[Federal Register Volume 89, Number 11 (Wednesday, January 17, 2024)]
[Notices]
[Pages 2989-2993]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00710]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99307; File No. SR-CboeBZX-2024-003]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
Its Fee Schedule To Adopt Fees for the Short Interest Report

January 10, 2024.
    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 January 2, 2024, Cboe BZX Exchange, Inc. (the ``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'') proposes to 
amend its Fee Schedule. The text of the proposed rule change is 
provided below.
(additions are italicized; deletions are [bracketed])
* * * * *
Cboe U.S. Equities Fee Schedules
BZX Equities
Effective [December 12, 2023] January 2, 2024
* * * * *
Market Data Fees:
* * * * *
Cboe Premium Exchange Tools

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                       Description                              Fee
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Monthly Fee per User Login..............................             $65
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[[Page 2990]]

Short Interest Report *

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                        Delivery                                Fee
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Monthly Fee--Access.....................................            $250
Monthly Fee--Access (Historical Data)...................             250
Monthly Fee per Internal Distributor....................             500
Monthly Fee Internal Distributor (Historical Data)......             500
Monthly Fee per External Distributor **.................             750
Monthly Fee External Distributor (Historical Data) **...             750
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* The Short Interest Report is available for purchase on a monthly basis
  or on an annual basis.
** The Short Interest Report provided for External Distribution is only
  for display use redistribution.

* * * * *
    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 to adopt fees to be 
assessed to individuals that elect to subscribe to the Short Interest 
Reports, effective January 2, 2024.
    On December 11, 2023 the Exchange proposed to adopt a new data 
product known as the Short Interest Report.\3\ The Short Interest 
Report contains a summary of consolidated market short interest 
positions in all BZX-listed securities \4\ only as reported by the 
Financial Industry Regulatory Authority, Inc. (``FINRA''); it is 
designed to facilitate the distribution of short sale data to, among 
other things, provide analytical and investment data that the brokerage 
industry, academic institutions, and investors may use in developing 
risk-assessment tool and trading models for BZX-listed issues. The 
report data fields include Cycle Settlement Date,\5\ BATS-Symbol,\6\ 
Security Name, Number of Shares Net Short Current Cycle,\7\ Number of 
Shares Net Short Previous Cycle,\8\ Cycle Average Daily Trade 
Volume,\9\ Minimum Number of Trade Days to Cover Shorts,\10\ Split 
Indicator,\11\ Manual Revision Indicator,\12\ Percent Change in Short 
Position,\13\ and Change in Short Position from Previous.\14\
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    \3\ See SR-CboeBZX-2023-102.
    \4\ A BZX-listed security is a security listed on the Exchange 
pursuant to Chapter 14 of the Exchange's Rules and includes both 
corporate listed securities and Exchange Traded Products (``ETPs'').
    \5\ ``Cycle Settlement Date'' is the reporting period date.
    \6\ ``BATS-Symbol'' is the Exchange-assigned symbol for the 
given security.
    \7\ ``Number Shares Net Short Current Cycle'' is the total of 
uncovered open short interest positions in a particular security in 
shares, for the current reporting period.
    \8\ ``Number of Shares Net Short Previous Cycle'' is the total 
number of uncovered open short interest positions in a particular 
security in shares, for the previous reporting period.
    \9\ ``Cycle Average Daily Trade Volume'' is the number of shares 
traded on average per day in a particular security in shares.
    \10\ ``Minimum Number of Trade Days to Cover Shorts'' is the 
ratio of the current short interest position over the average daily 
volume for the current settlement date.
    \11\ ``Split Indicator'' indicates whether the security has 
undergone a stock split during the current reporting period.
    \12\ ``Manual Revision Indicator'' indicates whether the 
security's short interest for the previous reporting period has been 
revised.
    \13\ ``Percent Change in Short Position'' is the percent change 
from the current reporting period's short interest compared to the 
previous reporting period's short interest.
    \14\ ``Change in Short Position from Previous'' is the 
difference between the current and previous reporting period of 
uncovered short interest positions in a particular security in 
shares.
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    The Short Interest Report is available for purchase by both Members 
\15\ and non-Members on a monthly or annual subscription basis, and 
subscribers will receive a daily end-of-day file (with values updated 
twice per month). The Short Interest Report is also available for 
purchase on a historical monthly basis. The historical reports provide 
the end-of-day report for each day during a given calendar month, are 
available for purchase dating back to March 31, 2015, and include the 
same data fields as the daily end-of-day files. Members and non-Members 
have the ability to re-distribute (internally and/or externally) the 
Short Interest Report.
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    \15\ See Exchange Rule 1.5(n).
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    The Exchange now proposes to adopt fees applicable to individuals 
that subscribe to the Short Interest Reports. As proposed, the Exchange 
would assess a monthly \16\ fee of $250 per month for individuals that 
subscribe to the report, $500 per month for an Internal Distributor 
\17\ of the report, and a fee of $750 per month to an External 
Distributor \18\ of the report. These fees may be paid on a monthly 
basis or on an annual basis.\19\ Data provided to an External 
Distributor via the Short Interest Report is only for display use 
redistribution (e.g., the data may be provided on the distributor's 
platform). Therefore, distributors of the data may not charge 
separately for data included in the Report or incorporate such data 
into their product. External Distributors, unlike Internal 
Distributors, are typically compensated for the distribution of short 
sale data through subscription fees or other mechanisms. The higher 
price for External Distributors reflects the additional value these 
distributors may gain from the product.
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    \16\ The monthly fees for the Short Interest Reports are 
assessed based on a 30-day period. For example, if an individual 
subscribes to the Short Interest Report on December 15, 2023, the 
monthly fee will cover the period of December 15, 2023 through 
January 15, 2023. If the individual cancels his/her subscription 
prior to January 15, 2023, the individual will not be charged for 
(or have access to) Short Interest Reports for the remainder of 
January.
    \17\ An ``Internal Distributor'' of an Exchange Market Data 
product is a Distributor that receives the Exchange Market Data 
product and then distributes that data to one or more users within 
the Distributor's own entity.
    \18\ An ``External Distributor'' of an Exchange Market Data 
product is a Distributor that receives the Exchange Market Data 
product and then distributes that data to a third party or one or 
more users outside the Distributor's own entity.
    \19\ Those who subscribe to the Short Interest Report during the 
middle of a month will receive the end-of-day report for each day 
beginning on the date of subscription.
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    Additionally, the Exchange proposes to adopt fees for the Short 
Interest Report provided on a historical basis. As

[[Page 2991]]

noted above, the Short Interest Report will be available for each 
calendar month dating back to March 31, 2015. As proposed, the fees for 
Short Interest Reports provided on a historical basis are the same as 
the fees proposed for the standard Short Interest Report: the Exchange 
would assess a fee of $250 per historical month for individuals that 
subscribe, $500 per historical month assessed to Internal Distributors 
of the report, and a fee of $750 per historical month assessed to 
External Distributors of the report. Data provided via the historical 
Short Volume Report is also for display use redistribution only (e.g., 
the data may be provided on the distributor's platform). Therefore, 
distributors of the historical data may not charge separately for data 
included in the Short Interest Report or incorporate such data into 
their product. Nonetheless, the Exchange believes it is reasonable, 
equitable and not unfairly discriminatory to charge a fee for display 
use redistribution that reflects the value these distributors may gain 
from the historical product.
    The Exchange anticipates that a wide variety of market participants 
will purchase the Short Interest Report, including, but not limited to, 
active equity trading firms and academic institutions. For example, the 
Exchange notes that academic institutions may utilize the Short 
Interest Report data and as a result promote research and studies of 
the equities industry to the benefit of all market participants. The 
Exchange further believes the Short Interest Report may provide helpful 
trading information regarding investor sentiment that may allow market 
participants to make more informed trading decisions and may be used to 
create and test trading models and analytical strategies and provide 
comprehensive insight into trading on the Exchange.
    The Exchange notes that the Short Interest Report is a completely 
voluntary product, in that the Exchange is not required by any rule or 
regulation to make the reports or services available and that potential 
subscribers may purchase it only if they voluntarily choose to do so. 
Further, the Exchange notes that other exchanges offer similar products 
for a fee.\20\
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    \20\ See, e.g., Specifications for Short Interest file, 
available at: https://www.nasdaq.com/solutions/short-interest-report; and NYSE Group Short Interest Client Specification, 
available at: 
NYSE_Group_Short_Interest_Client_Specification_v1.5.pdf.
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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.\21\ Specifically, the 
Exchange believes the proposed rule change is consistent with the 
section 6(b)(5) \22\ 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) \23\ requirement that the rules of an exchange not be 
designed to permit unfair discrimination between customers, issuers, 
brokers, or dealers. The Exchange also believes the proposed rule 
change is consistent with section 6(b)(4) of the Act,\24\ which 
requires that Exchange rules provide for the equitable allocation of 
reasonable dues, fees, and other charges among its Trading Permit 
Holders and other persons using its facilities.
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    \21\ 15 U.S.C. 78f(b).
    \22\ 15 U.S.C. 78f(b)(5).
    \23\ Id.
    \24\ 15 U.S.C. 78f(b)(4).
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    In adopting Regulation NMS, the Commission granted self-regulatory 
organizations (``SROs'') and broker-dealers increased authority and 
flexibility to offer new and unique market data to the public. It was 
believed that this authority would expand the amount of data available 
to consumers, and also spur innovation and competition for the 
provision of market data. The Exchange believes that the Short Interest 
Report further broadens the availability of U.S. equity market data to 
investors consistent with the principles of Regulation NMS. The Short 
Interest Report also promotes increased transparency through the 
dissemination of short interest data. The Short Interest Report 
benefits investors by providing access to the Short Interest Report 
data, which may promote better informed trading, as well as research 
and studies of the equities industry.
    The Exchange operates in a highly competitive environment. Indeed, 
there are currently 16 registered equities exchanges that trade 
equities. Based on publicly available information, no single equities 
exchange has more than 13% of the equity market share.\25\ The 
Commission has repeatedly expressed its preference for competition over 
regulatory intervention in determining prices, products, and services 
in the securities markets. Particularly, 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.'' \26\ Making similar data products 
available to market participants fosters competition in the 
marketplace, and constrains the ability of exchanges to charge 
supracompetitive fees. In the event that a market participant views one 
exchange's data product as more attractive than the competition, that 
market participant can, and often does, switch between similar 
products. The proposed fees are a result of the competitive environment 
of the U.S. equities industry as the Exchange seeks to adopt fees to 
attract purchasers of the recently introduced Short Interest Report.
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    \25\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (December 18, 2023), available at https://www.cboe.com/us/equities/market_statistics/.
    \26\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005) (``Regulation NMS Adopting 
Release'').
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    The Exchange believes that the proposed fees for the Short Interest 
Report are consistent with the Act in that they are reasonable, 
equitable, and not unfairly discriminatory. In particular, the Exchange 
believes that the proposed fees are reasonable because they are 
reasonably aligned with the value and benefits provided to users that 
choose to subscribe to the Short Interest Report on the Exchange. As 
discussed above, the Short Interest Report may be beneficial to Members 
and non-Members as it may provide helpful trading information regarding 
investor sentiment that may allow market participants to make more 
informed trading decisions and may be used to create and test trading 
models and analytical strategies and provide comprehensive insight into 
trading on the Exchange. Therefore, the Exchange believes that it is 
reasonable to assess a modest fee to users that subscribe to the Short 
Interest Report.
    The Exchange further believes the proposed fee is reasonable 
because the amount assessed is less than the analogous fees charged by 
competitor exchanges. For example, for its Short Interest Reports, 
Nasdaq charges $500

[[Page 2992]]

for access, $1,000 for Internal Distributors and from $2,500 to $7,500 
for External Distributors (depending on the number of subscribers).\27\ 
Additionally, NYSE and its affiliated equity markets (the ``NYSE 
Group'') have a similar Short Interest Report offering, seemingly for a 
charge.\28\ The Exchange therefore believes that the proposed fees are 
reasonable and set at a level to compete with other equity exchanges 
that offer similar reports. Indeed, proposing fees that are excessively 
higher than established fees for similar data products would simply 
serve to reduce demand for the Exchange's data product, which as noted, 
is entirely optional. Although each of these similar data products 
provide only proprietary trade data and not trade data from other 
exchanges, it is possible investors are still able to gauge overall 
investor sentiment across different equities based on the included data 
points on any one exchange. As such, if a market participant views 
another exchange's potential report as more attractive, then such 
market participant can merely choose not to purchase the Exchange's 
Short Interest Report and instead purchase another exchange's similar 
data product, which offers similar data points, albeit based on that 
other market's trading activity.
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    \27\ See Nasdaq Rule 7, Section 122.
    \28\ See https://www.nyse.com/market-data/reference/nyse-group-short-interest, which includes a ``Purchase Now'' option. The 
Exchange is unaware of a related filing for the offering.
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    In addition, the Exchange believes that the proposed fees are 
equitable and not unfairly discriminatory because they will apply to 
all similarly situated Members and non-Members that choose to subscribe 
to the Short Interest Report equally. As stated, the Short Interest 
Report is completely optional and not necessary for trading. Rather, 
the Exchange voluntarily makes the Short Interest Report available, and 
users may choose to subscribe (and pay for) the report based on their 
own individual business needs. Potential subscribers may subscribe to 
the Short Interest Report at any time if they believe it to be valuable 
or may decline to purchase it.
    The Exchange also believes it is reasonable, equitable and not 
unfairly discriminatory to charge an External Distributor of the Short 
Interest Report a higher fee than an Internal Distributor as an 
External Distributor may provide the data on their platform. External 
Distributors, unlike Internal Distributors, are typically compensated 
for the distribution of short sale data through subscription fees or 
other mechanisms. Therefore, the Exchange believes it is reasonable, 
equitable and not unfairly discriminatory to charge a higher fee for 
display use redistribution, as it reflects the additional value these 
distributors may gain from the Short Interest product. Additionally, 
the Exchange believes it is reasonable, equitable and not unfairly 
discriminatory to charge an Internal Distributor of the Short Interest 
Report a higher fee than an individual, as an Internal Distributor may 
distribute the data to one or more users within the Distributor's own 
entity; thus, the higher fee reflects the additional value such 
Internal Distributors may gain from the Short Interest product. 
Further, the proposed fee will apply equally to similarly situated 
individuals, Internal Distributors and External Distributors, 
respectively. Moreover, as described above, another Exchange similarly 
charges Internal and External Distributors higher fees as compared to 
individuals for a similar data product.

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. The Exchange does not 
believe that the proposed rule change will impose any burden on 
intramarket competition that is not necessary or appropriate in 
furtherance of the purposes of the Act because the Short Interest 
Report will be available equally to all Members and non-Members that 
choose to subscribe to the report. Market participants are not required 
to purchase the Short Interest Report, and the Exchange is not required 
to make the Short Interest Report available to investors. Rather, the 
Exchange is voluntarily making the Short Interest Report available, and 
market participants may choose to receive (and pay for) this data based 
on their own business needs. Potential purchasers may request the data 
at any time if they believe it to be valuable or may decline to 
purchase such data. Given the above, the Exchange does not believe the 
proposed rule change will result in any burden on competition that is 
not necessary or appropriate in furtherance of the purposes of the Act. 
Additionally, as discussed above, the Exchange believes it is 
appropriate to charge Internal and External Distributors higher fees as 
compared to individuals, as the higher fees reflect the additional 
value such Internal Distributors and External Distributors may gain 
from the Short Interest product.
    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, similar products offered by Nasdaq are priced higher than 
the Short Volume Report. 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.'' 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'. . . .''. Accordingly, the Exchange does not believe its 
proposal imposes any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act.
    Further, making similar data products available to market 
participants fosters competition in the marketplace, and constrains the 
ability of exchanges to charge supracompetitive fees. In the event that 
a market participant views one exchange's data product as more 
attractive than the competition, that market participant can, and often 
does, switch between similar products. The proposed fees are a result 
of the competitive environment of the U.S. equities industry as the 
Exchange seeks to adopt fees to attract purchasers of the Short 
Interest Report. As noted above, the Exchange believes that the 
proposed fees are reasonable and set at a level to compete with other 
equity exchanges that offer similar reports. Accordingly, the Exchange 
does not believe its proposal imposes any burden on competition that is 
not necessary or

[[Page 2993]]

appropriate in furtherance of the purposes of the Act.

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 \29\ and paragraph (f) of Rule 19b-4 \30\ 
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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    \29\ 15 U.S.C. 78s(b)(3)(A).
    \30\ 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-2024-003 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-2024-003. 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-2024-003 and should 
be submitted on or before February 7, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\31\
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    \31\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-00710 Filed 1-16-24; 8:45 am]
BILLING CODE 8011-01-P