[Federal Register Volume 89, Number 12 (Thursday, January 18, 2024)]
[Notices]
[Pages 3444-3447]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-00845]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99321; File No. SR-CboeBZX-2024-002]


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

January 11, 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 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, effective January 
2, 2024.
    By way of background, the Exchange currently makes available for 
purchase Depth Data, which is a daily archive of the Exchange's depth 
of book real-time feed, which provides depth-of-book quotations and 
execution information based on equity orders entered into the 
System.\3\ The Exchange also offers Historical Depth Data, which offers 
such data on a historical basis, i.e., T+1 or later, dating back to 
September 2019. The Depth Data and Historical Depth Data are available 
for purchase to Members and Non-Members on the Cboe LiveVol, LLC 
(``LiveVol'') website,\4\ for internal use only; LiveVol is a wholly 
owned subsidiary of the Exchange's parent company, Cboe Global Markets, 
Inc.
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    \3\ See BZX Fee Schedule and BZX Rule 11.22. Daily end-of-day 
delivery is provided via the DataShop SFTP. Files will typically 
become available after 10 p.m. ET; see also BZX Rule 1.5, which 
defines ``System.''
    \4\ See https://datashop.cboe.com/cboe-us-equities-pitch.
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    The Exchange's options platform (``BZX Options'') and affiliated 
equities and options exchanges (i.e., Cboe Exchange, Inc. (``Cboe 
Options''), Cboe C2 Exchange, Inc. (``C2 Options''), Cboe EDGX 
Exchange, Inc. (``EDGX''), Cboe BYX Exchange, Inc. (``BYX''), and Cboe 
EDGA Exchange, Inc. (``EDGA'') (collectively, ``Affiliates'') also 
offer similar data products.\5\ Particularly, each of the Exchange's 
Affiliates offer a daily and historical archive of their depth of book 
real-time feed with execution information based on their trading 
activity that is substantially similar to the information provided by 
the Exchange through its Depth Data products.
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    \5\ See, for example, EDGX Fee Schedule, BYX Fee Schedule, EDGA 
Fee Schedule.
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    Currently, the Exchange charges a fee of $500 per month of 
Historical Depth Data accessed by a user. This fee has been in place, 
without change, since April 2010 when the Exchange first began charging 
for access to historical quotation and transactions data from the 
Exchange's PITCH data feed (``Historical PITCH Data'').\6\ In the time 
since, the

[[Page 3445]]

Exchange has made a number of significant enhancements to its platform, 
including, among other things, a significant expansion of its listing 
program for exchange-traded products, that have resulted in improved 
trading opportunities for investors and, consequently, more valuable 
market data. Further, the Exchange has implemented a more efficient 
means of data delivery (via SFTP rather than shipment of hard drives), 
which consequently increases the value of the market data product.
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    \6\ See Securities Exchange Act Release No. 61885 (April 9, 
2010), 75 FR 20018 (April 16, 2010) (SR-BATS-2010-002); see also 
Securities Exchange Act Release No. 74285 (February 18, 2015), 80 FR 
9828 (February 24, 2015) (SR-BATS-2015-11), pursuant to which 
``Historical PITCH'' was renamed ``Historical Depth.''
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    The Exchange now proposes to increase the fee from $500 to $1,000 
per month of Historical Depth Data accessed by a user.\7\ As is 
currently the case, the data will be provided to data recipients for 
internal use only, and thus, no redistribution will be permitted.
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    \7\ As part of the proposed rule change, the Exchange proposes 
to establish a separate ``Historical Depth'' table in its Fee 
Schedule, and rename the current ``BZX Historical Top, Historical 
Depth or Historical Last Sale Data'' to ``BZX Historical Top or 
Historical Last Sale Data.'' The Exchange also proposes to remove 
the fee related to delivery per 1TB drive of data as the Exchange 
does not provide 1TB drives anymore.
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    The Exchange notes that the Depth Data products, including the 
Historical Depth Data, are completely voluntary products, 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.\8\
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    \8\ See, e.g., https://www.nasdaqtrader.com/Trader.aspx?id=DPPriceListOptions#nom; and https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Fee_Schedule.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.\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 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. The Exchange also believes the proposed rule 
change is consistent with Section 6(b)(4) of the Act,\12\ 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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    \9\ 15 U.S.C. 78f(b).
    \10\ 15 U.S.C. 78f(b)(5).
    \11\ Id.
    \12\ 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. 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.'' \13\
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    \13\ 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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    With respect to market data, the decision of the United States 
Court of Appeals for the District of Columbia Circuit in NetCoalition 
v. SEC upheld the Commission's reliance on the existence of competitive 
market mechanisms to evaluate the reasonableness and fairness of fees 
for proprietary market data:

    In fact, the legislative history indicates that the Congress 
intended that the market system `evolve through the interplay of 
competitive forces as unnecessary regulatory restrictions are 
removed' and that the SEC wield its regulatory power `in those 
situations where competition may not be sufficient,' such as in the 
creation of a `consolidated transactional reporting system.' \14\
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    \14\ See NetCoalition v. SEC, 615 F.3d 525, 535 (D.C. Cir. 2010) 
(``NetCoalition I'') (quoting H.R. Rep. No. 94-229 at 92 (1975), as 
reprinted in 1975 U.S.C.C.A.N. 323).

    The court agreed with the Commission's conclusion that ``Congress 
intended that `competitive forces should dictate the services and 
practices that constitute the U.S. national market system for trading 
equity securities.' '' \15\
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    \15\ Id. at 535.
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    More recently, the Commission confirmed that it applies a ``market-
based'' test in its assessment of market data fees, and that under that 
test:

the Commission considers whether the exchange was subject to 
significant competitive forces in setting the terms of its proposal 
for [market data], including the level of any fees. If an exchange 
meets this burden, the Commission will find that its fee rule is 
consistent with the Act unless there is a substantial countervailing 
basis to find that the terms of the rule violate the Act or the 
rules thereunder.\16\
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    \16\ See Securities Exchange Act Release No. 34-90217 (October 
16, 2020), 85 FR 67392 (October 22, 2020) (SR-NYSENAT-2020-05) 
(Order Approving a Proposed Rule Change to Establish Fees for the 
NYSE National Integrated Feed) (internal quotation marks omitted), 
quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74781 (December 9, 2008) (NYSE ArcaBook Approval 
Order).

    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.\17\ Making 
similar data products available to market participants fosters 
competition in the marketplace, and constrains the ability of exchanges 
to charge supercompetitive 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 increase fees for Historical Depth Data, while continuing to 
attract purchasers.
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    \17\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (December 8, 2023), available at https://www.cboe.com/us/equities/market_statistics/.
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    The Exchange's Historical Depth Data is a competitively priced 
alternative to historical depth of book data disseminated by other 
national securities exchanges. The Exchange's Depth Data products, 
including Historical Depth Data, benefits a wide range of investors 
that participate in the national market system. As noted above, Nasdaq 
and NYSE have a similar Depth Data offerings for a charge.\18\ 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.

[[Page 3446]]

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. 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 Historical Depth Data offering and instead 
purchase another exchange's similar data product, which offers similar 
data points, albeit based on other market's trading activity.
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    \18\ See supra note 8.
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    Further, the Exchange believes the fees are reasonable, as even 
with the proposed fee increase, they continue to represent a relatively 
modest fee for historical depth of book data that has proven valuable 
for investors. The Exchange believes the fee, as proposed, remains 
reasonable, as the moderate increase is the first increase to the fee 
since its introduction in 2010.
    The Exchange also believes that the proposed fee is reasonable 
because it is reasonably aligned with the value and benefits provided 
to users that choose to purchase Historical Depth Data from the 
Exchange. As discussed above, Historical Depth Data 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. As noted above, 
since first introducing the Historical Depth Data product offering, the 
Exchange has made a number of significant enhancements to its platform, 
including, among other things, a significant expansion of its listing 
program for exchange-traded products, that have resulted in improved 
trading opportunities for investors and, consequently, more valuable 
market data.
    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 purchase 
Historical Depth Data equally. As stated, Historical Depth Data is 
completely optional and not necessary for trading. Rather, the Exchange 
voluntarily makes Historical Depth Data available, and users may choose 
to purchase the data based on their own individual business needs. 
Potential purchasers may purchase Historical Depth Data at any time if 
they believe it to be valuable or may decline to purchase it. Moreover, 
several other exchanges offer a similar data product which offer the 
same type of data content through similar reports.\19\
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    \19\ See supra note 8.
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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. The Exchange operates in a 
highly competitive environment in which the Exchange must continually 
adjust its fees to remain competitive. Because competitors are free to 
modify their own fees in response, the Exchange believes that the 
degree to which fee changes in this market may impose any burden on 
competition is extremely limited. As discussed above, the Exchange's 
Historical Depth Data offering is subject to direct competition from 
several other exchanges that offer similar data products. The proposed 
rule changes are grounded in the Exchange's efforts to compete more 
effectively. In this competitive environment, potential purchasers are 
free to choose which, if any, similar product to purchase to satisfy 
their need for market information. As a result, the Exchange believes 
this proposed rule change permits fair competition among national 
securities exchanges.
    Additionally, the Exchange believes the proposed rule change does 
not impose any burden on intramarket competition that is not necessary 
or appropriate in furtherance of the purposes of the Act. The proposed 
Historical Depth Data fees will apply equally to Members and non-
Members who purchase Historical Depth Data. Moreover, purchase of 
Historical Depth Data is optional.
    Finally, 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 are offered by Nasdaq and NYSE. 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 intermarket 
competition that is not necessary or 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 \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:

[[Page 3447]]

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-2024-002 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-2024-002. 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-2024-002 and should 
be submitted on or before February 8, 2024.

    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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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-00845 Filed 1-17-24; 8:45 am]
BILLING CODE 8011-01-P