[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
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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
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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