[Federal Register Volume 87, Number 156 (Monday, August 15, 2022)]
[Notices]
[Pages 50133-50135]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-17432]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-95457; File No. SR-CboeBZX-2022-041]


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

August 9, 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 August 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'') 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.

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 (``BZX Equities'') by eliminating the 
Supplemental Incentive Program under Footnote 1 (Add/Remove Volume 
Tiers). The Exchange proposes to implement these changes effective 
August 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 rebates to 
members that add liquidity and assesses fees to those that remove 
liquidity.
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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (June 27, 2022), available at https://markets.cboe.com/us/equities/market_statistics/.
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    The Exchange's Fee Schedule sets forth the standard rebates and 
rates applied per share for orders that provide and remove liquidity, 
respectively. Currently, for orders in securities priced at or above 
$1.00, the Exchange provides a standard rebate of $0.00160 per share 
for orders that add liquidity and assesses a fee of $0.0030 per share 
for orders that remove liquidity. For orders in securities priced below 
$1.00, the Exchange does not provide a rebate or assess a fee for 
orders that add liquidity and assesses a fee of 0.30% of total dollar 
value for orders that remove liquidity. Additionally, in response to 
the competitive environment, the Exchange also offers tiered pricing, 
which provides Members with opportunities to qualify for higher rebates 
or lower 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 more stringent criteria.
Supplemental Incentive Program
    Pursuant to footnote 1 of the Fee Schedule, the Exchange currently 
offers three Supplemental Incentive Program tiers--one tier each for 
Fee Codes B \4\, V,\5\ and Y.\6\ Each tier provides an additional 
enhanced rebate for Members that add a certain Tape ADAV \7\ as a 
percentage of that Tape's TCV.\8\ The Exchange no longer desires to 
maintain such tiers and therefore proposes to eliminate the 
Supplemental Program Incentive tiers for Tapes A, B, and C from the fee 
schedule. The Exchange would rather redirect future resources and 
funding into other programs and tiers intended to incentivize increased 
order flow.
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    \4\ Orders yielding Fee Code ``B'' are displayed orders adding 
liquidity to BZX (Tape B).
    \5\ Orders yielding Fee Code ``V'' are displayed orders adding 
liquidity to BZX (Tape A).
    \6\ Orders yielding Fee Cody ``Y'' are displayed orders adding 
liquidity to BZX (Tape C).
    \7\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day and is 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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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\9\ Specifically, the Exchange believes the proposed rule change is 
consistent with the Section 6(b)(5) \10\ 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. 
Additionally, the Exchange believes the proposed rule change is 
consistent with

[[Page 50134]]

the Section 6(b)(5) \11\ requirement that the rules of an exchange not 
be designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers.
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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.
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    The Exchange believes that eliminating the Supplemental Incentive 
Program under Footnote 1 is reasonable because the Exchange is not 
required to maintain this program or provide additional rebates. Orders 
yielding fee codes B, V, or Y have other opportunities to obtain 
enhanced rebates, such as via the Add Volume Tiers or the Single MPID 
Investor Tier.\12\ The Exchange believes that eliminating the 
Supplemental Incentive Program is equitable and not unfairly 
discriminatory because it applies uniformly to all Members. The 
Exchange also notes that the proposed changes will not adversely impact 
any Member's ability to qualify for reduced fees or enhanced rebates 
offered under other tiers.
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    \12\ See Cboe BZX U.S. Equities Exchange Fee Schedule.
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    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 maker-
taker 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. Specifically, 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 
or liquidity provision and/or growth patterns.
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    \13\ See Cboe EDGX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
    \14\ See Cboe BZX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
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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 competition that is not necessary or appropriate 
in furtherance of the purposes of the Act.
    Particularly, the proposed elimination of the Supplemental 
Incentive Program does not impose a burden on intramarket competition 
that is not in furtherance of the Act in that the elimination of the 
tier applies to all Members equally and all Members will continue to 
have an opportunity to receive enhanced rebates or reduced fees offered 
under other tiers. Furthermore, the Exchange believes that the 
remaining tiers will continue to incentivize Members to submit 
additional liquidity to the Exchange and to increase their order flow 
on the Exchange generally, thereby contributing to a deeper and more 
liquid market and promoting price discovery and market quality on the 
Exchange to the benefit of all market participants and enhancing the 
attractiveness of the Exchange as a trading venue, which the Exchange 
believes, in turn, would continue to encourage market participants to 
direct additional order flow to the Exchange. Greater liquidity 
benefits all Members by providing more trading opportunities and 
encourages Members to send additional orders to the Exchange, thereby 
contributing to robust levels of liquidity, which benefits all market 
participants.
    The Exchange believes the proposal to eliminate the Supplemental 
Incentive Program does not impose a burden on intermarket competition 
that is not necessary or appropriate in furtherance of the purposes of 
the Act. The Exchange does not believe that the proposed change 
represents a significant departure from pricing currently offered by 
the Exchange or pricing offered by other equities exchanges. 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 changes will impair the ability of 
Members or competing venues to maintain their competitive standing in 
the financial markets. 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 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\
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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

[[Page 50135]]

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-2022-041 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-2022-041. 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. 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-2022-041, and should 
be submitted on or before September 6, 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,
Deputy Secretary.
[FR Doc. 2022-17432 Filed 8-12-22; 8:45 am]
BILLING CODE 8011-01-P