contract. The Exchange lastly proposes 
to ease Tier 9's current criteria to encourage entry of additional 
orders to the Exchange. Particularly, the Exchange proposes to reduce 
the required ADAV in Market Maker orders to 0.75% of OCV (instead of 
1.30%). The Exchange also proposes to eliminate the second prong of the 
required criteria.
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    \11\ ``ADV'' means average daily volume calculated as the number 
of contracts added or removed, combined, per day. See Exchange Fee 
Schedule.
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Market Maker Non-Penny Add Tiers
    The Exchange currently offers two Market Maker Non-Penny Pilot Add 
Volume Tiers (``MM Non-Penny Add Tiers'') under footnote 6, which 
provide an enhanced rebate of $0.43 and $0.52 per contract for 
qualifying Market Maker orders which add liquidity in Non-Penny Pilot 
securities \12\ and yield fee code NM. The Exchange proposes to 
increase the enhanced rebates in the MM Non-Penny Add Tiers. 
Specifically, the exchange proposes to (i) increase the rebate under MM 
Non-Penny Add Tier 1 from $0.43 per contract to $0.45 per contract and 
(ii) increase the rebate under MM Non-Penny Add Tier 3 from $0.52 per 
contract to $0.54 per contract.
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    \12\ ``Penny Pilot Securities'' are those issues quoted pursuant 
to Exchange Rule 21.5, Interpretation and Policy .01.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the Section 6 of the Act,\13\ in general, and Section 6(b)(4),\14\ 
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.
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    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes the proposed modifications to the NBBO Setter 
Tier 3 and MM Penny Add Tier 3 (renumbered to Tier 9) decreasing the 
ADAV as a percentage of OCV criteria that a Member must meet, along 
with eliminating the second prong of MM Penny Add Tier 3, is a 
reasonable means to further incentive Members to send a higher level of 
orders to the Exchange. Particularly, the Exchange believes that 
decreasing the tiers' criteria, although modestly, will encourage those 
Members who could not achieve the tiers previously to increase their 
order flow as a means to receive the tiers' additional rebate and 
enhanced rebate, respectively. The Exchange similarly believes 
increasing the rebate under MM Penny Add Tier 3 (renumbered to Tier 9) 
is reasonable because Members would receive a higher rebate for 
satisfying the required criteria and it is a means to further 
incentivize Members to send a higher level of orders to the Exchange. 
Furthermore, the Exchange believes that the proposed changes to both 
tiers are non-discriminatory because they apply, and are available, to 
all Members.
    The Exchange believes eliminating the QIP Tiers is reasonable 
because the Exchange is not required to maintain these tiers and 
Members still have a number of other opportunities and a

[[Page 22548]]

variety of ways to receive enhanced rebates, including the existing and 
new MM Penny and Non-Penny Add Tiers, as discussed throughout this 
filing. The Exchange believes the proposal to eliminate these tiers is 
also equitable and not unfairly discriminatory because it applies to 
all Members.
    The Exchange believes the proposed changes to the criteria under MM 
Penny Add Tiers 1 and 2 are reasonable because the proposed changes are 
modest and are designed to encourage entry of additional options orders 
to the Exchange. 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. Additionally, the Exchange believes the proposed 
criteria is commensurate with the rebates under the Tiers. The Exchange 
believes the proposed changes are equitable and not unfairly 
discriminatory because they apply equally to all Members.
    The Exchange believes the proposal to adopt new MM Penny Add Tiers 
is reasonable because it provides Members additional opportunities and 
alternatives to receive enhanced rebates. The Exchange believes the 
proposed changes also provide an incremental incentive for Members to 
strive for the highest tier level, which provides increasingly higher 
rebates. The Exchange additionally notes that volume-based incentives 
and discounts have been widely adopted by exchanges and are equitable 
and non-discriminatory 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 of an exchange's market quality; (ii) 
associated with higher levels of market activity, such as higher levels 
of liquidity provision and/or growth patterns; and (iii) introduction 
of higher volumes of orders into the price and volume discovery 
processes. The proposed required criteria of the Volume Tiers are 
intended to incentivize Members to send additional orders to the 
Exchange in an effort to qualify for the enhanced rebate made available 
by the respective tiers. The Exchange also notes that increased volume 
on the Exchange provides greater trading opportunities for all market 
participants. The Exchange also believes the proposed required criteria 
under the proposed tiers are commensurate with the proposed 
corresponding rebates. The Exchange believes the proposed tiers are 
also equitable and not unfairly discriminatory because they apply to 
all Members.
    The Exchange lastly believes increasing the rebates under the MM 
Non-Penny Tiers are reasonable because Members would receive a higher 
rebate for satisfying the required criteria. The Exchange believes 
increased rebates will further incentivize Members to send a higher 
level of orders to the Exchange. The Exchange believes the proposed 
rebates are also equitable and not unfairly discriminatory because they 
apply to all Members that satisfy the respective tiers.

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

    The Exchange believes the proposed amendments 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 rule change will impose any burden 
on intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the proposed changes for 
each separate type of market participant will be assessed equally to 
all such market participants. While different fees are assessed to 
different market participants in some circumstances, these different 
market participants have different obligations and different 
circumstances as discussed above. For example, Market Makers have 
quoting obligations that other market participants do not have. 
Further, the Exchange does not believe that the proposed changes 
represent a significant departure from previous pricing offered by the 
Exchange or pricing offered by the Exchange's competitors. 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.

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 \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-2019-038 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-2019-038. 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

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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-2019-038 and should be submitted on or before June 7, 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. 2019-10226 Filed 5-16-19; 8:45 am]
 BILLING CODE 8011-01-P