[Federal Register Volume 88, Number 145 (Monday, July 31, 2023)]
[Notices]
[Pages 49518-49521]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2023-16122]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-97977; File No. SR-CboeBZX-2023-049]


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

July 25, 2023.
    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 July 12, 2023, Cboe BZX Exchange, Inc. (``Exchange'' or ``BZX'') 
filed with the Securities and Exchange Commission (``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.

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'') as follows: (1) adopt a 
new Add Volume Tier and renumber the remaining tiers; (2) adopt a new 
Step-Up Tier; and (3) modifying the rates associated with certain fee 
codes. The Exchange proposes to implement the proposed change to its 
fee schedule on July 3, 2023.\3\
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    \3\ The Exchange initially filed the proposed fee change on June 
30, 2023 (SR-CboeBZX-2023-045). On July 12, 2023, the Exchange 
withdrew that proposal 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,\4\ no single registered 
equities exchange has more than 15% of the market share. Thus, in such 
a low-concentrated and highly competitive market, no single equities

[[Page 49519]]

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. 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.\5\ 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.\6\ 
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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    \4\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (June 22, 2023), available at https://www.cboe.com//equities/market_statistics/.
    \5\ See BZX Equities Fee Schedule, Standard Rates.
    \6\ Id.
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Add Volume Tiers
    Pursuant to footnote 1 of the Fee Schedule, the Exchange currently 
offers various Add/Remove Volume Tiers. In particular, the Exchange 
offers seven Add Volume Tiers that provide Members an opportunity to 
receive enhanced rebates for orders yielding fee codes B,\7\ V,\8\ and 
Y \9\ where a Member reaches certain add volume-based criteria offered 
in each tier. The Exchange now proposes to introduce a new Add Volume 
Tier 4 and renumber existing Add Volume Tiers 4-7. The proposed 
criteria of new Add Volume Tier 4 is as follows:
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    \7\ Orders yielding Fee Code ``B'' are displayed orders adding 
liquidity to BZX (Tape B).
    \8\ Orders yielding Fee Code ``V'' are displayed orders adding 
liquidity to BZX (Tape A).
    \9\ Orders yielding Fee Code ``Y'' are displayed orders adding 
liquidity to BZX (Tape C).
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     Proposed Add Volume Tier 4 will provide a rebate of 
$0.0028 per share for qualifying orders (i.e., orders yielding fee 
codes B, V, or Y) where (1) Member is enrolled in at least 50 BZX-
listed LMP Securities \10\ for which it meets the following criteria 
for at least 50% of the trading days in the applicable month: (i) 
Member has an NBBO Time \11\ >=15% or an NBBO Size Time \12\ >=25%; and 
(ii) Member has a Displayed Size Time \13\ >=90%; and (2) Member is 
enrolled in at least 30 LMM Securities; \14\ and (3) Member has an ADAV 
as a percentage of TCV \15\ >=0.15%.
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    \10\ ``LMP Securities'' means a list of securities included in 
the Liquidity Management Program, the universe of which will be 
determined by the Exchange and published in a circular distributed 
to Members and on the Exchange's website. Such LMP Securities will 
include all Cboe-listed ETPs and certain non-Cboe listed-ETPs for 
which the Exchange wants to incentive Members to provide enhanced 
market quality. All Cboe-listed securities will be LMP Securities 
immediately upon listing on the Exchange. The Exchange will not 
remove a security from the list of LMP Securities without 30 days 
prior notice.
    \11\ ``NBBO Time'' means the average of the percentage of time 
during regular trading hours during which the Member maintains at 
least 100 shares at each of the NBB and NBO.
    \12\ ``NBBO Size Time'' means the percentage of time during 
regular trading hours during which there are size-setting quotes at 
the NBBO on the Exchange.
    \13\ ``Displayed Size Time'' means the percentage of time during 
regular trading hours during which the Member maintains at least 
2,500 displayed shares on the bid and separately maintains at least 
2,500 displayed shares on the offer that are priced no more than 2% 
away from the NBB and NBO, respectively.
    \14\ ``LMM Securities'' are BZX-listed securities for which a 
Lead Market Maker (``LMM'') for which the Member is the LMM.
    \15\ ``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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    The Exchange's proposal to introduce a new Add Volume Tier 4 is 
designed to provide Members with an additional way in which to receive 
an enhanced rebate if certain criteria are satisfied, specifically by 
incentivizing additional volume in securities identified by the 
Exchange, including BZX-listed securities. The Exchange believes that 
by introducing proposed Add Volume Tier 4 Members are incentivized to 
add displayed volume on the Exchange, thereby contributing to a deeper 
and more liquid market, which benefits all market participants and 
provides greater execution opportunities on the Exchange.
Step-Up Tiers
    Pursuant to footnote 2 of the Fee Schedule, the Exchange currently 
offers two Step Up Tiers that provide Members an opportunity to receive 
an enhanced rebate from the standard rebate for liquidity adding orders 
that yield fee codes B, V, and Y where they increase their relative 
liquidity each month over a predetermined baseline. The Exchange now 
proposes to add a new Step-Up Tier 1. Proposed Step-Up Tier 1 would 
provide for the following:
     Proposed Step-Up Tier 1 would offer an enhanced rebate of 
$0.0028 per share for qualifying orders (i.e., orders yielding fee 
codes B, V, or Y) where Member has a Step-Up ADAV \16\ from June 2023 
>=10,000,000.
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    \16\ ``Step-Up ADAV'' means ADAV in the relevant baseline month 
subtracted from current ADAV.
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    Additionally, the Exchange notes that Proposed Step-Up Tier 1 will 
expire no later than September 30, 2023, which the Exchange will 
indicate on the Exchange's fee schedule.
    The Exchange notes that the Step-Up Tiers in general are designed 
to provide Members with additional opportunities to receive enhanced 
rebates by increasing their order flow to the Exchange, which further 
contributes to a deeper, more liquid market and provides even more 
execution opportunities for active market participants. Like other 
Step-Up Tiers, the proposed Step-Up Tier 1 is designed to give members 
an additional opportunity to receive an enhanced rebate for orders 
meeting the applicable criteria. Increased overall order flow benefits 
all Members by contributing towards a robust and well-balanced market 
ecosystem.
Fee Code Changes
    The Exchange offers various fee codes for orders routed away from 
the Exchange. The Exchange is proposing to modify the routing fees 
associated with fee codes BY,\17\ BJ,\18\ AX,\19\ AA,\20\ AY,\21\ 
P,\22\ and RY \23\ to match the base add or remove rate for the 
associated market center to which the order is routed. The rebates for 
fee codes BJ, AA, and P will be revised to $0.0016 per share in 
securities priced above $1.00.\24\ The rebates for fee codes BY and AY 
will be revised to $0.0002 per share in securities priced above 
$1.00.\25\ The fee for fee code RY will be revised to $0.0020 per share 
in securities priced above $1.00.\26\ The fee for fee code AX will be 
revised to $0.0030 per share in securities priced above $1.00.\27\ 
There

[[Page 49520]]

are no changes to the fees or rebates associated with securities priced 
below $1.00.
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    \17\ Fee code BY is appended to orders routed to BYX using 
Destination Specific, TRIM or SLIM routing strategy.
    \18\ Fee code BJ is appended to orders routed to EDGA using TRIM 
or SLIM routing strategy.
    \19\ Fee code AX is appended to orders routed to EDGX using ALLB 
routing strategy.
    \20\ Fee code AA is appended to orders routed to EDGA using ALLB 
routing strategy.
    \21\ Fee code AY is appended to orders routed to BYX using the 
ALLB routing strategy.
    \22\ Fee code P is appended to orders routed to EDGX that add 
liquidity.
    \23\ Fee code RY is appended to orders routed to BYX that add 
liquidity.
    \24\ See BZX Equities Fee Schedule, Standard Rates; EDGA 
Equities Fee Schedule, Standard Rates.
    \25\ See BYX Equities Fee Schedule, Standard Rates.
    \26\ Id.
    \27\ See EDGX Equities Fee Schedule, Standard Rates.
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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.\28\ Specifically, the Exchange believes the proposed rule change 
is consistent with the section 6(b)(5) \29\ 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 the section 6(b)(5) \30\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers as well as section 6(b)(4) \31\ 
as it is designed to 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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    \28\ 15 U.S.C. 78f(b).
    \29\ 15 U.S.C. 78f(b)(5).
    \30\ Id.
    \31\ 15 U.S.C. 78f(b)(4)
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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 introduce a new Add Volume Tier 4 and a new Step-Up 
Tier 1 reflects 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. The Exchange believes the proposed Add Volume Tier 4 and 
Step-Up Tier 1 are reasonable as they serve to incentivize Members to 
increase their liquidity-adding, displayed volume, which benefit all 
market participants by incentivizing continuous liquidity and thus, 
deeper, more liquid markets as well as increased execution 
opportunities. Particularly, the proposed incentives are designed to 
incentivize continuous displayed liquidity, which signals other market 
participants to take the additional execution opportunities provided by 
such liquidity. This overall increase in activity deepens the 
Exchange's liquidity pool, offers additional cost savings, supports the 
quality of price discovery, promotes market transparency, and improves 
market quality for all investors.
    The Exchange believes the proposed changes to fee codes BY, BJ, AX, 
AA, AY, P, and RY are reasonable and not unfairly discriminatory as 
these changes will apply to all Members and do not represent a 
significant departure from the Exchange's general pricing structure. 
Indeed, the proposed changes to these fee codes are intended to match 
the base add or remove rates on the Exchanges affiliates.\32\ The 
Exchange also believes the proposed Add Volume Tier 4 and Step-Up Tier 
1 represent an equitable allocation of rebates and are not unfairly 
discriminatory because all Members are eligible for those tiers and 
would have the opportunity to meet a tier's criteria and would receive 
the proposed rebate if such criteria is met. Further, the proposed 
rebates are commensurate with the proposed criteria. That is, the 
rebates reasonably reflect the difficulty in achieving the applicable 
criteria as proposed. Without having a view of activity on other 
markets and off-exchange venues, the Exchange has no way of knowing 
whether this proposed rule change would definitely result in any 
Members qualifying for the proposed tier. While the Exchange has no way 
of predicting with certainty how the proposed tiers will impact Member 
activity, the Exchange anticipates that at least one Member will be 
able to satisfy the criteria proposed under proposed Add Volume Tier 4 
and at least one Member will be able to satisfy the criteria proposed 
under proposed Step-Up Tier 1. The Exchange also notes that proposed 
tier/rebate will not adversely impact any Member's ability to qualify 
for other reduced fee or enhanced rebate tiers. Should a Member not 
meet the proposed criteria under the modified tier, the Member will 
merely not receive that corresponding enhanced rebate.
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    \32\ Supra notes 24-27.
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    Additionally, the Exchange notes that relative volume-based 
incentives and discounts have been widely adopted by exchanges,\33\ 
including the Exchange,\34\ 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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    \33\ See e.g., EDGX Equities Fee Schedule, Footnote 1, Add/
Remove Volume Tiers.
    \34\ See e.g., 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. Rather, as discussed above, 
the Exchange believes that the proposed changes would encourage the 
submission of additional order flow to a public exchange, thereby 
promoting market depth, execution incentives and enhanced execution 
opportunities, as well as price discovery and transparency for all 
Members. As a result, the Exchange believes that the proposed changes 
further the Commission's goal in adopting Regulation NMS of fostering 
competition among orders, which promotes ``more efficient pricing of 
individual stocks for all types of orders, large and small.'' \35\
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    \35\ Securities Exchange Act Release No. 51808, 70 FR 37495, 
37498-99 (June 29, 2005) (S7-10-04) (Final Rule).
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    The Exchange believes the proposed rule changes do not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
tier changes apply to all Members equally in that all Members are 
eligible for the proposed Add Volume Tier 4 and proposed Step-Up Tier 
1, have a reasonable opportunity to meet the tiers' criteria and will 
receive the corresponding additional rebates if such criteria are met. 
Additionally, the proposed tiers are designed to attract additional 
order flow to the Exchange. The Exchange believes that the proposed 
tier criteria would incentivize market participants to direct liquidity 
adding displayed order flow to the Exchange, bringing with it 
additional execution opportunities for market participants and improved 
price transparency. Greater overall order flow, trading opportunities, 
and pricing transparency benefits all market participants on the 
Exchange by

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enhancing market quality and continuing to encourage Members to send 
orders, thereby contributing towards a robust and well-balanced market 
ecosystem.
    The Exchange believes the proposal to revise the applicable fees or 
rebates associated with routing orders away from the Exchange does not 
a burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. The fees and 
rebates associated with routing orders away from the Exchange apply to 
all Members on an equal and non-discriminatory basis and Members can 
choose to use (or not use) the Exchange's routing functionality as part 
of their decision to submit order flow to the Exchange.
    Next, 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 15 other equities exchanges and 
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 15% \36\ of the market share. 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.'' \37\ 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'. . ..''.\38\ 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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    \36\ Supra note 4.
    \37\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \38\ 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 \39\ and paragraph (f) of Rule 19b-4 \40\ 
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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    \39\ 15 U.S.C. 78s(b)(3)(A).
    \40\ 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 (https://www.sec.gov/rules/sro.shtml); or
     Send an email to [email protected]. Please include 
file number SR-CboeBZX-2023-049 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-2023-049. 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 (https://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 
a.m. and 3 p.m. Copies of the filing also will be available for 
inspection and copying at the principal office of the Exchange. Do not 
include personal identifiable information in submissions; you should 
submit only information that you wish to make available publicly. We 
may redact in part or withhold entirely from publication submitted 
material that is obscene or subject to copyright protection. All 
submissions should refer to file number SR-CboeBZX-2023-049 and should 
be submitted on or before August 21, 2023.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\41\
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    \41\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Deputy Secretary.
[FR Doc. 2023-16122 Filed 7-28-23; 8:45 am]
BILLING CODE 8011-01-P