[Federal Register Volume 85, Number 238 (Thursday, December 10, 2020)]
[Notices]
[Pages 79539-79541]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27086]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-90567; File No. SR-CboeBYX-2020-033]


Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of Proposed Rule Change To Amend its 
Fee Schedule To Remove Unused Routing-related Fee Codes

December 4, 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 December 1, 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 to remove unused 
routing-related fee codes, effective December 1, 2020.
    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,\3\ no single registered 
equities exchange has more than 16% 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 $0.00050 per share for orders that remove liquidity, assesses a fee 
of $0.00200 per share for orders that add liquidity and assesses a 
standard fee of $0.00300 for orders that are routed. For orders priced 
below $1.00, the Exchange does not assess a fee or provide a rebate for 
orders that add liquidity, assesses a fee of 0.10% of total dollar 
value for orders that remove liquidity, and assesses a fee of 0.29% of 
total dollar value for orders that are routed. 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 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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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (November 27, 2020), available at https://markets.cboe.com/us/equities/market_statistics/.
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    The Exchange assesses fees in connection with orders routed away to 
various exchanges. The Exchange proposes to eliminate several routing-
related fee codes that have been unused for several years. 
Particularly, the Exchange proposes to eliminate the following fee 
codes:
     Fee Code 9, which is appended to orders routed to NYSE 
Arca and adds liquidity (Tapes A or C) and provides a rebate of 
$0.00210 per share for securities priced at or above $1.00 and are free 
for securities priced below $1.00;
     Fee Code NB, which is appended to orders routed to any 
exchange not covered by Fee Code NA and adds non-displayed liquidity 
and assesses a fee of $0.00300 per share for securities priced at or 
above $1.00 and a fee of 0.30% of dollar value for securities priced 
below $1.00;
     Fee Code R, which is appended to orders re-routed by NYSE 
using RDOT, RDOX or Post to Away routing strategy and assesses a fee of 
0.00300 per share;
     Fee Code RA, which is appended to orders re-routed to EDGA 
and adds liquidity and assess a fee of 0.00300 per share for securities 
priced at or above $1.00 and are free for securities priced below 
$1.00; and
     Fee Code RB, which is appended to orders routed to Nasdaq 
BX and adds liquidity and assess a fee of 0.00200 per share for 
securities priced at or above $1.00 and are free for securities priced 
below $1.00.
    As noted, above the Exchange has observed no volume in recent years 
in orders yielding fee codes 9, NB, R, RA and RB. The Exchange believes 
that, because no Members elect to route their orders that yield these 
fee codes, the current demand (or lack thereof) does not warrant the 
infrastructure and ongoing Systems maintenance required to support 
separate fee codes specifically applicable to these types of 
transactions. Therefore, the Exchange now proposes to delete fee codes 
9, NB, R, RA and RB in the Fee Schedule. The Exchange notes that 
Members will continue to be able to choose to route their orders to any 
exchange covered by these fee codes and such orders will be 
automatically and uniformly assessed the current fees (or rebates) in 
place for routed orders, as applicable (e.g., the

[[Page 79540]]

standard fees applied to routed orders, which yields fee code X).
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\4\ in general, and 
furthers the objectives of Section 6(b)(4),\5\ 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) \6\ 
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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    \4\ 15 U.S.C. 78f.
    \5\ 15 U.S.C. 78f(b)(4).
    \6\ 15 U.S.C. 78f.(b)(5).
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    The Exchange also believes the proposed rule change to remove fee 
codes 9, NB, R, RA and RB is reasonable as the Exchange has observed no 
volume in orders yielding these fee codes and, therefore, the Exchange 
believes the proposed change will have a de minimis impact. 
Additionally, the Exchange believes that infrastructure and ongoing 
Systems maintenance required to support separate fee codes specifically 
applicable to these types of routed orders is not warranted or 
necessary in light of the fact that it has not received any recent 
volume yielding these fee codes. As noted above, to the extent volume 
for transactions currently covered by these fee codes ever increases, 
such orders will be automatically and uniformly assessed the current 
fees (or rebates) in place for routed orders, as applicable (e.g., the 
standard fees applied to routed orders, which yield fee code X). 
Finally, the Exchange believes that the proposed elimination of the fee 
codes is equitable and not unfairly discriminatory as it applies 
equally to all members that use the Exchange to route orders. If 
members do not favor the Exchange's pricing for routed orders, they can 
send their routable orders directly to away markets instead of using 
routing functionality provided by the Exchange. Routing through the 
Exchange is voluntary, and the Exchange operates in a competitive 
environment where market participants can readily direct order flow to 
competing venues or providers of routing services if they deem fee 
levels to be excessive.

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 intramarket or intermarket competition that is not 
necessary or appropriate in furtherance of the purposes of the Act. 
Rather, as discussed above, the Exchange believes that the proposed 
change would encourage the submission of additional order flow to a 
public exchange, thereby promoting market depth, execution incentives 
and enhanced execution opportunities, as well as price discovery and 
transparency for all Members. As a result, the Exchange believes that 
the proposed change furthers the Commission's goal in adopting 
Regulation NMS of fostering competition among orders, which promotes 
``more efficient pricing of individual stocks for all types of orders, 
large and small.'' \7\
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    \7\ Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    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 
change applies to all Members equally.
    Next, 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 purposes 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 16% 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 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.'' \8\ 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'. . ..''.\9\ 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.
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    \8\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \9\ NetCoalition v. SEC, 615 F.3d 525, 539 (DC Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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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)

[[Page 79541]]

of the Act \10\ and paragraph (f) of Rule 19b-4 thereunder.\11\ 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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    \10\ 15 U.S.C. 78s(b)(3)(A).
    \11\ 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-2020-033 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-2020-033. 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-2020-033 and should be submitted 
on or before December 31, 2020.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\12\
     
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    \12\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27086 Filed 12-9-20; 8:45 am]
BILLING CODE 8011-01-P