[Federal Register Volume 86, Number 189 (Monday, October 4, 2021)]
[Notices]
[Pages 54777-54780]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-21484]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-93148; File No. SR-CboeBYX-2021-022]


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

September 28, 2021.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on September 21, 2021, Cboe BYX Exchange, Inc. (``Exchange'' or 
``BYX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I and 
II below, which Items have been prepared by the self-regulatory 
organization. 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 BYX Exchange, Inc. (the ``Exchange'' or ``BYX'' or ``BYX 
Equities'') proposes 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 applicable to its 
equities trading platform (``BYX Equities'') to modify the rebate 
associated with certain routing fee codes and eliminate certain routing 
fee codes.\3\
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    \3\ The Exchange initially filed the proposed fee changes 
September 1, 2021 (SR-CboeBYX-2021-019). On September 13, 2021, the 
Exchange withdrew that filing and re-submitted the proposed fee 
changes (SR-CboeBZX-2021-021). On September 21, 2021, the Exchange 
withdrew that filing and re-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

[[Page 54778]]

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 14% 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 believes that the ever-shifting market share among 
the exchanges from month to month demonstrates that market participants 
can shift order flow, discontinue, or 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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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (August 26, 2021), available at https://markets.cboe.com/us/equities/market_statistics/.
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    The Exchange assesses fees and provides rebates in connection with 
orders routed away to various exchanges. Now, the Exchange proposes to 
modify certain routing fee codes currently under the Fee Codes and 
Associated Fees section of the Fee Schedule. First, the Exchange 
proposes to modify fee code C, which is appended to orders routed to 
Nasdaq BX, Inc. (``Nasdaq BX'') using destination specific, TRIM or 
SLIM routing strategies, and currently provides a rebate of $0.00100 
per share. Specifically, the Exchange proposes to reduce the rebate to 
$0.00050 per share.
    Second, the Exchange proposes to modify fee code NX, which is 
appended to orders routed to NYSE National, Inc. (``NYSE National'') 
using the TRIM or SLIM routing strategy, and currently provides a 
rebate of $0.00200 per share. The Exchange proposes to reduce the 
rebate to $0.00050 per share.
    Finally, as a result of minimal use in the last months, the 
Exchange proposes to eliminate fee codes BO, IX, and SX in their 
entirety. Fee code BO is appended to orders routed using a destination 
specific routing strategy unless otherwise specified, and currently 
assesses a fee of $0.00300 per share. Fee code IX is appended to orders 
routed to the Investors Exchange LLC (``IEX'') using a destination 
specific routing strategy, and currently assesses a fee of $0.00300 per 
share. Fee code SX is appended to orders routed using the SLIM routing 
strategy (except to Cboe BZX Exchange, Inc. (``BZX Equities''), Cboe 
EDGA Exchange, Inc. (``EDGA Equities'') Nasdaq BX, NYSE American LLC 
(``NYSE American'') or NYSE National), and currently assesses a fee of 
$0.00290 per share. The Exchange believes that because so few users 
elect to route their orders with specifications to which fee code BO, 
IX, or SX is applicable, the current demand does not warrant the 
infrastructure and ongoing Systems maintenance required to support the 
separate fee codes. Therefore, the Exchange now proposes to delete fee 
code BO, IX, and SX in the Fee Schedule. The Exchange notes that users 
will continue to be able to choose to route their orders with the same 
specifications to which fee codes BO, IX, and SX currently applies--
such orders will simply be assessed the fees currently in place for 
routed orders generally.\5\ That is, if any of the routed orders to 
which fee code BO, IX, or SX currently apply fee code X will be 
appended to such orders, which assesses a fee of $0.00300 per share.
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    \5\ The Exchange notes that there are other fee codes that apply 
to certain other routing specifications, however, those routed 
orders not otherwise specified in such other routing fee code 
descriptions yield the general routing fee code X.
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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,\6\ in general, and 
furthers the objectives of Section 6(b)(4),\7\ 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) \8\ 
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.
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    \6\ 15 U.S.C. 78f.
    \7\ 15 U.S.C. 78f(b)(4).
    \8\ 15 U.S.C. 78f(b)(5).
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    As described above, 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 Exchange believes that 
its proposal to reduce the rebates applicable to fee codes C and NX is 
fair, equitable, and reasonable because the proposed fees and rebate 
remain consistent with pricing offered by the Exchange's affiliates and 
competitors and does not represent a significant departure from the 
Exchange's general pricing structure. Specifically, the proposed 
rebates applicable to fee codes C and NX are more than that offered by 
the Nasdaq Stock Market LLC (``Nasdaq''), which does not provide a 
standard rebate for similar orders.\9\ Therefore, the Exchange believes 
the proposed rebates associated with fee codes C and NX remain 
consistent with pricing previously offered by the Exchange's affiliates 
and other exchanges and does not represent a significant departure from 
such pricing.
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    \9\ See ``Route Rates'' on the Nasdaq fee schedule at http://nasdaqtrader.com/Trader.aspx?id=PriceListTrading2.
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    The Exchange believes the proposed rule change to remove fee code 
BO, IX, and SX is reasonable as the Exchange has observed a minimal 
amount of volume in orders yielding the fee code and, therefore, the 
continuation of these fee codes does not warrant the infrastructure and 
ongoing Systems maintenance required to support separate fee codes for 
specific routed orders. As such, the Exchange also believes that is 
reasonable and equitable to assess routed orders which meet the 
specifications to which fee code BO, IX, and SX are currently 
applicable the standard routing fee currently in place for all other 
routed orders--via fee code X. The fee associated with fee code X is 
$0.00300, which is the same as the fee currently assessed for orders 
yielding fee code BO and IX, and is only slightly higher than the fee 
currently assessed for fee code SX. The Exchange believes that the 
proposed rule change is equitable and not unfairly discriminatory 
because Members will continue to have the option to elect to route 
their orders in the same manner and will be automatically and uniformly 
assessed the applicable standard rates in place for generally all other 
routed orders. Further, 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 optional, and the Exchange

[[Page 54779]]

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 changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
that the proposed modifications represent a significant departure from 
previous pricing offered by the Exchange or pricing offered by the 
Exchange's competitors. Further, while the Exchange is proposing to 
eliminate fee codes BO, IX, and SX orders that meet specifications of 
fee code BO, IX, or SX going forward will be assessed the rate for 
orders routed generally. Members may opt to disfavor the Exchange's 
pricing if they believe that alternatives offer them better value. 
Accordingly, the Exchange does not believe that the proposed change 
will impair the ability of Members or competing venues to maintain 
their competitive standing in the financial markets.
    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 
fee and rebate modifications will continue to apply to all Members 
equally, and as noted above, orders currently meeting the 
specifications of fee code BO, IX, or SX will be assessed the rate for 
orders routed generally under fee code X. 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 
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 14% of the market share.\10\ 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.'' \11\ 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'. . . .''.\12\ 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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    \10\ Supra note 3.
    \11\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \12\ 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 upon filing pursuant 
to Section 19(b)(3)(A) \13\ of the Act and paragraph (f)(2) of Rule 
19b-4 \14\ thereunder, because it establishes a due, fee, or other 
charge imposed by the Exchange. At any time within 60 days of the 
filing of such 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 shall institute proceedings under Section 19(b)(2)(B) \15\ 
of the Act to determine whether the proposed rule change should be 
approved or disapproved.
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    \13\ 15 U.S.C. 78s(b)(3)(A).
    \14\ 17 CFR 240.19b-4(f).
    \15\ 15 U.S.C. 78s(b)(2)(B).
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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-2021-022 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-2021-022. 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 will also 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

[[Page 54780]]

comment submissions. You should submit only information that you wish 
to make available publicly. All submissions should refer to File Number 
SR-CboeBYX-2021-022 and should be submitted on or before October 25, 
2021.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\16\
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    \16\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2021-21484 Filed 10-1-21; 8:45 am]
BILLING CODE 8011-01-P