[Federal Register Volume 87, Number 61 (Wednesday, March 30, 2022)]
[Notices]
[Pages 18411-18413]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-06633]
[[Page 18411]]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94511; File No. SR-CboeBZX-2022-021]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
Its Fee Schedule
March 24, 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 14, 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'') 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 as 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 Exchange proposes to amend its fee schedule for its equity
options platform (``BZX Options'') to adopt fees for Certification
Logical Port fees, effective March 1, 2022.\3\
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\3\ The Exchange initially filed the proposed fee changes on
March 1, 2022 (SR-CboeBZX-2022-013). On March 14, 2022, the Exchange
withdrew that filing and submitted this proposal.
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By way of background, the Exchange offers a variety of logical
ports, which provide users with the ability within the Exchange's
System to accomplish a specific function through a connection, such as
order entry, data receipt or access to information. Specifically, the
Exchange offers Logical Ports,\4\ Logical Ports with Bulk Quoting
Capabilities,\5\ Purge Ports,\6\ GRP Ports and Multicast PITCH Server
Ports.\7\ For each type of the aforementioned logical ports that is
used in the production environment, the Exchange also offers
corresponding ports which provide Members and non-Members access to the
Exchange's certification environment to test proprietary systems and
applications (i.e., ``Certification Logical Ports''). The certification
environment facilitates testing using replicas of the Exchange's
production environment process configurations which provide for a
robust and realistic testing experience. For example, the certification
environment allows unlimited firm-level testing of order types, order
entry, order management, order throughput, acknowledgements, risk
settings, mass cancelations, and purge requests. Historically, the
Exchange has not assessed fees for Certification Logical Ports. The
Exchange now proposes to establish a monthly fee for Certification
Logical Ports. Particularly, the Exchange proposes to adopt a monthly
fee of $250 per Certification Logical Port. However, the Exchange notes
that it will continue to offer free of charge one Certification Logical
Port per logical port type offered in the production environment (i.e.,
Logical Ports, Logical Ports with Bulk Quoting Capabilities, Purge
Ports, GRP Ports and Multicast PITCH Server Ports) to each Member or
non-Member, as applicable. Any additional Certification Logical Ports
will be assessed $250 per month per port.\8\ Additionally, Members and
non-Members are not required to purchase any particular production
logical port in order to receive a corresponding Certification Logical
Port free of charge.\9\ Further, the Exchange notes that purchasing
additional Certification Logical Ports is voluntary and not required in
order to participate in the production environment, including live
production trading on the Exchange. The Exchange also notes that other
exchanges similarly assess fees related to their respective testing
environments.\10\
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\4\ Logical Ports include FIX and BOE ports (used for order
entry), drop logical port (which grants users the ability to receive
and/or send drop copies) and ports that are used for receipt of
certain market data feeds.
\5\ Bulk Quoting Capabilities Ports provide users with the
ability to submit and update multiple bids and offers in one message
through logical ports enabled for bulk-quoting.
\6\ Purge Ports allow users to submit a cancelation for all open
orders, or a subset thereof, across multiple sessions under the same
Executing Firm ID (``EFID'').
\7\ Spin Ports and GRP Ports are used to request and receive a
retransmission of data from the Exchange's Multicast PITCH data
feeds.
\8\ For example, if a Member maintains 3 FIX Certification
Logical Ports, 1 Purge Certification Logical Port, and 1 set of
Multicast PITCH Spin Server Certification Logical Port, the Member
will be assessed $500 per month for Certification Logical Port Fees
(i.e., 1 FIX, 1 Purge and 1 set of Multicast PITCH Spin Server
Certification Logical Ports x $0 and 2 FIX Certification Logical
Ports x $250).
\9\ For example, a Member may obtain a Certification Purge Port
free of charge, even if that Member has not otherwise purchased a
Purge Port for the live production environment. Certification
Logical Ports are not automatically enabled for each User, but
rather must be proactively requested by users.
\10\ See e.g., Nasdaq Stock Market LLC, Equity 7, Pricing
Schedule, Section 130. See also MIAX Options Exchange Fee Schedule,
Section 4, Testing and Certification Fees.
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Lastly, the Exchange does not intend to prorate Certification
Logical Ports for the first month of service and intends to make this
clear in the notes section under the Options Logical Port Fees section
of the Fees Schedule.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\11\ Specifically, the
Exchange believes the proposed rule change is consistent with the
Section 6(b)(5) \12\ 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
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open market and a national market system, and, in general, to protect
investors and the public interest. Additionally, the Exchange believes
the proposed rule change is consistent with Section 6(b)(4) of the
Act,\13\ which requires that Exchange rules provide for the equitable
allocation of reasonable dues, fees, and other charges among its
Members and other persons using its facilities.
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\11\ 15 U.S.C. 78f(b).
\12\ 15 U.S.C. 78f(b)(5).
\13\ 15 U.S.C. 78f(b)(4).
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As noted above, the Exchange's certification environment provides a
robust and realistic testing experience using a replica of the
Exchange's production environment process configurations. This
environment enables market participants to manage risk more effectively
through testing software development changes in certification prior to
implementing them in the live trading environment, thereby reducing the
likelihood of a potentially disruptive system failure in the live
trading environment, which has the potential to affect all market
participants. As such, the Exchange believes it's reasonable to adopt a
Certification Logical Port fee as it better enables the Exchange to
continue to maintain and improve its testing environment, which the
Exchange believes serves to improve live production trading on the
Exchange. The Exchange also believes the proposed Certification Logical
Port fee is reasonable because while such ports will no longer be
completely free, Members and non-Members will continue to be entitled
to receive free of charge one Certification Logical Port for each type
of logical port that are currently offered in the production
environment. Notably, the Exchange believes one Certification Logical
Port per logical port type will be sufficient for most users and indeed
anticipates that the majority of users will not purchase additional
Certification Logical Ports. More specifically, while the Exchange has
no way of predicting with certainty the impact of the proposed changes,
it anticipates approximately 17% of Users to be assessed fees for
Certification Logical Ports (i.e., request Certification Ports in
excess of the Certification Logical Ports provided free of charge). For
those users who wish to obtain additional Certification Logical Ports
based on their respective business needs, they are able to do so for a
modest fee. Indeed, the proposed fee is lower than the fees assessed
for the corresponding logical ports used in the Exchange's production
environment.\14\ Additionally, the Exchange notes other exchanges
similarly assess fees relating to their respective testing
environments.\15\ Further, the decision to purchase additional ports is
optional and no market participant is required or under any regulatory
obligation to purchase excess Certification Logical Ports in order to
access the Exchange's certification environment.\16\
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\14\ See Cboe BZX Options Fees Schedule, Options Logical Port
Fees.
\15\ See e.g., Nasdaq Stock Market LLC, Equity 7, Pricing
Schedule, Section 130. See also MIAX Options Exchange Fee Schedule,
Section 4, Testing and Certification Fees.
\16\ Although many Users use Certification Logical Ports on a
daily basis, the Exchange notes frequency of use of Certification
Logical Ports varies by User and depends on a User's business needs.
To the extent a User purchases additional Certification Logical
Ports and its respective needs change or it determines it no longer
wishes to maintain excess Certification Logical Ports, the User is
free to cancel such ports for the following month(s).
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The Exchange believes the proposed fee is also equitable and not
unfairly discriminatory because it applies uniformly to all market
participants that choose to obtain additional Certification Logical
Ports. The Exchange also believes the proposed fee is reasonable,
equitable and not unfairly discriminatory because it is designed to
encourage market participants to be efficient with their respective
Certification Logical Port usage. Without some sort of fee for its
Certification Logical Ports, the Exchange believes that Members and
non-Members may be less efficient in testing their systems, potentially
resulting in excessive time and resources being consumed by the
Exchange in supporting testing and certifying Members and non-Members
to the detriment of all market participants as Exchange resources are
diverted away from other trading operations. Additionally, similar to
its production environment, the Exchange's certification environment
does not have unlimited system capacity to support unlimited testing.
As such, the proposed fee structure also ensures that firms that use
the most capacity pay for that capacity, rather than placing that
burden on market participants that have more modest needs. The Exchange
lastly believes that its proposed fee is aligned with the goals of the
Commission in facilitating a competitive market for all firms that
trade on the Exchange and of ensuring that critical market
infrastructure has ``levels of capacity, integrity, resiliency,
availability, and security adequate to maintain their operational
capability and promote the maintenance of fair and orderly markets.''
\17\
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\17\ See Securities Exchange Act Release No. 73639 (November 19,
2014), 79 FR 72251 (December 5, 2014) (File No. S7-01-13)
(Regulation SCI Adopting Release).
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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. The
Exchange does not believe that the proposed rule change will impose any
burden on intramarket competition because as the proposed change
applies uniformly to all market participants. Additionally, the
Exchange does not believe that the proposed fee creates an undue burden
on competition because the Exchange will continue to offer free of
charge one Certification Logical Port per each logical port type
offered in the production environment. Although the Exchange now
proposes to charge users for additional Certification Logical Ports,
the Exchange believes without some sort of fee assessed for excess
Certification Logical Ports, Members and non-Members may be less
efficient in testing their systems, potentially resulting in excessive
time and resources being consumed by the Exchange and also potentially
impacting the certification environment's capacity thresholds. The
proposed fee structure therefore would ensure that market participants
that pay the proposed fee are the ones that demand the most resources
from the Exchange. Also as discussed, the purchase of additional ports
is optional and based on the business needs of each market participant.
Moreover, such market participants will continue to benefit from access
to the certification environment, which the Exchange believes provides
a robust and realistic testing experience via a replica of the
production environment.
The Exchange does not believe that the proposed rule changes will
impose any burden on intermarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. Particularly,
the proposed change applies only to the Exchange's certification
environment. Additionally, the Exchange notes that it operates in a
highly competitive market. Members have numerous alternative venues
that they may participate on and direct their order flow, including 15
other options exchanges, as well as off-exchange venues, where
competitive products are
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available for trading. Indeed, participants can readily choose to send
their orders to other exchange, and, additionally off-exchange venues,
if they deem overall 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 change
imposes any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act.
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\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) of the Act \20\ 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 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).
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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-2022-021 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-2022-021. 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-2022-021 and should be submitted
on or before April 20, 2022.
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).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2022-06633 Filed 3-29-22; 8:45 am]
BILLING CODE 8011-01-P