[Federal Register Volume 85, Number 199 (Wednesday, October 14, 2020)]
[Notices]
[Pages 65093-65095]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-22705]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90122; File No. SR-CboeBYX-2020-029]


Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Increase 
Maker Transaction Fees

October 8, 2020.
    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 October 6, 2020, Cboe BYX Exchange, Inc. (the ``Exchange'' or 
``BYX'') 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 the 
Substance of the Proposed Rule Change

    Cboe BYX Exchange, Inc. (the ``Exchange'' or ``BZX'') is filing 
with the Securities and Exchange Commission (``Commission'') a proposed 
rule change to amend the fee schedule. 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/byx/), 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 its fee schedule.\3\
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    \3\ The Exchange initially filed the proposed fee changes on 
October 1, 2020 (SR-CboeBYX-2020-026). On October 5, 2020, the 
Exchange withdrew that filing and submitted SR-CboeBYX-2020-027. On 
October 6, 2020 the Exchange withdrew that filing and submitted this 
filing.
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    The Exchange first 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. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues 
that do not have similar self-regulatory responsibilities under the 
Exchange Act, to which market participants may direct their order flow. 
Based on publicly available information,\4\ no single registered 
equities exchange has more than 19% of the market share. Thus, in such 
a low-concentrated and highly competitive market, no single equities 
exchange possesses significant pricing power in the execution of order 
flow. The Exchange in particular operates a ``Taker-Maker'' model 
whereby it pays credits to members that remove liquidity and assesses 
fees to those that add liquidity. The Exchange's Fees Schedule sets 
forth the standard rebates and rates applied per share for orders that 
provide and remove liquidity, respectively. Particularly, for 
securities at or above $1.00, the Exchange provides a standard rebate 
of $0.0005 per share for orders that remove liquidity and assesses a 
fee of $0.0019 per share for orders that add liquidity. The Exchange 
believes that the ever-shifting market share among the exchanges from 
month to month demonstrates that market participants can shift order 
flow or discontinue to reduce use of certain categories of products, in 
response to fee changes. Accordingly, competitive forces

[[Page 65094]]

constrain the Exchange's transaction fees, and market participants can 
readily trade on competing venues if they deem pricing levels at those 
other venues to be more favorable.
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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (September 28, 2020), available at https://markets.cboe.com/us/equities/market_statistics/.
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    As stated above, the Exchange currently provides a standard fee of 
$0.0019 per share for liquidity adding orders (i.e., those yielding fee 
codes B, V, Y) in securities priced at or above $1.00. The Exchange now 
proposes to modestly increase the current standard fee of $0.00190 per 
share to $0.00200 per share for orders that add liquidity for 
securities priced at or above $1.00. The Exchange notes that although 
this proposed standard fee for liquidity adding orders is higher than 
the current standard fee for such orders, the proposed fee is in line 
with similar fees for liquidity adding orders in place on other 
exchanges.\5\
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    \5\ See Nasdaq BX, Inc. Pricing List, ``Charge for providing 
liquidity through Nasdaq BX Equities System,'' which assesses a 
standard fee of $0.0030 per share for displayed orders that add 
liquidity. See also, Cboe EDGA Exchange, Inc., Fees Schedule, which 
also assesses a standard fee of $0.0030 per share for displayed 
orders that add liquidity.
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    The Exchange next proposes to amend the fee for non-displayed 
orders that add liquidity using the Mid-Point Peg order type \6\ and 
yield fee code ``MM'', [sic] Currently, orders yielding fee code'' MM'' 
are assessed a fee of $0.00050 in securities priced at or above $1.00. 
Orders yielding fee code ``MM'' in securities priced below $1.00 are 
not assessed a fee. The Exchange now proposes to increase the current 
fee of $0.00050 per share to $0.00100 per share for orders yielding fee 
code ``MM'' in securities priced at or above $1.00. Orders yield fee 
code ``MM'' in securities priced below $1.00 would continue to be free. 
The Exchange notes that the proposed fee is lower than fees assessed on 
similar liquidity adding orders on other equities exchanges.\7\
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    \6\ See Rule 11.9(c)(9), which states that a Mid-Point Peg order 
is a limit order that after entry into the System, the price of the 
order is automatically adjusted by the System in response to changes 
in the NBBO to be pegged to the mid-point of the NBBO, or, 
alternatively, pegged to the less aggressive of the midpoint of the 
NBBO or one minimum price variation inside the same side of the NBBO 
as the order.
    \7\ See Nasdaq BX, Inc. Pricing List, ``Charge for providing 
liquidity through Nasdaq BX Equities System'', which assesses a 
standard fee of $0.0015 per share for non-displayed orders that add 
liquidity using midpoint pegging.
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    The Exchange lastly notes that the Standard Rate Table in the 
Exchange's fees schedule currently lists the standard fee and rebates 
using only four decimals for orders priced at or above $1.00 that (1) 
add liquidity, (2) remove liquidity or (3) route and remove liquidity, 
whereas the Fee Codes and Associated Fees table in the fees schedule 
lists fees and rebates using five decimals. To add consistency to the 
fees schedule and alleviate potential confusion, the Exchange proposes 
to update the fees and rebates in the Standard Rates table to 5 
decimals. The Exchange does not believe this update is a substantive 
change, but rather maintains clarity in the fees schedule.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\8\ in general, and 
furthers the objectives of Section 6(b)(4),\9\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its Members and issuers and other persons 
using its facilities. The Exchange also believes that the proposed rule 
change is consistent with the objectives of Section 6(b)(5) \10\ 
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, and, particularly, is not 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Exchange 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.
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    \8\ 15 U.S.C. 78f.
    \9\ 15 U.S.C. 78f(b)(4).
    \10\ 15 U.S.C. 78f.(b)(5).
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    In particular, the Exchange believes that the proposed fee changes 
are reasonable, equitable and non-discriminatory because the proposed 
changes both represent a modest fee increase and such fees are equally 
applicable to all Members of the Exchange. Additionally, as noted 
above, the Exchange operates in highly competitive market. The Exchange 
is only one of several equity venues to which market participants may 
direct their order flow, and it represents a small percentage of the 
overall market. Moreover, the proposed standard fees for adding 
liquidity orders and non-displayed orders that add liquidity using the 
Mid-Point Peg order are still lower than those offered at other Taker-
Maker exchanges for similar transactions, respectively.\11\
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    \11\ See supra notes 4 and 5.
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    The Exchange lastly believes the proposed change to update the fees 
and rebate in the Standard Rates table to use five decimals instead of 
four decimals to match the fees and rebates listed in the Fee Codes and 
Associated Fees table provides consistency in the fees schedule and 
alleviates potential confusion, thereby removing impediments to and 
perfecting the mechanism of a free and open market and a national 
market system, and, in general, protecting investors and the public 
interest.

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

    The Exchange believes the proposed rule change does not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
changes apply to all displayed liquidity adding orders in securities at 
or above $1.00 equally and all non-displayed liquidity adding midpoint 
peg orders in securities at or above $1.00 equally, and thus applies to 
all Members equally. Additionally, the Exchange believes the proposed 
rule change does not impose any burden on intermarket competition that 
is not necessary or appropriate in furtherance of the purpose of the 
Act. As previously discussed, the Exchange operates in a highly 
competitive market. Members have numerous alternative venues that they 
may participate on and direct their order flow, including 15 other 
equities exchanges and off-exchange venues and alternative trading 
systems. Additionally, the Exchange represents a small percentage of 
the overall market. Based on publicly available information, no single 
equities exchange has more than 19% of the market share. Therefore, no 
exchange possesses significant pricing power in the execution of order 
flow. Indeed, participants can readily choose to send their orders to 
other exchange and off-exchange venues if they deem fee levels at those 
other venues to be more favorable. Moreover, the Commission has 
repeatedly expressed its preference for competition over regulatory 
intervention in determining prices, products, and services in the 
securities markets. Specifically, in Regulation NMS, the Commission 
highlighted the importance of market forces in determining prices and 
SRO revenues and, also, recognized that current

[[Page 65095]]

regulation of the market system ``has been remarkably successful in 
promoting market competition in its broader forms that are most 
important to investors and listed companies.'' The fact that this 
market is competitive has also long been recognized by the courts. In 
NetCoalition v. Securities and Exchange Commission, the D.C. Circuit 
stated as follows: ``[n]o one disputes that competition for order flow 
is `fierce.' . . . As the SEC explained, `[i]n the U.S. national market 
system, buyers and sellers of securities, and the broker-dealers that 
act as their order-routing agents, have a wide range of choices of 
where to route orders for execution'; [and] `no exchange can afford to 
take its market share percentages for granted' because `no exchange 
possesses a monopoly, regulatory or otherwise, in the execution of 
order flow from broker dealers'. . . .''. Accordingly, the Exchange 
does not believe its proposed fee change imposes any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.

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 unsolicited 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 \12\ and paragraph (f) of Rule 19b-4 \13\ 
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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    \12\ 15 U.S.C. 78s(b)(3)(A).
    \13\ 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-CboeBYX-2020-029 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-CboeBYX-2020-029. 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-CboeBYX-2020-029 and should be submitted 
on or before November 4, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\14\
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    \14\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-22705 Filed 10-13-20; 8:45 am]
BILLING CODE 8011-01-P