[Federal Register Volume 86, Number 76 (Thursday, April 22, 2021)]
[Notices]
[Pages 21363-21365]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-08309]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-91593; File No. SR-CboeBYX-2021-010]


Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
its Fees Schedule

April 16, 2021.
    Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of 
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby 
given that, on April 12, 2021, 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 and II 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\ 15 U.S.C. 78a.
    \3\ 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 BYX Exchange, Inc. (the ``Exchange'' or ``BYX'' or ``BYX 
Equities'') 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 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 decrease the 
standard liquidity removing rebate and eliminate the Step-Up Tiers 
provided under footnote 2. The Exchange proposes to implement the 
proposed change to its Fee Schedule on April 1, 2021.\4\
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    \4\ The Exchange initially filed the proposed fee changes April 
1, 2021 (SR-CboeBYX-2021-007). On April 12, 2021, the Exchange 
withdrew that filing and submitted this proposal.
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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, no single registered equities 
exchange has more than 16% of the market share.\5\ 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 remove and 
provide 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 and assesses a fee of $0.00200 
per share for orders that add liquidity. For orders priced below $1.00, 
the Exchange does not assess a fee or provide a rebate for orders that 
add liquidity and assesses a fee of 0.10% of total dollar value for 
orders that remove 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 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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    \5\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (March 30, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
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    As stated above, the Exchange currently provides a standard rebate 
of $0.00050 per share for liquidity removing orders (i.e., those 
yielding fee codes N,\6\ W,\7\ and BB \8\) in securities priced at or 
above $1.00. Orders in securities priced below $1.00 that remove 
liquidity are assessed a fee of 0.10% of the total dollar value. The 
Exchange now proposes to decrease the current standard rebate of 
$0.00050 per share to $0.00020 per share for orders that remove 
liquidity for securities priced at or above $1.00. Orders that remove 
liquidity in securities priced below $1.00 would continue to be 
assessed a fee of 0.10% of the total dollar value. Although this 
proposed standard rebate for liquidity removing orders is lower than 
the current base rate for such orders, other taker-maker exchanges 
charge a fee for firms removing liquidity that do not meet certain 
volume thresholds.\9\
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    \6\ Orders yielding Fee Code ``N'' are orders removing liquidity 
from BYX (Tape C).
    \7\ Orders yielding Fee Code ``W'' are orders removing liquidity 
from BYX (Tape A).
    \8\ Orders yielding Fee Code ``BB'' are orders removing 
liquidity from BYX (Tape B).
    \9\ E.g., the Nasdaq BX offers rebates ranging from $0.0009 to 
$0.0018 to firms reaching certain adding and removing liquidity 
volume thresholds; however, it charges a fee of $0.0007 to firms 
removing liquidity that do not reach the adding and removing volume 
thresholds. See http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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    The tiered pricing models set forth in footnote 2 of the Fee 
Schedule (Step-Up Tiers) provide Members an opportunity to qualify for 
a reduced fee on their orders that add liquidity where they increase 
their relative liquidity each month over a predetermined baseline.

[[Page 21364]]

Tier 1 of the Step-Up Tiers provides a reduced fee of $0.0016 per share 
to a Member that has a Step-Up Add TCV \10\ from December 2019 equal to 
or greater than 0.05%. The Exchange now proposes to eliminate the Step-
Up Tiers and reserve footnote 2. The Exchange no longer wishes to, nor 
is it required to, maintain such a tier and therefore proposes to 
eliminate the Step-Up Tier from the Fee Schedule. Specifically, the 
proposed rule change removes this tier as the Exchange would rather 
redirect resources and funding into other programs and tiers intended 
to incentivize increased order flow. As a result of the proposed 
change, the Exchange also proposes to eliminate references to footnote 
2 from fee codes B,\11\ V,\12\ and Y.\13\
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    \10\ ``Step-Up Add TCV'' means ADAV as a percentage of TCV in 
the relevant baseline month subtracted from current ADAV as a 
percentage of TCV.
    \11\ Orders yielding Fee Code ``B'' are orders adding liquidity 
to BYX (Tape B).
    \12\ Orders yielding Fee Code ``V'' are orders adding liquidity 
to BYX (Tape A).
    \13\ Orders yielding Fee Code ``Y'' are orders adding liquidity 
to BYX (Tape C).
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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,\14\ in general, and 
furthers the objectives of Section 6(b)(4) and 6(b)(5),\15\ in 
particular, as it is designed to provide for the equitable allocation 
of reasonable dues, fees and other charges among its Members, issuers 
and other persons using its facilities. 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. The 
proposed rule changes reflect a competitive pricing structure designed 
to incentivize market participants to direct their order flow to the 
Exchange, which the Exchange believes would enhance market quality to 
the benefit of all Members.
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    \14\ 15 U.S.C. 78f.
    \15\ 15 U.S.C. 78f(b)(4) and (5).
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    In particular, the Exchange believes that the proposed amendment to 
reduce the standard liquidity removing rebate is reasonable, equitable 
and non-discriminatory because the proposed change represents a rebate 
decrease and such rebates are equally applicable to liquidity removing 
orders and thus are also equally applicable to all Members of the 
Exchange. Additionally, the proposed rebate for liquidity removing 
orders are still higher than rebates offered at other exchanges for 
similar transactions.\16\
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    \16\ Supra note 7[sic].
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    The Exchange also believes the proposed amendment to remove the 
Step-Up Tier is reasonable because no Member has achieved this tier in 
several months. Furthermore, the Exchange is not required to maintain 
this tier and as discussed, Members still have a number of other 
opportunities and a variety of ways to receive reduced fees, including 
the including existing Tiers 1 through 5 of the Add/Remove Volume 
Tiers. The Exchange believes the proposal to eliminate the Step-Up Tier 
is also equitable and not unfairly discriminatory because it applies to 
all Members.
    As noted above, the Exchange operates in a highly competitive 
market. The Exchange is only one of 16 equity venues to which market 
participants may direct their order flow, and it represents a small 
percentage of the overall market. It is also only one of several taker-
maker exchanges. Competing equity exchanges offer similar rates and 
tiered pricing structures to that of the Exchange, including schedules 
of rebates and fees that apply based upon members achieving certain 
volume thresholds.

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. 
Particularly, the proposed changes apply to all liquidity removing 
orders equally, and thus apply 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 other 
equities exchanges, 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.\17\ 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.'' \18\ 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'. . . .''.\19\ Accordingly, the Exchange 
does not believe its proposed fee changes impose any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \17\ Supra note 3[sic].
    \18\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \19\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. 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 neither solicited nor received comments on the 
proposed rule change.

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) \20\ of the Act and paragraph (f) of Rule 19b-4 \21\ 
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

[[Page 21365]]

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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    \20\ 15 U.S.C. 78s(b)(3)(A).
    \21\ 17 CFR 240.19b-4(f)(2).
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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-2021-010 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-2021-010. 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-2021-010, and should be 
submitted on or before May 13, 2021.
    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\22\
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    \22\ 17 CFR 200.30-3(a)(12).

J. Lynn Taylor,
Assistant Secretary.
[FR Doc. 2021-08309 Filed 4-21-21; 8:45 am]
BILLING CODE 8011-01-P