[Federal Register Volume 86, Number 54 (Tuesday, March 23, 2021)]
[Notices]
[Pages 15524-15530]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-05913]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91339; File No. SR-CboeBZX-2021-020]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
the Fees Applicable to the BZX Top Feed

March 17, 2021.
    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 March 4, 2021, 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. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (the ``Commission'') a 
proposed rule change to amend the fees applicable to the BZX Top Feed. 
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 purpose of the proposed rule change is to amend the fees 
applicable to the BZX Top Feed,\3\ which is an uncompressed data feed 
that offers both top-of-book quotations and execution information based 
on equity orders entered into the System.\4\ Specifically, the Exchange 
proposes to: (1) Increase the fee for internal distribution of the BZX 
Top Feed; and (2) introduce Professional User fees for internal 
Professional Users of the BZX Top Feed.\5\ The current fees for 
external

[[Page 15525]]

distribution of the BZX Top Feed will continue to apply, without 
change, including various incentive programs that the Exchange has 
adopted to facilitate the provision of lower-cost market data to retail 
and other investors.\6\
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    \3\ The Exchange initially filed the proposed fee changes on 
January 4, 2021. See Securities Exchange Act Release No. 90919 
(January 14, 2021), 86 FR 6710 (January 2, 2021) [sic] (SR-CboeBZX-
2021-002). On March 4, 2021, the Exchange withdrew that filing and 
submitted this proposal.
    \4\ See BZX Rule 11.22(d).
    \5\ A Professional User of an Exchange Market Data product is 
any User other than a Non-Professional User. See BZX Schedule of 
Fees, Market Data Fees, Definitions. A ``Non-Professional User'' of 
an Exchange Market Data product is a natural person or qualifying 
trust that uses Data only for personal purposes and not for any 
commercial purpose and, for a natural person who works in the United 
States, is not: (i) Registered or qualified in any capacity with the 
Securities and Exchange Commission, the Commodities Futures Trading 
Commission, any state securities agency, any securities exchange or 
association, or any commodities or futures contract market or 
association; (ii) engaged as an ``investment adviser'' as that term 
is defined in Section 202(a)(11) of the Investment Advisors Act of 
1940 (whether or not registered or qualified under that Act); or 
(iii) employed by a bank or other organization exempt from 
registration under federal or state securities laws to perform 
functions that would require registration or qualification if such 
functions were performed for an organization not so exempt; or, for 
a natural person who works outside of the United States, does not 
perform the same functions as would disqualify such person as a Non-
Professional User if he or she worked in the United States. Id.
    \6\ See e.g., BZX Schedule of Fees, Financial Product 
Distribution Program. The Financial Product Distribution Program 
lowers the cost of distributing Derived Data based upon the 
Exchange's top-of-book offerings, including Derived Data that is 
often used by retail investors.
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Market Background
    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. 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.'' \7\ As the Commission 
itself recognized, the market for trading services in NMS stocks has 
become ``more fragmented and competitive.'' \8\
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    \7\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule) 
(``Regulation NMS Adopting Release'').
    \8\ See Securities Exchange Act Release No. 84875, 84 FR 5202, 
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot 
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
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    Equity trading is currently dispersed across sixteen exchanges, 
including three new U.S. equities exchanges that launched trading in 
2020, 32 alternative trading systems,\9\ and numerous broker-dealer 
internalizers and wholesalers, all competing fiercely for order flow. 
Based on publicly-available information, no single U.S. equities 
exchange has more than 20% market share.\10\ In turn, the market for 
top-of-book quotation and transaction data is highly competitive as 
national securities exchanges compete vigorously with each other to 
provide efficient, reliable, and low-cost data to a wide range of 
investors and market participants. In fact, there are twelve competing 
products offered by other national securities exchanges today,\11\ not 
counting products offered by the Exchange's affiliates, and each of the 
Exchange's affiliated U.S. equities exchanges also offers similar top-
of-book data. Each of those exchanges offer top-of-book quotation and 
last sale information based on their own quotation and trading activity 
that is substantially similar to the information provided by the 
Exchange through the BZX Top Feed.\12\ Exchange top-of-book data is 
therefore widely available today from a number of different sources.
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    \9\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsData. A list of 
alternative trading systems registered with the Commission is 
available at https://www.sec.gov/foia/docs/atslist.htm.
    \10\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, available at http://markets.cboe.com/us/equities/market_share/.
    \11\ Competing top-of-book products include, Nasdaq Basic, BX 
Basic, PSX Basic, NYSE BQT, NYSE BBO/Trades, NYSE Arca BQT, NYSE 
Arca BBO/Trades, NYSE American BBO/Trades, NYSE Chicago BBO/Trades, 
IEX TOPS, MIAX PEARL Equities Top of Market Feed, and MEMX MEMOIR 
Top.
    \12\ For example, The Nasdaq Stock Market LLC (``Nasdaq'') 
offers ``Nasdaq Basic'' which is a real-time market data product 
that offers best bid and offer and last sale information for all 
U.S. exchange-listed securities based on liquidity within the Nasdaq 
market center and trades reported to the FINRA/Nasdaq Trade 
Reporting Facility (``Nasdaq TRF''). See Nasdaq Equity Rules, Equity 
7, Pricing Schedule, Section 147(a). The type of information 
contained on the BZX Top Feed is substantially similar to that 
offered through Nasdaq Basic, except that the Exchange disseminates 
information about quotes and trades on BZX, whereas Nasdaq Basic 
provides information about quotes and trades on Nasdaq and the 
Nasdaq TRF. Other national securities with competing top-of-book 
products also offer substantially similar types of information 
through those top-of-book products.
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Fees for Internal Distribution of the BZX Top Feed
    Currently, the Exchange charges a modest fee of $500 per month for 
internal distribution of BZX Top Feed data,\13\ i.e., distribution 
within the distributor's own firm,\14\ and does not charge any 
additional fees for internal distribution based on the number of 
Professional or Non-Professional Users that receive access to this 
information. These internal distribution fees have been in place, 
without change, since July 2013 when the Exchange first began charging 
for access to the BZX Top Feed, which had previously been available 
free of charge.\15\ In the time since, the Exchange has made a number 
of significant enhancements to its platform, including, among other 
things, a significant expansion of its listing program for exchange-
traded products,\16\ that have resulted in improved trading 
opportunities for investors and, consequently, more valuable market 
data.
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    \13\ See BZX Schedule of Fees, BZX Top, Internal Distribution.
    \14\ The Exchange's fee schedule defines an Internal Distributor 
of an Exchange Market Data product as a Distributor that receives 
the Exchange Market Data product and then distributes that data to 
one or more Users within the Distributor's own entity. See BZX 
Schedule of Fees, Market Data Fees, Definitions.
    \15\ See Securities Exchange Act Release No. 69936 (July 3, 
2013), 78 FR 41483 (July 10, 2013) (SR-BATS-2013-39).
    \16\ See infra notes 44-45 and accompanying text.
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    As discussed, the Exchange now proposes to increase certain fees 
applicable to firms that consume this data as internal distributors, 
i.e., firms that use BZX Top Feed data for internal purposes as opposed 
to firms that distribute such data externally to its customers. As 
proposed, the Exchange would increase the monthly charge for internal 
distribution of BZX Top Feed data to $750 per month, which would 
continue to be significantly cheaper than similar products offered by 
the Exchange's main competitors.\17\ In addition, the Exchange would 
introduce Professional User fees for internal Professional Users of the 
BZX Top Feed. Those Professional User fees will be the same as the 
modest fee currently charged for external distribution of the BZX Top 
Feed, i.e., $4 per month for each Professional User. There would 
continue to be no charge associated with internal distribution to Non-
Professional Users. Further, as discussed, the current fees for 
external distribution of the BZX Top Feed would continue to apply, 
without change, including various incentive programs that the Exchange 
has adopted to facilitate the provision of lower-cost market data to 
retail and other investors. As a result, the Exchange believes that the 
proposed fee changes would allow it to be appropriately compensated for 
the value of its market data, particularly from professional financial 
services firms that use that data for internal purposes, while 
simultaneously ensuring that its data would continue to be available to 
a wide range of investors and market participants at a cost that 
facilitates widespread availability of such data.
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    \17\ See infra notes 32-39 and accompanying text.
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2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\18\ in general, and 
furthers the objectives of Section 6(b)(4),\19\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its members and other recipients of 
Exchange data. In addition, the Exchange believes that the proposed 
rule change is consistent with

[[Page 15526]]

Section 11(A) of the Act as it supports (i) fair competition among 
brokers and dealers, among exchange markets, and between exchange 
markets and markets other than exchange markets, and (ii) the 
availability to brokers, dealers, and investors of information with 
respect to quotations for and transactions in securities.\20\ Finally, 
the proposed rule change is also consistent with Rule 603 of Regulation 
NMS,\21\ which provides that any national securities exchange that 
distributes information with respect to quotations for or transactions 
in an NMS stock do so on terms that are not unreasonably 
discriminatory.
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    \18\ 15 U.S.C. 78f.
    \19\ 15 U.S.C. 78f(b)(4).
    \20\ 15 U.S.C. 78k-1.
    \21\ See 17 CFR 242.603.
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    The Exchange operates in a highly competitive environment. Indeed, 
with the launch of three new national securities exchanges that trade 
U.S. equity securities last September, there are now sixteen registered 
U.S equities exchanges, and with the exception of Long-Term Stock 
Exchange, Inc. (``LTSE''), which has determined to not offer any 
proprietary market data feeds, each of these exchanges offer associated 
market data products to their customers, either with or without a fee. 
It is in this robust and competitive market in which the Exchange is 
proposing to increase its fees, while still providing its data at a 
significantly lower price than competing products offered by other 
national securities exchanges with similar data quality.
    The Commission has repeatedly expressed its preference for 
competition over regulatory intervention in determining prices, 
products, and services in the securities markets. Further, with respect 
to market data, the decision of the United States Court of Appeals for 
the District of Columbia Circuit in NetCoalition v. SEC upheld the 
Commission's reliance on the existence of competitive market mechanisms 
to evaluate the reasonableness and fairness of fees for proprietary 
market data: ``In fact, the legislative history indicates that the 
Congress intended that the market system `evolve through the interplay 
of competitive forces as unnecessary regulatory restrictions are 
removed' and that the SEC wield its regulatory power `in those 
situations where competition may not be sufficient,' such as in the 
creation of a `consolidated transactional reporting system.' '' \22\ 
The court agreed with the Commission's conclusion that ``Congress 
intended that `competitive forces should dictate the services and 
practices that constitute the U.S. national market system for trading 
equity securities.' '' \23\ As discussed in this filing, significant 
competitive forces constrain the ability of the Exchange to charge 
supra-competitive fees.
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    \22\ NetCoalition v. SEC, 615 F.3d 525, 535 (DC Cir. 2010) 
(``NetCoalition I'') (quoting H.R. Rep. No. 94-229 at 92 (1975), as 
reprinted in 1975 U.S.C.C.A.N. 323).
    \23\ Id. at 535.
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i. The BZX Top Feed Is an Optional Market Data Product, and the 
Exchange Is Constrained in Its Pricing by Significant Competitive 
Forces
    Subscribing to the BZX Top Feed is entirely optional. The Exchange 
is not required to make the BZX Top Feed available to any customers, 
nor is any customer required to purchase the BZX Top Feed.\24\ A 
customer's decision as to whether to purchase the BZX Top Feed is 
therefore entirely discretionary, and is based on that firms individual 
business needs. Generally, firms that choose to subscribe to the BZX 
Top Feed do so because they believe that it is a cost-effective source 
for top-of-book data that provides valuable information about the 
market for national market system (``NMS'') stocks traded on the 
Exchange, where a consolidated display covering all U.S. equities 
exchanges is not required. Such firms are able to determine for 
themselves whether the BZX Top Feed helps them to achieve their 
business goals, and if so, whether or not it is attractively priced 
compared to other similar top-of-book products offered by competing 
exchanges.
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    \24\ The Exchange notes that broker-dealers are not required to 
purchase proprietary market data to comply with their best execution 
obligations. See In the Matter of the Application of Securities 
Industry and Financial Markets Association for Review of Actions 
Taken by Self-Regulatory Organizations, Release Nos. 34-72182; AP-3-
15350; AP-3-15351 (May16, 2014). Similarly, there is no requirement 
in Regulation NMS or any other rule that proprietary data be 
utilized for order routing decisions, and some broker-dealers and 
ATSs have chosen not to do so.
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    Indeed, if the BZX Top Feed does not provide sufficient value to 
firms based on the uses those firms may have for it, such firms may 
simply choose to conduct their business operations in ways that do not 
use the BZX Top Feed. In fact, comparing the number of internal 
distributors that currently subscribe to the BZX Top Feed, based on 
data compiled by the Exchange as of November 2020, to the total number 
of internal distributors that subscribe to core data offered by the CTA 
and UTP SIPs, as published on plan websites for Q3 2020,\25\ less than 
9.5% of internal distributors that purchase U.S. equities data choose 
to subscribe to the BZX Top Feed.\26\ The BZX Top Feed therefore 
represents an insignificant proportion of the market for such market 
data, and significantly more internal distributors choose not to 
purchase this product than those that do. Given the insignificant 
percentage of internal distributors that consume the BZX Top Feed, it 
is clear that such firms can and do exercise their right to choose to 
purchase, or not purchase, this particular market data product. And, as 
discussed later in this filing, any internal distributor of top-of-book 
data that does not wish to purchase the BZX Top Feed, due to the price 
of that data or for any other reason, can choose to substitute similar 
information from other exchanges.
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    \25\ See CTA Quarterly Population Metrics (Q3 2020), available 
at https://www.ctaplan.com/publicdocs/ctaplan/CTAPLAN_Population_Metrics_3Q2020.pdf; UTP Quarterly Population 
Metrics (Q3 2020), available at https://www.utpplan.com/DOC/UTP_2020_Q3_Stats_with_Processor_Stats.pdf.
    \26\ This statistic reflects the number of internal distributors 
that purchase the BZX Top Feed divided by the number of internal 
distributors that purchase consolidated market data from the SIPs, 
as reflected in publicly available information. Id. The Exchange 
does not have similar information about the number of internal 
distributors that purchase top-of-book data from other exchanges as 
competing exchanges do not typically make this information publicly 
available due to the commercially sensitive nature of such 
information.
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    Although the Exchange is not required to make any data, including 
top-of-book data, available through its proprietary market data 
platform, the Exchange believes that making such data available 
increases investor choice, and contributes to a fair and competitive 
market. Specifically, making such data publicly available through 
proprietary data feeds allows investors to choose alternative, 
potentially less costly, market data based on their business needs. For 
example, a buy-side investor or fintech firm may choose to purchase the 
BZX Top Feed, or a similar product from another exchange, in order to 
perform investment analysis, or to provide general information about 
the market for U.S. equity securities, respectively. In either case the 
choice to purchase the BZX Top Feed would be based on the firm's 
determination of the value of the data offered by their chosen product 
compared to the cost of acquiring this data instead of receiving 
similar data from other sources. The BZX Top Feed serves as a valuable 
reference for investors that do not require a consolidated display. 
Making alternative products available to market participants ultimately 
ensures competition in the marketplace, and constrains the ability of 
exchanges to charge supra-competitive fees.
    Further, in the event that a market data customer views one 
exchange's top-of-book data product and/or fees as more or less 
attractive than a competitor's offerings they can and

[[Page 15527]]

often do switch between competing products. As discussed, similar top-
of-book information is available from a number of competing U.S. 
equities exchanges.\27\ This include a number of large established 
exchanges that charge for access to such top-of-book data, as well as 
certain smaller or new exchange entrants that provide similar data 
without charge, in many cases as a way of attracting customers to their 
exchange while they seek to grow market share. In this way, the BZX Top 
Feed and other top-of-book products offered by a number of U.S. 
equities exchanges, are all substitutes. The availability of these 
substitute products constrains the Exchange's ability to charge supra-
competitive prices as market participants can easily obtain similar 
data from one of the Exchange's many competitors. In fact, the impact 
of competition on the market in which the BZX Top Feed is offered to 
market participants and investors is showcased by the Exchange's other 
recent fee changes related to this product, which involved the 
reduction of fees to facilitate the Exchange's ability to compete for 
customers.\28\ And, other exchanges have similarly filed to reduce the 
prices of their top-of-book data in order to compete with products 
offered by the Exchange and other competing exchanges.\29\
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    \27\ Although the Exchange does not have access to the customer 
lists for other competing products, it understands based on 
conversations with subscribers to the BZX Top Feed that they 
typically view exchange top-of-book products as substitutes and do 
not generally look to purchase such data from more than one national 
securities exchange.
    \28\ See supra note 6. The Exchange also notes that while this 
proposed fee change involves an increase in fees, it is 
simultaneously filing another proposed fee change to expand its 
Financial Products Distribution Program and further reduce certain 
fees. See Securities Exchange Act Release No. 90912 (January 13, 
2021), 86 FR 6398 (January 1, 2021) (SR-CboeBZX-2021-003) [sic].
    \29\ See e.g. Securities Exchange Act Release No. 90616 
(December 9, 2020), 85 FR 81237 (December 15, 2020) (SR-NASDAQ-2020-
086).
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    Distributors can discontinue use of the BZX Top Feed at any time 
and for any reason, including due to an assessment of the 
reasonableness of fees charged. Indeed, one internal distributor of the 
BZX Top Feed that cancelled its subscription as of February 2021 
informed the Exchange that its decision to do so was based on this fee 
increase, which initially went into effect for the month of January 
2021. Other internal distributors are free to similarly cancel their 
subscriptions in favor of a competitor offering, or cheaper or free 
data offered by the Exchange's affiliated U.S. equities exchanges, if 
they believe that the fees are too high given their particular use case 
for obtaining the data that the Exchange provides over the BZX Top 
Feed. The Exchange offers all of its proprietary market data products 
pursuant to a month-to-month contract that allows subscribers to choose 
to terminate their subscription at any time. As a result, there are no 
contractual or other legal impediments for firms that wish to cancel 
their subscription to the Exchange's market data products, including 
the BZX Top Feed. In addition, the Exchange notes that all internal 
distributors of the BZX Top Feed either receive this data through a 
market data vendor, as opposed to directly from the Exchange, or is a 
market data vendor itself.\30\ Thus, firms can seamlessly switch to any 
other competitor product offered by their chosen vendor without 
incurring additional switching costs, such as the cost of establishing 
connectivity to another exchange to receive its market data.\31\
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    \30\ One previous subscriber to the BZX Top Feed received this 
data directly from the Exchange. However, that subscriber recently 
terminated its subscription to the BZX Top Feed in favor of other 
products offered by the Exchange.
    \31\ Market data vendors typically establish connectivity to a 
number of national securities exchanges to be able to offer their 
market data to customers.
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    In setting the proposed fees for the BZX Top Feed, the Exchange 
considered the competitiveness of the market for proprietary data and 
all of the implications of that competition. Indeed, the Exchange is 
not in a position to charge unreasonable fees for its top-of-book data 
as there are a number of competing products in the market, including 
products that are currently offered free of charge by certain other 
exchanges that have determined not to charge for their market data. The 
existence of alternatives to the BZX Top Feed ensures that the Exchange 
cannot set unreasonable fees when vendors and subscribers can freely 
elect these alternatives or choose not to purchase a specific 
proprietary data product if the attendant fees are not justified by the 
returns that any particular vendor or data recipient would achieve 
through the purchase.
ii. The Proposed Fees Are Reasonable Given the Value of the Data 
Provided to Customers, and When Compared to Competing Market Data 
Products
    The proposed fees are also reasonable as even with the proposed fee 
increase they would continue to represent a relatively modest fee for 
top-of-book data that has proven valuable for investors. The BZX Top 
Feed is a competitively-priced alternative to top-of-book data 
disseminated by other national securities exchanges. It is purchased by 
a wide variety of market participants and vendors, including data 
platforms, websites, fintech firms, buy-side investors, retail brokers, 
regional banks, and securities firms inside and outside of the U.S. 
that desire low cost, high quality, real-time U.S. equity market data. 
By providing lower cost access to U.S. equity market data, the BZX Top 
Feed benefits a wide range of investors that participate in the 
national market system. As discussed, the decision to purchase a 
particular market data product from a particular exchange is largely 
based on two factors: (1) The quality of the data, and (2) the price 
charged for access to that data. The Exchange believes that the BZX Top 
Feed is competitive on both of these factors.
    First, the BZX Top Feed would remain competitively priced compared 
to similar products offered by other comparable U.S. equities 
exchanges. Although the BZX Top Feed is not offered free of charge like 
certain other competitor offerings, particularly those offered by newer 
U.S. equities exchanges that are seeking to grow market share, it is 
made available at a price that is significantly lower than the prices 
charged by the Exchange's main competitors--i.e., those with comparable 
market shares and data quality. Notably, even with the proposed fee 
increase, the BZX Top Feed would remain significantly cheaper than 
similar products offered by New York Stock Exchange LLC (``NYSE''), 
NYSE Arca, Inc. (``Arca''), and Nasdaq both in terms of the fees 
charged for internal distribution and the fees charge for each 
Professional User that is provided access to the feed. For example, 
NYSE charges a total of $3,000 per month for internal distribution of 
their equivalent products, i.e., $1,500 per month for applicable top-
of-book quotation information,\32\ and an additional $1,500 per month 
for transaction information,\33\ both of which are included in the BZX 
Top Feed for a single fee.\34\ Arca, which has a similar pricing model 
to NYSE, also charges a higher rate of $1,500 per month for internal 
distribution of its equivalent products, separated into a $750 per

[[Page 15528]]

month charge for top-of-book quotation information and an additional 
$750 per month charge for transaction information.\35\ Finally, Nasdaq 
charges its internal distributors a fee of $1,500 per month for Nasdaq 
Basic, which includes both top-of-book quotation information and 
transaction information for the same fee, similar to the Exchange's 
pricing model, but again at a higher cost.\36\ In each case, the 
internal distribution charges associated with obtaining comparable U.S. 
equities market data from NYSE, Arca, and Nasdaq runs at least double 
and up to four times as much as the proposed fee to be charged by the 
Exchange, meaning that the Exchange would continue to be offering its 
data at a price that is attractive compared to the prices charged by 
its competitors. Similarly, each of these exchanges charges a fee for 
each professional subscriber.\37\ Those professional subscriber fees 
are each higher than that proposed by the Exchange--i.e., $26 per month 
for Nasdaq,\38\ and $8 per month total for both NYSE and Arca.\39\
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    \32\ See NYSE PDP Market Data Pricing, Section 1.3, NYSE BBO.
    \33\ See NYSE PDP Market Data Pricing, Section 1.4, NYSE Trades.
    \34\ See supra note 4 and accompanying text. The Exchange also 
offers a separate market data product, i.e., BZX Last Sale, that 
exclusively provides last sale information. See BZX Rule 13.8(d). 
However, all of the information contained in the BZX Last Sale Feed 
is also made available in the BZX Top Feed at no additional charge.
    \35\ See NYSE PDP Market Data Pricing, Section 3.3, NYSE Arca 
BBO; NYSE PDP Market Data Pricing, Section 3.4, NYSE Arca Trades.
    \36\ See Nasdaq Equity Rules, Equity 7, Pricing Schedule, 
Section 147(c)(1). In addition, Nasdaq also charges distributors a 
$100 monthly administrative fee. See Nasdaq Equity Rules, Equity 7, 
Pricing Schedule, Section 135.
    \37\ These exchanges use a definition of ``professional 
subscriber'' that is substantially similar to the Professional User 
definition used by the Exchange. See e.g. Nasdaq Equity Rules, 
Equity 7, Pricing Schedule, Section 147(d)(4)(B); NYSE 
Nonprofessional Subscriber Policy, available at https://www.nyse.com/publicdocs/nyse/data/Policy-Non-ProfessionalSubscribers_PDP.pdf.
    \38\ Nasdaq's Professional User fee is divided into Nasdaq 
issues ($13), NYSE issues ($6.50), and other issues ($6.50) for a 
total of $26 per month for each Professional User. See Nasdaq Equity 
Rules, Equity 7, Pricing Schedule, Section 147(b)(1).
    \39\ NYSE and Arca's fees are both broken down into $4 per month 
for BBO information and an additional $4 per month for Trades 
information. See supra notes 32, 33, and 35.
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    Second, the proposed fees are reasonable given the value of the 
data provided in the BZX Top Feed and used by data recipients in their 
profit-generating activities. The BZX Top Feed provides top-of-book 
quotations and transactions executed on the Exchange, and provides a 
valuable window into the market for securities traded on a market that 
accounts for about 5% of U.S. equity market volume today.\40\ As 
discussed, the Exchange offers the BZX Top Feed in a competitive 
environment where firms may freely choose which market data products 
best suit their business needs. Invariably, firms that choose to 
purchase the BZX Top Feed instead of receiving one of the many free 
products offered by other exchanges,\41\ including free products 
offered by an affiliate of the Exchange,\42\ have decided that the 
value of the BZX Top Feed is greater than that offered by those other 
products. Indeed, by incentivizing market quality improvements through 
its Lead Market Maker (``LMM'') and other programs designed to enhance 
the quality of its market,\43\ the Exchange is able to offer higher 
quality market data products to customers. The Exchange consistently 
ranks among the top U.S. equities exchanges in terms of various market 
quality measures, e.g., NBBO quote quality and NBBO market share.\44\ 
In turn, investors may choose to rely on the Exchange's market data 
products instead of other competitor offerings based on the value they 
provide in relation to any additional cost associated with obtaining 
that market data from the Exchange. For example, investors may wish to 
obtain market data from an exchange that has a higher time at the 
inside, as data obtained from an exchange that is quoting more often at 
the NBBO may better reflect the applicable market for securities it 
trades. Similarly, an exchange with greater overall market share will 
produce more transaction information that may be valuable to consumers 
of its data. Improvements in market quality will therefore directly 
impact the value of the market data that an exchange is able to offer 
to investors.
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    \40\ See https://markets.cboe.com/us/equities/market_share/.
    \41\ See e.g., Investors Exchange Fee Schedule, Market Data 
fees.
    \42\ See e.g., Cboe EDGA Exchange, Inc., Fee Schedule, EDGA Top.
    \43\ Under the LMM Program, the Exchange offers daily incentives 
for LMMs securities listed on the Exchange for which the LMM meets 
certain Minimum Performance Standards. See Securities Exchange Act 
Release No. 86213 (June 27, 2019), 84 FR 31951 (July 3, 2019). The 
term ``Minimum Performance Standards'' means a set of standards 
applicable to an LMM that may be determined from time to time by the 
Exchange. See Rule 11.8(e)(1)(E). Such standards will vary between 
LMM Securities depending on the price, liquidity, and volatility of 
the LMM Security in which the LMM is registered. Id. The performance 
measurements will include: (A) Percent of time at the NBBO; (B) 
percent of executions better than the NBBO; (C) average displayed 
size; and (D) average quoted spread. Id.
    \44\ See https://www.cboe.com/us/equities/market_statistics/market_quality/.
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iii. The Proposed Fees Are Equitable and Not Unfairly Discriminatory as 
Internal Distributors Will Be Subject to Uniform Pricing Based on Their 
Usage of the Data and Differences Between the Fees Charged for Internal 
and External Distribution are Appropriate
    The Exchange believes the proposed fees for internal distribution 
of the BZX Top Feed will continue to be allocated fairly and equitably 
among subscribers, and are not unfairly discriminatory, as the proposed 
fees will apply equally to all data recipients that choose to subscribe 
to the BZX Top Feed and distribute that data to internal subscribers. 
As proposed, all internal distributors of the BZX Top Feed will be 
subject to the same internal distribution fee, regardless of the type 
of business that they operate, or the use they plan to make of the data 
feed. Thus, all internal distributors would have access to the BZX Top 
Feed on the same equitable and non-discriminatory terms. Similarly, 
with the introduction of Professional User fees, internal distributors 
of the BZX Top Feed will be subject to the same modest fees based 
solely on the number of Professional Users that each internal 
distributor has chosen to permission for access to this information. 
The Exchange does not believe that it is inequitable, or unfairly 
discriminatory, to charge a fee based on the number of Professional 
Users within a firm that have access to the BZX Top Feed as this 
ensures that firms with the highest usage pay their equitable share for 
the data.
    The Exchange also believes that it is fair and equitable, and not 
unfairly discriminatory, to continue not to charge a fee for internal 
distribution to Non-Professional Users. The Exchange's fee structure is 
generally designed to facilitate lower cost access to its market data 
by retail investors, either through substantially lower User fees for 
Non-Professional Users, or other incentive programs, such as the Small 
Retail Broker Distribution Program, which was recently implemented to 
lower the cost of the Exchange's market data to small broker-dealers 
that serve retail investors. The Exchange does not believe that any 
significant number of Non-Professional Users to [sic] receive BZX Top 
Feed Data through internal, i.e., within the distributor's firm, as 
opposed to external distribution, and in the event that certain firms 
may distribute data internally to Users that qualify as Non-
Professional, providing such Users access without any User fees would 
facilitate the Exchange's overall goals of facilitating access to its 
data by retail investors, which the Commission has continually found to 
be consistent with the Exchange Act.
    Finally, the Exchange believes that it is fair and equitable, and 
not unfairly discriminatory to continue to charge different fees for 
internal and external distribution of the BZX Top Feed. As is common 
practice, the Exchange charges lower fees to distributors that use its 
market data products for internal distribution only than to 
distributors

[[Page 15529]]

that redistribute that data externally to their customers. In the case 
of the BZX Top Feed, external distributors are subject to a higher 
distribution fee, and are also subject to Non-Professional User fees, 
which as discussed above the Exchange has determined to continue not to 
charge to internal distributors.\45\ Increasing the fees that the 
Exchange charges for internal distribution of the BZX Top Feed, as 
proposed, would actually serve to decrease the disparity in charge 
between internal and external distribution, while at the same time 
continuing to facilitate the internal distribution of the BZX Top Feed 
at a lower cost. The Exchange continues to believe that it is 
appropriate to distinguish between internal and external distributors 
in setting fees for the BZX Top Feed as external distributors can 
redistribute the Exchange's market data to its clients for a fee, 
whereas internal distributors are not allowed to redistribute the data.
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    \45\ See BZX Schedule of Fees, BZX Top. The proposed 
Professional User fee for internal distribution of the BZX Top Feed 
is the same as currently charged for external distribution of that 
market data product. Id.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change would 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The Exchange 
operates in a highly competitive environment, and its ability to price 
these data products is constrained by competition among exchanges that 
offer similar data products to their customers. Top-of-book data is 
broadly disseminated by competing U.S. equities exchanges. There are 
therefore a number of alternative products available to market 
participants and investors, including products offered by certain 
competing exchanges without charge. In this competitive environment 
potential subscribers are free to choose which competing product to 
purchase to satisfy their need for market information. Often, the 
choice comes down to price, as market data customers look to purchase 
cheaper top-of-book data products, and quality, as market participants 
seek to purchase data that represents significant market liquidity.
    Intramarket Competition. The Exchange believes that the proposed 
fees do not put any market participants at a relative disadvantage 
compared to other market participants. As discussed, the proposed fees 
would apply to all internal distributors of the BZX Top Feed on an 
equal and non-discriminatory basis, and the continued difference in 
fees for internal and external distribution are appropriate given the 
ability for external distributors to redistribute data externally to 
their clients. The Exchange therefore believes that the proposed fees 
neither favor nor penalize one or more categories of market 
participants in a manner that would impose an undue burden on 
competition.
    To the extent that particular fees would apply to only a subset of 
subscribers, e.g., Professional versus Non-Professional Users, those 
distinctions are not unfairly discriminatory and do not unfairly burden 
one set of customers over another. As discussed, the Exchange does not 
believe that any significant number of Non-Professional Users receive 
BZX Top Feed Data through internal distribution. Further, to the extent 
that any Non-Professional Users receive the BZX Top Feed through 
internal distribution, the Exchange believes that it is not unfairly 
discriminatory not to charge a fee for their usage as this would 
facilitate the dissemination of market data to retail investors.
    Intermarket Competition. The Exchange believes that the proposed 
fees do not impose a burden on competition or on other SROs that is not 
necessary or appropriate in furtherance of the purposes of the Act. In 
setting the proposed fees, the Exchange is constrained by the 
availability of numerous substitute products offered by other national 
securities exchanges. Because market data customers can find suitable 
substitute feeds, an exchange that overprices its market data products 
stands a high risk that users may substitute another product. These 
competitive pressures ensure that no one exchange's market data fees 
can impose an undue burden on competition, and the Exchange's proposed 
fees do not do so here.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    No written comments were either solicited or received.

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 \46\ and paragraph (f) of Rule 19b-4 \47\ 
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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    \46\ 15 U.S.C. 78s(b)(3)(A).
    \47\ 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-2021-020 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-2021-020. 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

[[Page 15530]]

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-2021-020 and should 
be submitted on or before April 13, 2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\48\
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    \48\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-05913 Filed 3-22-21; 8:45 am]
BILLING CODE 8011-01-P