[Federal Register Volume 87, Number 49 (Monday, March 14, 2022)]
[Notices]
[Pages 14310-14312]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-05246]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-94377; File No. SR-CboeBZX-2022-011]


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

March 8, 2022.
    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 1, 2022, 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. (the ``Exchange'' or ``BZX'' or ``BZX 
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/bzx/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

I. 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 modify the Add/
Remove Volume Tiers 1 and 2, and to eliminate the Single MPID Investor 
Tier 1. The Exchange proposes to implement the proposed change to its 
fee schedule on March 1, 2022.
    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 
Securities Exchange Act of 1934 (the ``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 ``Maker-Taker'' model whereby it pays credits to 
Members that add liquidity and assesses fees to those that remove 
liquidity. The Exchange's fee 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 $0.0016 per share for 
orders that add liquidity and assesses a fee of $0.0030 per share for 
orders that remove liquidity. Additionally, in response to the 
competitive environment, the Exchange also offers tiered pricing which 
provides Members opportunities to qualify for higher rebates or reduced 
fees where certain volume criteria and thresholds are met. Tiered 
pricing provides an incremental incentive for Members to strive for 
higher tier levels, which provides increasingly higher benefits or 
discounts for satisfying increasingly more stringent criteria.
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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (February 22, 2022), available at https://markets.cboe.com/us/equities/market_statistics/.
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    Under footnote 1 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers. In particular, the Exchange offers six 
displayed add volume tiers that each provide an enhanced rebate for 
Members' qualifying orders yielding fee codes B,\4\ V,\5\ or Y,\6\ 
where a Member reaches certain add volume-based criteria. Currently 
Tiers 1 and 2 are as follows:
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    \4\ Orders yielding Fee Code ``B'' are orders adding liquidity 
to BZX (Tape B).
    \5\ Orders yielding Fee Code ``V'' are orders adding liquidity 
to BZX (Tape A).
    \6\ Orders yielding Fee Code ``Y'' are orders adding liquidity 
to BZX (Tape C).
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     Tier 1 provides a rebate of $0.0020 per share to 
qualifying orders (i.e., orders yielding fee codes B, V, or Y) where 
the Member has an ADAV \7\ as a percentage of TCV \8\ equal to or 
greater than 0.10%, or the Member has an ADAV equal to or greater than 
10 million shares.
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    \7\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day and ``ADV'' means average daily 
volume calculated as the number of shares added or removed, 
combined, per day. ADAV and ADV are calculated on a monthly basis.
    \8\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply.
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     Tier 2 provides a rebate of $0.0025 per share to 
qualifying orders (i.e., orders yielding fee codes B, V, or Y) where 
the Member has an ADAV as a percentage of TCV equal to or greater than 
0.20%, or the Member has an ADAV equal to or greater than 20 million 
shares.
    Now, the Exchange proposes to amend the criteria of Tier 1 and 
reduce the rebate applicable to Tier 2. Specifically, the Exchange 
proposes to amend Tiers 1 and 2 as follows:
     Proposed Tier 1 will provide a rebate of $0.0020 per share 
to qualifying orders (i.e., orders yielding fee codes B, V, or Y) where 
the Member has an ADAV as a percentage of TCV equal to or greater than 
0.15%, or the Member has an ADAV equal to or greater than 15 million 
shares.
     Tier 2 provides a rebate of $0.23 per share to qualifying 
orders (i.e., orders yielding fee codes B, V, or Y) where the Member 
has an ADAV as a percentage of TCV equal to or greater than 0.20%, or 
the Member has an ADAV equal to or greater than 20 million shares.
    Under footnote 4 of the Fee Schedule, the Exchange currently offers 
two Single MPID Investor Tiers. In particular, the Single MPID Investor 
Tier 1 provides an enhanced rebate of $0.0030 per share for

[[Page 14311]]

Members qualifying orders yielding fee codes B, V, or Y where (1) an 
MPID has a Step-Up ADV \9\ from May 2021 equal to or greater than 0.10% 
of TCV or a Step-Up ADV from May 2021 equal to or greater than 8 
million shares; and (2) the MPID adds a Step-Up ADAV \10\ from May 2021 
equal to or greater than 0.05% of TCV. Now, the Exchange proposes to 
eliminate the Single MPID Investor Tier 1 as no Member has reached this 
tier in several months and the Exchange therefore no longer wishes to, 
nor is it required to, maintain such a tier. Based on the proposed 
elimination of Single MPID Investor Tier 1, the Exchange also proposes 
to renumber existing Single MPID Investor Tier 2 to Single MPID 
Investor Tier 1.
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    \9\ ``Step-Up ADV'' means ADV in the relevant baseline month 
subtracted from current day ADV.
    \10\ ``Step-Up ADAV'' means ADAV in the relevant baseline month 
subtracted from current ADAV.
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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,\11\ in general, and 
furthers the objectives of Section 6(b)(4) and 6(b)(5),\12\ 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, and thus is in the public interest. 
Additionally, the Exchange notes that relative volume-based incentives 
and discounts have been widely adopted by exchanges,\13\ including the 
Exchange,\14\ and are reasonable, equitable and non-discriminatory 
because they are open to all Members on an equal basis and provide 
additional benefits or discounts that are reasonably related to (i) the 
value to an exchange's market quality and (ii) associated higher levels 
of market activity, such as higher levels of liquidity provision and/or 
growth patterns. Competing equity exchanges offer similar tiered 
pricing structures, including schedules of rebates and fees that apply 
based upon members achieving certain volume and/or growth thresholds, 
as well as assess similar fees or rebates for similar types of orders, 
to that of the Exchange.
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    \11\ 15 U.S.C. 78f.
    \12\ 15 U.S.C. 78f(b)(4) and (5).
    \13\ See EDGX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \14\ See BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
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    While the proposed changes to the criteria of the displayed add 
volume Tier 1 is more stringent than the current criteria, the Exchange 
believes that the change is reasonable as it continues to incentivize 
Members to increase their displayed liquidity adding volume on the 
Exchange. Additionally, while the displayed add volume Tier 2 provides 
a lesser rebate than that currently offered under the same criteria, 
the Exchange similarly believes that the change is reasonable as it 
continues to incentivize Members to increase their displayed liquidity 
adding volume on the Exchange. Furthermore, the Exchange believes that 
the existing and proposed enhanced rebates under Tiers 1 and 2, 
respectively, are commensurate with the proposed and existing criteria, 
respectively. Proposed Tiers 1 and 2 will continue to be available to 
all Members and provide all Members with an additional opportunity to 
receive an enhanced rebate. An overall increase in activity would 
deepen the Exchange's liquidity pool, offers additional cost savings, 
support the quality of price discovery, promote market transparency and 
improve market quality, for all investors.
    The Exchange also believes that the proposal represents an 
equitable allocation of fees and rebates and is not unfairly 
discriminatory because all Members will be eligible for the displayed 
add volume Tiers 1 and 2 and have the opportunity to meet the Tiers' 
criteria and receive the corresponding enhanced rebate if such criteria 
is met. Without having a view of activity on other markets and off-
exchange venues, the Exchange has no way of knowing whether these 
proposed changes would definitely result in any Members qualifying for 
Tiers 1 and 2. While the Exchange has no way of predicting with 
certainty how the proposed changes will impact Member activity, based 
on trading activity from the prior month, the Exchange anticipates that 
no Member will achieve proposed Tier 1 and two Members will satisfy the 
criteria under proposed Tier 2. The Exchange also notes that proposed 
changes will not adversely impact any Member's ability to qualify for 
reduced fees or enhanced rebates offered under other tiers. Should a 
Member not meet the proposed new criteria, the Member will merely not 
receive that corresponding enhanced rebate.
    The Exchange believes the proposed amendment to remove Single MPID 
Investor Tier 1 is reasonable because no Member has achieved this tier 
in several months. Moreover, the Exchange is not required to maintain 
this tier and Members still have a number of other opportunities and a 
variety of ways to receive enhanced rebates for displayed liquidity, 
including the enhanced rebate under the proposed Single MPID Investor 
Tier 1. The Exchange believes the proposal to eliminate this tier is 
also equitable and not unfairly discriminatory because it applies to 
all Members.

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 orders equally, and 
thus applies to all Members equally. Additionally, the Exchange 
believes the proposed rule change does not impose any burden on 
intermarket competition that is not necessary or appropriate in 
furtherance of the purpose of the Act.
    As previously discussed, the Exchange operates in a highly 
competitive market. Members have numerous alternative venues that they 
may participate on and direct their order flow, including 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.\15\ 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

[[Page 14312]]

investors and listed companies.'' \16\ 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'. . . .''.\17\ Accordingly, the Exchange 
does not believe its proposed fee changes imposes any burden on 
competition that is not necessary or appropriate in furtherance of the 
purposes of the Act.
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    \15\ Supra note 3.
    \16\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \17\ 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) of the Act \18\ and paragraph (f) of Rule 19b-4 \19\ 
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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    \18\ 15 U.S.C. 78s(b)(3)(A).
    \19\ 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-2022-011 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-2022-011. 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-CboeBZX-2022-011 and should be submitted 
on or before April 4, 2022.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\20\
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    \20\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-05246 Filed 3-11-22; 8:45 am]
BILLING CODE 8011-01-P