[Federal Register Volume 89, Number 32 (Thursday, February 15, 2024)]
[Notices]
[Pages 11891-11893]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-03098]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99508; File No. SR-CboeBYX-2024-005]


Self-Regulatory Organizations; Cboe BYX Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend 
its Fee Schedule Regarding Periodic Auctions

February 9, 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 1, 2024, Cboe BYX Exchange, Inc. (the ``Exchange'' or 
``BYX'') 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 BYX Exchange, Inc. (the ``Exchange'' or ``BYX'') 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/BYX/), at the Exchange's Office of the Secretary, and at 
the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend its Fee Schedule applicable to its 
equities trading platform (``BYX Equities'') by modifying the rate 
associated with fee code AU in securities priced at or above $1.00. The 
Exchange proposes to implement these changes effective February 1, 
2024.
    The Exchange first notes that it operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. More specifically, the 
Exchange is only one of 16 registered equities exchanges, as well as a 
number of alternative trading systems and other off-exchange venues 
that do not have similar self-regulatory responsibilities under the 
Securities Exchange Act of 1934 (the ``Act''), to which market 
participants may direct their order flow. Based on publicly available 
information,\3\ no single registered equities exchange has more than 
13% of the market share. Thus, in such a low-concentrated and highly 
competitive market, no single equities exchange possesses significant 
pricing power in the execution of order flow. The Exchange in 
particular operates a ``Taker-Maker'' model whereby it pays credits to 
members that remove liquidity and assesses fees to those that add 
liquidity. The Exchange's Fee Schedule sets forth the standard rebates 
and rates applied per share for orders that remove and provide 
liquidity, respectively. Currently, for orders in securities priced at 
or above $1.00, the Exchange provides a standard rebate of $0.00200 per 
share for orders that remove liquidity and assesses a fee of $0.00200 
per share for orders that add liquidity.\4\ For orders in securities 
priced below $1.00, the Exchange does not assess any fees for orders 
that add liquidity, and provides a rebate in the amount of 0.10% of the 
total dollar value for orders that remove liquidity.\5\

[[Page 11892]]

Additionally, in response to the competitive environment, the Exchange 
also offers tiered pricing which provides Members opportunities to 
qualify for higher rebates or reduced fees where certain volume 
criteria and thresholds are met. Tiered pricing provides an incremental 
incentive for Members to strive for higher tier levels, which provides 
increasingly higher benefits or discounts for satisfying increasingly 
more stringent criteria.
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    \3\ See Cboe Global Markets, U.S. Equities Market Volume 
Summary, Month-to-Date (January 26, 2024), available at https://www.cboe.com/us/equities/market_statistics/.
    \4\ See BYX Equities Fee Schedule, Standard Rates.
    \5\ Id.
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Fee Code AU
    The Exchange currently offers fee code AU, which is appended to 
Periodic Auction Only \6\ or Periodic Auction Eligible \7\ orders that 
are executed in a Periodic Auction.\8\ Currently, the Exchange does not 
assess a fee or provide a rebate for any orders appended with fee code 
AU. Now, the Exchange proposes to modify the rate associated with fee 
code AU in securities priced at or above $1.00. The Exchange proposes 
to assess a fee of $0.00040 per share in securities priced at or above 
$1.00 for orders appended with fee code AU. The Exchange does not 
propose to implement a fee for securities appended with fee code AU in 
securities priced below $1.00. The purpose of introducing a fee 
associated with fee code AU in securities priced at or above $1.00 is 
for business and competitive reasons, as the Exchange has seen 
increased participation in Periodic Auctions and now seeks to implement 
a fee for Members \9\ who choose to add liquidity designed to 
participate in a Periodic Auction. The Exchange notes that while it is 
adding a modest fee for securities priced at or above $1.00 appended 
with fee code AU, the fee remains lower than many of the fees assessed 
to liquidity-adding orders on the Exchange.\10\
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    \6\ See Rule 11.25(b)(1). A ``Periodic Auction Only Order'' is a 
non-displayed limit order entered with an instruction to participate 
solely in Periodic Auctions pursuant to Rule 11.25. Periodic Auction 
Only Orders are not eligible for execution on the Continuous Book.
    \7\ See Rule 11.25(b)(2). A ``Periodic Auction Eligible Order'' 
is a non-displayed limit order eligible to trade on the Continuous 
Book that is entered with an instruction to also initiate a Periodic 
Auction, if possible, pursuant to Rule 11.25.
    \8\ A Periodic Auction is a price forming auction that is 
executed at the price level which maximizes the total number of 
shares in both the auction book and the continuous market that are 
executed in the auction and does not interrupt trading on the 
continuous market. See Securities Exchange Act Release No. 91423 
(March 26, 2021), 86 FR 17230 (April 1, 2021) (SR-CboeBYX-2020-021) 
(``Periodic Auction Filing''). See also Securities Exchange Act 
Release No. 94012 (January 20, 2022), 87 FR 4060 (January 26, 2022) 
(SR-CboeBYX-2021-024) (``Periodic Auction Amendment'').
    \9\ See Rule 1.5(n). The term ``Member'' shall mean any 
registered broker or dealer that has been admitted to membership in 
the Exchange.
    \10\ See BYX Equities Fee Schedule, Standard Rates. See also BYX 
Equities Fee Schedule, Fee Codes and Associated Fees.
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2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Act and the rules and regulations thereunder applicable to the 
Exchange and, in particular, the requirements of Section 6(b) of the 
Act.\11\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \12\ 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) \13\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers as well as Section 6(b)(4) \14\ 
as it is designed to provide for the equitable allocation of reasonable 
dues, fees and other charges among its Members and other persons using 
its facilities.
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    \11\ 15 U.S.C. 78f(b).
    \12\ 15 U.S.C. 78f(b)(5).
    \13\ Id.
    \14\ 15 U.S.C. 78f(b)(4)
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    As described above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. The Exchange believes the 
proposed amendment to the fee associated with fee code AU is reasonable 
as it does not represent a significant departure from the Exchange's 
general pricing structure. The Exchange notes that the proposed 
amendment to the fee associated with fee code AU represents a modest 
increase over existing prices and yet the proposed fee is lower than 
other similar fees assessed to orders that add liquidity to the BYX 
Book.\15\ In addition, the Exchange believes the proposed amendment 
represents an equitable allocation of fees and rebates and is not 
unfairly discriminatory because the fees will apply to all Members who 
add liquidity by submitting Periodic Auction Only or Periodic Auction 
Eligible orders, equally.
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    \15\ See, e.g. EDGA Equity Fee Schedule, Fee Codes B, V, and Y.
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B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
impose any burden on competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Rather, as discussed above, 
the Exchange believes that the proposed change would encourage the 
submission of additional order flow to a public exchange, thereby 
promoting market depth, execution incentives and enhanced execution 
opportunities, as well as price discovery and transparency for all 
Members. As a result, the Exchange believes that the proposed changes 
further the Commission's goal in adopting Regulation NMS of fostering 
competition among orders, which promotes ``more efficient pricing of 
individual stocks for all types of orders, large and small.''
    The Exchange believes the proposed rule changes do not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. The proposed fees associated 
with fee code AU would apply to all Members equally in that all Members 
would be subject to the same fee for the execution of a Periodic 
Auction Only or Periodic Auction Eligible order during a Periodic 
Auction on the Exchange. Each of the Periodic Auction Only and Periodic 
Auction Eligible order types are available to all Members on an equal 
and non-discriminatory basis. As a result, any Member can decide to use 
(or not use) the Periodic Auction Only or Periodic Auction Eligible 
order type based on the benefits provided by such order types in 
potentially avoiding unfavorable executions, and the associated charge 
that the Exchange proposes to amend.
    Next, the Exchange believes the proposed rule changes does not 
impose any burden on intermarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. As previously 
discussed, the Exchange operates in a highly competitive market. 
Members have numerous alternative venues that they may participate on 
and direct their order flow, including other equities exchanges, off-
exchange venues, and alternative trading systems. Additionally, the 
Exchange represents a small percentage of the overall market. Based on 
publicly available information, no single equities exchange has more

[[Page 11893]]

than 13% of the market share.\16\ Therefore, no exchange possesses 
significant pricing power in the execution of order flow. Indeed, 
participants can readily choose to send their orders to other exchange 
and off-exchange venues if they deem fee levels at those other venues 
to be more favorable. Moreover, the Commission has repeatedly expressed 
its preference for competition over regulatory intervention in 
determining prices, products, and services in the securities markets. 
Specifically, in Regulation NMS, the Commission highlighted the 
importance of market forces in determining prices and SRO revenues and, 
also, recognized that current regulation of the market system ``has 
been remarkably successful in promoting market competition in its 
broader forms that are most important to investors and listed 
companies.'' \17\ 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' . . . .''.\18\ Accordingly, the Exchange does not believe its 
proposed fee change imposes any burden on competition that is not 
necessary or appropriate in furtherance of the purposes of the Act.
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    \16\ Supra note 1.
    \17\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \18\ NetCoalition v. SEC, 615 F.3d 525, 539 (D.C. Cir. 2010) 
(quoting Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-
21)).
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C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange neither solicited nor received comments on the 
proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \19\ and paragraph (f) of Rule 19b-4 \20\ 
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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    \19\ 15 U.S.C. 78s(b)(3)(A).
    \20\ 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-CboeBYX-2024-005 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-CboeBYX-2024-005. 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-CboeBYX-2024-005 and should 
be submitted on or before March 7, 2024.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\21\
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    \21\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-03098 Filed 2-14-24; 8:45 am]
BILLING CODE 8011-01-P