[Federal Register Volume 89, Number 29 (Monday, February 12, 2024)]
[Notices]
[Pages 9875-9880]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-02753]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99480; File No. SR-CboeBZX-2024-013]


Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Modify 
the Minimum Performance Standards Applicable to Primary Equity 
Securities Under the Lead Market Maker Program as Set forth in Rule 
11.8(e)(1)(E), and To Make Corresponding Changes to Its Fee Schedule

February 6, 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 February 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 and 
II 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. (``BZX'' or the ``Exchange'') is filing 
with the Securities and Exchange Commission (``Commission'' or ``SEC'') 
a proposed rule change to modify the Minimum Performance Standards 
applicable to Primary Equity Securities under the Lead Market Maker 
program (``LMM Program'') as set forth in Rule 11.8(e)(1)(E), and to 
make corresponding changes to its Fee Schedule. The text of the 
proposed rule change is provided in Exhibit 5 below.
    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 modify the Minimum Performance Standards 
\3\ under the LMM Program as set forth in Rule 11.8(e)(1)(E) applicable 
to Primary Equity Securities \4\ (also referred to as ``Corporate 
Securities'') listed on the Exchange. The Exchange is not proposing any 
substantive changes to the LMM Program as it relates to Exchange-Traded 
Products (``ETPs'') or Closed-End Funds, but is merely proposing to 
make changes in its Rulebook to clearly delineate the LMM Program 
applicable to Corporate Securities. The Exchange also proposes to make 
corresponding changes to its Fee Schedule. The Exchange proposes to 
implement these changes on February 2, 2024.\5\
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    \3\ ``Minimum Performance Standards'' means a set of standards 
applicable to an LMM that may be determined from time to time by the 
Exchange. See Exchange Rule 11.8(e)(1)(E).
    \4\ As defined in Rule 14.1(a), the term ``Primary Equity 
Security'' means a Company's first class of Common Stock, Ordinary 
Shares, Shares or Certificates of Beneficial Interest of Trust, 
Limited Partnership Interests or American Depositary Receipts 
(``ADRs'') or Shares (``ADSs'').
    \5\ The Exchange initially filed the proposed fee change on 
February 1, 2024 (SR-Cboe-BZX-2024-012). On February 2, 2024, the 
Exchange withdrew that filing and submitted this proposal.
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    On June 2, 2014,\6\ the Exchange implemented the LMM Program on the 
Exchange, which provided enhanced rebates to market makers registered 
with the Exchange (``Market Makers'') that were also registered as a 
lead market maker (``LMM'') in an LMM Security and met the Minimum 
Performance Standards in Exchange-listed exchange-traded products 
(``ETPs'').\7\ On April 8, 2020, the Exchange amended the LMM Program 
to include Cboe-listed Primary Equity Securities and Closed-End 
Funds,\8\ and made corresponding changes to its Fee Schedule.\9\ Now, 
the Exchange proposes to modify the Minimum Performance Standards 
applicable to only Primary Equity Securities listed on the Exchange, 
and separate those Minimum Performance Standards from those applicable 
to Closed-End Funds in the Exchange's rulebook.
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    \6\ See the Securities Exchange Act Release Nos. 72020 (April 
25, 2014) 79 FR 24807 (May 1, 2014) (SR-BATS-2014-015) (the ``LMM 
Program filing''); 72333 (June 5, 2014) 79 FR 33630 (June 11, 2014) 
(SR-BATS-2014-019) (the ``LMM Fee filing'').
    \7\ See Rule 11.8(e)(1)(A).
    \8\ As provided in Rule 14.8(a), the term ``Closed-End Funds'' 
means closed-end management investment companies registered under 
the Investment Company Act of 1940.
    \9\ See Securities Exchange Act Release No. 88617 (April 10, 
2020) 85 FR 21056 (April 15, 2020) (SR-CboeBZX-2020-032).
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    Currently, the Minimum Performance Standards for Primary Equity 
Securities and Closed-End Funds include the following under Rule 
11.8(e)(1)(E)(i)-(v):
    (i) Registration as a market maker in good standing with the 
Exchange;
    (ii) Time at the inside requirements, which, for Qualified 
Securities,\10\ require that an LMM maintain quotes at the NBB and the 
NBO at least 5% of Regular Trading Hours where the security has a 
consolidated average daily volume equal to or greater than 500,000 
shares and at least 15% of Regular Trading Hours where the security has 
a consolidated average daily volume of less than 500,000 shares. For 
Enhanced Securities,\11\ an LMM must quote at the NBB and the NBO at 
least 5% of Regular Trading Hours where the security has a consolidated 
average daily volume

[[Page 9876]]

equal to or greater than 500,000 shares and at least 40% of Regular 
Trading Hours where the security has a consolidated average daily 
volume of less than 500,000 shares;
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    \10\ Qualified Securities are BZX-listed primary equity 
securities and closed-end funds for which LMMs are eligible to 
receive certain incentives, as set forth in the Exchange's Fee 
Schedule, if the Minimum Performance Standards applicable to 
Qualified Securities are met.
    \11\ Enhanced Securities are BZX-listed primary equity 
securities and closed-end funds securities for which LMMs are 
eligible to certain incentives that are higher than those available 
for Qualified Securities, if the more stringent Minimum Performance 
Standards applicable to Enhanced Securities are met.
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    (iii) Auction participation requirements, which, for a Qualified 
Security, require that the Opening Auction price is within 4% of the 
last Reference Price, as defined in Rule 11.23(a)(19), and 2% for an 
Enhanced Security. For a Qualified Security, such requirements provide 
that the Closing Auction price must be within 3% of the last Reference 
Price and 1% for an Enhanced Security;
    (iv) Market-wide NBB and NBO spread and size requirements, which 
require 300 shares at both the NBB and NBO during at least 50% of 
Regular Trading Hours for both Qualified Securities and Enhanced 
Securities. For Qualified Securities, the NBBO spread of such shares 
must be no wider than 2% for a security priced equal to or greater than 
$5 and no wider than 7% for a security priced less than $5. For 
Enhanced Securities, the NBBO spread of such shares must be no wider 
than 1% for securities priced equal to or greater than $5 and no wider 
than 2% for securities priced less than $5; and
    (v) Depth of book requirements, which, for securities priced equal 
to or greater than $5 requires at least $150,000 of displayed posted 
liquidity on both the buy and the sell side within the percentages 
described below during at least 90% of Regular Trading Hours and, for 
securities priced less than $5, at least $50,000 of displayed posted 
liquidity on both the buy and the sell side within the percentages 
described below during at least 90% of Regular Trading Hours. For 
Qualified Securities, such liquidity must be within 2% of both the NBB 
and NBO for securities priced equal to or greater than $5 and within 7% 
of both the NBB and NBO for securities priced less than $5. For 
Enhanced Securities, such liquidity must be within 1% of both the NBB 
and NBO for securities priced equal to or greater than $5 and within 2% 
of both the NBB and NBO for securities priced less than $5.
    Now, the Exchange proposes to adopt similar Minimum Performance 
Standards applicable to Primary Equity Securities under proposed Rule 
11.8(e)(1)(E)(i) and move the existing Minimum Performance Standards, 
which would be applicable only to Closed-End Funds, to proposed Rule 
11.8(e)(1)(E)(ii). Specifically, the Minimum Performance Standards 
applicable to Primary Equity Securities would be set forth in Rule 
11.8(e)(1)(E)(i)(a)-(e), as discussed below.
    Proposed subparagraph (a) would require that the LMM is registered 
as a market maker in good standing with the Exchange and is identical 
to the existing requirement under Rule 11.8(e)(1)(E)(i).
    Proposed subparagraph (b) would set forth the time at the inside 
requirements identical to existing Rule 11.8(e)(1)(E)(ii), except for 
the percentage of time the LMM must have quotes at the NBB and NBO. 
Specifically, subparagraph (b) would provide that the time at the 
inside requirements, which, for Qualified Securities, require that an 
LMM maintain quotes at the NBB and the NBO at least 10% of Regular 
Trading Hours where the security has a consolidated average daily 
volume equal to or greater than 500,000 shares and at least 20% of 
Regular Trading Hours where the security has a consolidated average 
daily volume of less than 500,000 shares. For Enhanced Securities, an 
LMM must quote at the NBB and the NBO at least 10% of Regular Trading 
Hours where the security has a consolidated average daily volume equal 
to or greater than 500,000 shares and at least 20% of Regular Trading 
Hours where the security has a consolidated average daily volume of 
less than 500,000 shares. Under the current structure, LMMs in 
Corporate Securities and Closed-End Funds that meet the Enhanced 
Security Minimum Performance Standards are eligible to receive higher 
incentives than such LMMs that meet the Qualified Security Minimum 
Performance Standards because such Enhanced Security Minimum 
Performance Standards are more stringent. As proposed, the Qualified 
Security Minimum Performance Standards and Enhanced Security Minimum 
Performance Standards for Corporate Securities are identical, as are 
the proposed incentives which are discussed in further detail below. 
Nonetheless, the Exchange is proposing to keep the concept of Qualified 
Security Minimum Performance Standards and Enhanced Security Minimum 
Performance Standards in the Exchange's Rulebook as the Exchange 
expects to modify those Minimum Performance Standards (at a later date 
through another proposal) so that they are not identical.
    Proposed subparagraph (c) would set forth the auction participation 
requirements identical to existing Rule 11.8(e)(1)(E)(iii), except for 
the percentage requirements as it relates to Enhanced Securities for 
both the Opening and Closing Auction. Specifically, subparagraph (c) 
would require that for a Qualified Security, the Opening Auction price 
is within 4% of the last Reference Price, as defined in Rule 
11.23(a)(19), and 4% for an Enhanced Security. For a Qualified 
Security, such requirements provide that the Closing Auction price must 
be within 3% of the last Reference Price and 3% for an Enhanced 
Security. As described above, while the Exchange acknowledges that the 
proposed quoting requirements for Qualified Security Minimum 
Performance Standards and Enhanced Security Minimum Performance 
Standards are identical, the Exchange expects to modify these 
requirements at a later date through another proposal.
    Proposed subparagraph (d) would set forth the market-wide NBB and 
NBO spread and size requirements identical to existing Rule 
11.8(e)(1)(E)(iv), except that the requirements would not consider the 
price of the security, and that the applicable percentage requirements 
for both Qualified and Enhanced Securities could be different. 
Specifically, proposed Rule 11.8(e)(1)(E)(i)(d) would require 300 
shares at both the NBB and NBO during at least 50% of Regular Trading 
Hours for both Qualified Securities and Enhanced Securities. For 
Qualified Securities, the NBBO spread of such shares must be no wider 
than 5%. For Enhanced Securities, the NBBO spread of such shares must 
be no wider than 5%. As described above, while the Exchange 
acknowledges that the proposed spread requirements for Qualified 
Security Minimum Performance Standards and Enhanced Security Minimum 
Performance Standards are identical, the Exchange expects to modify 
these requirements at a later date through another proposal.
    Proposed subparagraph (e) would set forth the depth of book 
requirements identical to existing Rule 11.8(e)(1)(E)(v), except that 
the requirements would not consider the price of the security, and the 
applicable percentage requirements for both Qualified and Enhanced 
Securities could be different. Specifically, proposed Rule 
11.8(e)(1)(E)(i)(E) would require at least $50,000 of displayed posted 
liquidity on both the buy and the sell side within the percentages 
described below during at least 90% of Regular Trading Hours. For 
Qualified Securities, such liquidity must be within 5% of both the NBB 
and NBO. For Enhanced Securities, such liquidity must be within 5% of 
both the NBB and NBO. As described above, while the Exchange 
acknowledges that the proposed depth of book requirements

[[Page 9877]]

for Qualified Security Minimum Performance Standards and Enhanced 
Security Minimum Performance Standards are identical, the Exchange 
expects to modify these requirements at a later date through another 
rule filing.
    As noted above, to conform the proposal to the Exchange's rulebook, 
the Exchange proposes to move the existing Minimum Performance 
Standards for Closed-End Funds to proposed Rule 11.8(e)(1)(E)(ii)(a)-
(e). The Exchange is not proposing to modify any of the Minimum Price 
Standards applicable to Closed-End Funds at this time.
    The Exchange also proposes to modify the Exchange's Fee Schedule to 
delineate the LMM program applicable to Primary Equity Securities from 
the LMM program applicable to ETPs and Closed-End Funds, as provided in 
footnote 14 of the Fee Schedule, and to adopt and amend definitions 
included in the Fee Schedule to clarify the difference in the LMM 
programs. The Exchange notes that it is not proposing any substantive 
change to the LMM Pricing under footnote 14 of the Fee Schedule as it 
relates to ETPs and Closed-End Funds, but is merely extricating 
Corporate Securities from existing LMM Pricing and establishing new 
applicable pricing to LMMs in Corporate Securities.
    First, the Exchange proposes to modify the current definition of 
Qualified LMM to apply only to Corporate Securities. Currently, the 
definition of Qualified LMM applies to all BZX-listed securities, 
including Corporate Securities, ETPs, and Closed-End Funds. Now, the 
Exchange proposes to modify the definition of Qualified LMM to provide 
that it meets the Minimum Performance Standards defined in proposed 
Rule 11.8(e)(1)(E)(i), which are applicable to Corporate Securities. 
The Exchange also proposes to adopt a new definition for ``Qualified 
ETP LMM'', which would mean an LMM in a BZX-listed ETP or Closed-End 
Fund security that meets Qualified ETP LMM performance standards set 
forth in Rule 11.8(e)(1)(E).\12\ Such Minimum Performance Standards for 
Closed-End Funds are defined in Rule 11.8(e)(1)(E)(ii). The Exchange is 
not proposing any substantive change to the term Qualified LMM as it 
pertains to ETPs or Closed-End Funds, but is simply proposing a new 
definition in order to clearly delineate Qualified LMMs in Corporate 
Securities from Qualified LMMs in ETPs and Closed-End Funds. Finally, 
while not new in concept, the Exchange proposes to adopt a new 
definition for ``LMM Securities'', which would mean BZX-listed 
securities for which a Member is an LMM. Currently, the term ``LMM 
Security'' is defined in footnote 14(A)(i) of the Fee Schedule, but, as 
described below, the Exchange is proposing to modify the existing 
definition so that it applies only to ETPs and Closed-End Funds. As the 
term ``LMM Security'' is used as a defined term elsewhere in the Fee 
Schedule, the Exchange is proposing to adopt a new definition under the 
``Definitions'' section of the Fee Schedule that is substantively 
identical to the existing term in footnote 14(A)(i).
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    \12\ Such standards applicable to ETPs and Closed-End Funds will 
vary between LMM Securities depending on the price, liquidity, and 
volatility of the LMM Security in which the LMM is registered. The 
performance measurements will include: (A) percent of time at the 
NBBO; (B) percent of executions better than the NBBO; (C) average 
displayed size; and (D) average quoted spread. For additional 
detail, see LMM Program Filing.
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    As noted above, footnote 14 of the Fee Schedule sets forth LMM 
Pricing on the Exchange. The Exchange proposes to re-letter existing 
paragraphs (A) through (D) under footnote 14, to (B) through (E), 
respectively, to provide for new paragraph (A). Proposed paragraph (A) 
would set forth the Liquidity Provision Rates applicable to Primary 
Equity Securities (also referred to as ``Corporate Securities'') listed 
on the Exchange. Specifically, paragraph (A) would provide that 
Qualified LMMs in BZX-listed Primary Equity Securities are eligible to 
receive the Corporate LMM Add Liquidity Rebate for such Corporate 
Securities for a calendar month on a security-by-security basis. For 
each calendar month the Qualified LMM will receive a rebate of $0.0030 
per share (or the greater of any other applicable rebate). Qualified 
LMMs in Corporate Securities will be subject to the standard remove fee 
of $0.0030 per share in securities priced at or above $1.00, and 0.30% 
of the total dollar value for securities priced below $1.00.
    Currently, LMMs in Corporate Securities are eligible to receive the 
LMM Liquidity Provision Rates as provided under paragraph (A) of 
footnote 14 in the Fee Schedule, which provides for a maximum stipend 
for LMMs that meet the Minimum Performance Standards. As proposed, LMMs 
in Corporate Securities will no longer be eligible for the LMM 
Liquidity Provision Rates program but may have the potential to receive 
higher incentives under the proposed program as the rebates are 
transaction-based and therefore have no maximum incentive in a given 
month.
    Similarly, because the Exchange has proposed to modify the Minimum 
Performance Standards applicable to Corporate Securities, the Exchange 
is also proposing that LMMs in Corporate Securities will no longer be 
eligible for the LMM Add Liquidity Rebate as provided under paragraph 
(B) of footnote 14 in the Fee Schedule. As proposed, the LMM Add 
Liquidity Rebates would continue to be available to LMMs in ETPs and 
Closed-End Funds. The LMM Add Liquidity Rebate currently provides that 
LMMs in BZX-listed securities that have a consolidated average daily 
volume (``CADV'') greater than or equal to 1,000,000 (an ``ALR 
Security'') are eligible to receive the LMM Add Liquidity Rebate for 
such ALR Securities for a calendar month on a security-by-security 
basis. For each calendar month in which an LMM is a Qualified LMM in an 
ALR Security, the LMM will receive the greater of an enhanced rebate of 
$0.0039 per share (instead of any other applicable rebate for 
transactions in the ALR Security) or the LMM Liquidity Provision Rates 
described above that would otherwise apply for the LMM in the 
applicable ALR Security. While the proposed Corporate LMM Liquidity 
Provision Rates provide a lower rebate than the current LMM Add 
Liquidity Rebate, the Exchange believes that the proposed rebate is 
commensurate with the difficulty of meeting the proposed Minimum 
Performance Standards and transacting volume in Corporate Securities.
    The Exchange proposes to modify the naming conventions in proposed 
paragraph (B) under footnote 14 to make clear that the Liquidity 
Provision Rates are only applicable to ETPs and Closed-End Funds, and 
are not applicable to Corporate Securities. Specifically, proposed 
paragraph (B)(i) under footnote 14 would provide that LMMs in BZX-
listed ETP and Closed-End Fund securities (``ETP LMMs'') will receive 
the applicable rates on a daily basis per security for which the LMM is 
a Qualified ETP LMM (a ``Qualified ETP Security'') based on the average 
aggregate daily auction volume of the BZX-listed securities for which 
the Member is the ETP LMM (``ETP LMM Securities''). Proposed paragraph 
(B)(ii) under footnote 14 would provide that LMMs in BZX-listed ETP and 
Closed-End Fund securities will receive the applicable rates on a daily 
basis per Qualified ETP Security for which they also meet certain 
enhanced market quality standards (an ``Enhanced ETP Security'') in 
addition to the Standard Rates provided in paragraph (B)(i) under 
footnote 14. The Exchange also proposes to modify the description of 
the rates to

[[Page 9878]]

provide that the daily incentive is applicable to a Qualified ETP 
Security or Enhanced ETP Security, as applicable. The Exchange is not 
proposing any changes to the calculation of the ETP and Closed-End Fund 
LMM Liquidity Provision Rates.
    The Exchange proposes to modify proposed paragraph (C) under 
footnote 14 to provide that the LMM Add Liquidity Rebate is only 
applicable to ETP and Closed-End Fund securities listed on the 
Exchange. Accordingly, proposed paragraph (C) would state that ETP 
LMMs, as defined in paragraph (B)(i) of footnote 14, in BZX-listed 
securities that have a CADV >=1,000,000 (an ``ALR Security'') are 
eligible to receive the ETP LMM Add Liquidity Rebate for such ALR 
Securities for a calendar month on a security-by-security basis. For 
each calendar month in which an ETP LMM is a Qualified ETP LMM in an 
ALR Security, the ETP LMM will receive the greater of an enhanced 
rebate of $0.0039 per share (instead of any other applicable rebate for 
transactions in the ALR Security) or the ETP LMM Liquidity Provision 
Rates described above that would otherwise apply for the ETP LMM in the 
applicable ALR Security. ETP LMMs in an ALR Security remain eligible to 
achieve other incentives and tiers unless otherwise explicitly 
excluded. The Exchange is not proposing to change how the LMM Add 
Liquidity Rebate is calculated or the amount of the rebate, but is 
merely modifying it to extricate Corporate Securities from the rebate 
program.
    The Exchange is proposing no changes to proposed paragraph (D) 
under footnote 14. Closing Auction rates applicable to LMMs in ETP, 
Closed-End Funds and Corporate BZX-Listed securities will continue to 
transact for free in the Closing Auction in their LMM Securities.
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.\13\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \14\ 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. 
Further, the Exchange believes that the proposed rule change is 
consistent with Section 6(b)(4),\15\ in that it provides for the 
equitable allocation of reasonable dues, fees and other charges among 
members and other persons using any facility or system which the 
Exchange operates or controls and it does not unfairly discriminate 
between customers, issuers, brokers or dealers. The Exchange also notes 
that its listing business operates in a highly-competitive market in 
which market participants, which includes both issuers of securities 
and LMMs, can readily transfer their listings or opt not to 
participate, respectively, if they deem fee levels, liquidity provision 
incentive programs, or any other factor at a particular venue to be 
insufficient or excessive. The LMM Program reflects a competitive 
pricing structure designed to incentivize issuers to list new products 
and transfer existing products to the Exchange and market participants 
to enroll and participate as LMMs on the Exchange, which the Exchange 
believes will enhance market quality in all ETPs, Primary Equity 
Securities, and Closed-End Funds listed on the Exchange.
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    \13\ 15 U.S.C. 78f(b).
    \14\ 15 U.S.C. 78f(b)(5).
    \15\ 15 U.S.C. 78f(b)(4).
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    The Exchange believes that the proposal to adopt separate Minimum 
Performance Standards applicable to Primary Equity Securities is 
consistent with the Act because it will enhance market quality in those 
securities. Under the current LMM Program, LMMs in Corporate Securities 
are incentivized to provide tightened spreads, deeper liquidity, and 
provide better execution opportunities. As proposed, LMMs in Corporate 
Securities will continue to be incentivized to meet Minimum Performance 
Standards, albeit with slightly less stringent standards than are 
currently applicable. Nonetheless, the Exchange believes the proposed 
Minimum Performance Standards are appropriate for Corporate Securities, 
which are typically more liquid than other types of listed products. 
Further, the Exchange believes Minimum Performance Standards tailored 
specifically to Corporate Securities listed on the Exchange will be 
more attractive to LMMs as they more closely align with quoting and 
trading activity in those securities, while still generally aligning 
with the existing Minimum Performance Standards on the Exchange, which 
LMMs are already familiar with.
    The Exchange believes that the proposed rebate under the Proposed 
Corporate LMM Liquidity Provision Rates is reasonable as they are in-
line with other rebates available to Members on the Exchange. For 
example, under the Add Volume Tiers of footnote 1 of the Fee Schedule, 
Members are eligible for rebates ranging from $0.0020 up to $0.0031 per 
share if they meet certain required criteria. Furthermore, as discussed 
above, LMMs will continue to be eligible for other rebates, such as 
those available under the Add Volume Tiers, and will receive the 
greater among the rebates that it qualifies.
    The Exchange believes it is reasonable to separate Corporate 
Securities from ETP and Closed-End Fund securities in the LMM Program. 
In particular, as the Exchange is proposing to adopt specific liquidity 
rates applicable to LMMs in Corporate Securities, the Exchange believes 
it follows to remove Corporate Securities from the existing liquidity 
provisions of proposed sections (B) and (C) under footnote 14 of the 
Fee Schedule.
    The Exchange also believes that it is reasonable to provide 
incentives to LMMs in Corporate Securities on a transaction basis 
rather than solely achieving certain objective market quality metrics. 
Unlike ETPs, Corporate Securities are valued on the trading price of 
the security rather than derived from the underlying assets owned by 
the ETP.\16\ Therefore, the Exchange believes it is important to 
incentivize both transactions and market quality metrics in those 
securities. The Exchange believes its proposed LMM Program for 
Corporate Securities strikes an appropriate balance by requiring an LMM 
to achieve certain Minimum Performance Standards in order to be 
eligible to receive the Corporate LMM Liquidity Provision Rates on the

[[Page 9879]]

Exchange, as provided in proposed footnote 14(A) of the Fee Schedule.
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    \16\ The end-of-day net asset value (``NAV'') of an ETP is a 
daily calculation based off of the most recent closing prices of the 
underlying assets and an accounting of the ETP's total cash position 
at the time of calculation. ETPs are generally subject to a creation 
and redemption mechanism to ensure that the ETP's price does not 
fluctuate too far from the NAV, which mechanisms mitigate the 
potential for exchange trading to impact the price of an ETP. The 
``arbitrage function'' performed by market participants influences 
the supply and demand of shares, and thus, trading prices relative 
to NAV. The arbitrage function helps to keep an ETP's price in line 
with the value of its underlying portfolio, and the Exchange 
believes that the arbitrage mechanism is generally an effective and 
efficient means of ensuring that intraday pricing in ETPs closely 
tracks the value of the underlying portfolio or reference assets.
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    Registration as an LMM is and will continue to be available equally 
to all Members and allocation of listed securities between LMMs is 
governed by Exchange Rule 11.8(e)(2). Where an LMM does not meet the 
Minimum Performance Standards for Corporate Securities as provided in 
proposed Rule 11.8(e)(1)(E)(i), they will not receive the Liquidity 
Provision Rates set forth in proposed footnote 14(A) of the Exchange's 
Fee Schedule. If an LMM does not meet the applicable Minimum 
Performance Standards for three out of the past four months, the LMM 
will continue to be subject to forfeiture of LMM status for that LMM 
Security, at the Exchange's discretion.
    As described above, the Exchange proposes to provide fees and 
rebates specifically applicable to a Qualified LMM in transactions in 
BZX-listed Primary Equity Securities as provided in proposed footnote 
14(A). The Exchange believes that the proposed fee for liquidity 
removing transactions in Corporate Securities is reasonable as it is 
generally consistent with the standard liquidity removing fee on the 
Exchange which charges a fee of $0.0030 per share for securities priced 
above $1. The Exchange also believes the proposed rebate for liquidity 
adding transactions in Corporate Securities is reasonable as it 
appropriately incentivizes LMMs to meet the proposed Minimum 
Performance Standards throughout the month in addition to transacting 
in those Corporate Securities. The Exchange notes that the proposed 
rebate is generally in-line with other volume adding incentives (e.g., 
the add volume tiers under footnote 1 of the Fee Schedule offer rebates 
ranging from $0.0020 up to $0.0031 per share), and the Exchange 
believes such rebate is reasonably commensurate with the Minimum 
Performance Standards and transaction requirements of the proposed 
Corporate LMM Liquidity Provision Rates.

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule changes will 
impose any burden on competition not necessary or appropriate in 
furtherance of the purposes of the Act. The Exchange does not believe 
the proposed change burdens competition, but rather, enhances 
competition as it is intended to increase the competitiveness of BZX 
both among Members by incentivizing Members to become LMMs in BZX-
listed Primary Equity Securities and as a listing venue by enhancing 
market quality in those securities. The marketplace for listings is 
extremely competitive and there are several other national securities 
exchanges that offer listings. Transfers between listing venues occur 
frequently for numerous reasons, including market quality. This 
proposal is intended to help the Exchange compete as a listing venue. 
Accordingly, the Exchange does not believe that the proposed changes 
will impair the ability of issuers, LMMs, or competing listing venues 
to maintain their competitive standing. The Exchange also notes that 
the proposed change is intended to enhance market quality in BZX-listed 
Primary Equity Securities, to the benefit of all investors in such BZX-
listed securities. The Exchange does not believe the proposed amendment 
would burden intramarket competition as it would be available to all 
Members uniformly. Registration as an LMM is available equally to all 
Members and allocation of listed securities between LMMs is governed by 
Exchange Rule 11.8(e)(2). Further, if an LMM does not meet the 
applicable Minimum Performance Standards for three out of the past four 
months, the LMM would continue to be subject to forfeiture of LMM 
status for that LMM Security, at the Exchange's discretion.

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

    Because the foregoing proposed rule change does not: (i) 
significantly affect the protection of investors or the public 
interest; (ii) impose any significant burden on competition; and (iii) 
become operative for 30 days from the date on which it was filed, or 
such shorter time as the Commission may designate, it has become 
effective pursuant to Section 19(b)(3)(A) of the Act \17\ and Rule 19b-
4(f)(6) \18\ thereunder.
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    \17\ 15 U.S.C. 78s(b)(3)(A).
    \18\ 17 CFR 240.19b-4(f)(6).
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    A proposed rule change filed under Rule 19b-4(f)(6) \19\ normally 
does not become operative prior to 30 days after the date of the 
filing. However, pursuant to Rule 19b-4(f)(6)(iii),\20\ the Commission 
may designate a shorter time of such action is consistent with the 
protection of investor and the public interest. The Exchange has asked 
the Commission to waive the 30-day operative delay so that the proposed 
rule change may become operative upon filing. The Exchange states that 
waiving the operative delay would allow market participants to realize 
immediately the benefits of the proposal, which the Exchange states 
include market quality enhancements, and would help the Exchange better 
compete as a listing venue for Primary Equity Securities without undue 
delay. The proposed change raises no novel legal or regulatory issues. 
Based on the foregoing, the Commission believes that waiving the 30-day 
operative delay is consistent with the protection of investors and the 
public interest. Therefore, the Commission hereby waives the operative 
delay and designates the proposal operative upon filing.\21\
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    \19\ 17 CFR 240.19b-4(f)(6).
    \20\ 17 CFR 240.19b-4(f)(6).
    \21\ For purposes only of waiving the 30-day operative delay, 
the Commission has also considered the proposed rule's impact on 
efficiency, competition, and capital formation. See 15 U.S.C. 
78c(f).
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    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.

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-2024-013 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-2024-013. This 
file number should be included on the subject line if email is used. To 
help the

[[Page 9880]]

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-2024-013 and should be submitted 
on or before March 4, 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), (59).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-02753 Filed 2-9-24; 8:45 am]
BILLING CODE 8011-01-P