[Federal Register Volume 89, Number 53 (Monday, March 18, 2024)]
[Notices]
[Pages 19375-19379]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-05634]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-99722; File No. SR-CboeBYX-2024-007]


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

March 12, 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 March 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

[[Page 19376]]

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: (1) modifying the 
Remove Volume Tiers; and (2) deleting the Step-Up Tier. The Exchange 
proposes to implement these changes effective March 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 
16% 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\ 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 (February 23, 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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Remove Volume Tiers
    Under footnote 1 of the Fee Schedule, the Exchange currently offers 
various Add/Remove Volume Tiers. In particular, the Exchange offers 
three Remove Volume Tiers that each provide an enhanced rebate for 
Members' qualifying orders yielding fee codes BB,\6\ N \7\ and W \8\ 
where a Member reaches certain add volume-based criteria. The Exchange 
first proposes to delete Remove Volume Tiers 7 and 8 as the Exchange 
does not wish to, nor is required to, maintain such tiers. More 
specifically, the proposed change removes these tiers as the Exchange 
would rather redirect future resources and funding into other programs 
and tiers intended to incentivize increased order flow.
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    \6\ Fee code BB is appended to orders that remove liquidity from 
BYX in Tape B securities.
    \7\ Fee code N is appended to orders that remove liquidity from 
BYX in Tape C securities.
    \8\ Fee code W is appended to orders that remove liquidity from 
BYX in Tape A securities.
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    Next, the Exchange proposes to introduce a new Remove Volume Tier 
6, and re-number current Remove Volume Tier 6 to Remove Volume Tier 7. 
In addition, the Exchange proposes to amend the criteria of current 
Remove Volume Tier 6 (proposed Remove Volume Tier 7). The criteria for 
proposed Remove Volume Tier 6 is as follows:
     Proposed Remove Volume Tier 6 provides a rebate of $0.0013 
per share in securities priced at or above $1.00 to qualifying orders 
(i.e., orders yielding fee codes BB, N, or W) where (1) Member has a 
combined Auction ADV \9\ and ADV \10\ >=0.08% of the TCV; \11\ and (2) 
Member has a combined Auction ADV and ADAV \12\ >=5,000,000 shares.
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    \9\ ``Auction ADV'' means average daily auction volume 
calculated as the number of shares executed in an auction per day.
    \10\ ``ADV'' means average daily volume calculated as the number 
of shares added ore removed, combined, per day. ADV is calculated on 
a monthly basis.
    \11\ ``TCV'' means total consolidated volume calculated as the 
volume reported by all exchanges and trade reporting facilities to a 
consolidated transaction reporting plan for the month for which the 
fees apply.
    \12\ ``ADAV'' means average daily added volume calculated as the 
number of shares added per day. ADAV is calculated on a monthly 
basis.
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    The criteria for current Remove Volume Tier 6 (proposed Remove 
Volume Tier 7) is as follows:
     Remove Volume Tier 6 provides a rebate of $0.0015 per 
share in securities priced at or above $1.00 to qualifying orders 
(i.e., orders yielding fee codes BB, N, or W) where (1) Member has a 
combined Auction ADV and ADV >=0.08% of the TCV; and (2) Member has a 
combined Auction ADV and ADAV >=500,000 shares.
    The proposed criteria for current Remove Volume Tier 6 (proposed 
Remove Volume Tier 7) is as follows:
     Proposed Remove Volume Tier 7 provides a rebate of $0.0015 
per share in securities priced at or above $1.00 to qualifying orders 
(i.e., orders yielding fee codes BB, N, or W) where (1) Member has a 
combined Auction ADV and ADV >=0.10% of the TCV; and (2) Member has a 
combined Auction ADV and ADAV >=7,000,000 shares.
    The Exchange believes that the proposed modification to current 
Remove Volume Tier 6 (proposed Remove Volume Tier 7) and the 
introduction of proposed Remove Volume Tier 6 will incentivize Members 
to add volume to the Exchange, thereby contributing to a deeper and 
more liquid market, which benefits all market participants and provides 
greater execution opportunities on the Exchange. While the proposed 
criteria in current Remove Volume Tier 6 (proposed Remove Volume Tier 
7) is more difficult to achieve than the current criteria, the revised 
criteria continue to remain commensurate with the rebate that will be 
received upon a Member satisfying the proposed criteria.
Step-Up Tier
    Under footnote 2 of the Fee Schedule, the Exchange currently offers 
a Step-Up Tier that assesses a reduced fee for Members' qualifying 
orders yielding fee codes B,\13\ V,\14\ Y,\15\ and AD \16\ where 
certain add volume-based criteria is met, including ``growing'' volume 
over a certain baseline month. The Exchange now proposes to delete the 
Step-Up Tier as the Exchange does not wish to, nor is required to, 
maintain such tier. More

[[Page 19377]]

specifically, the proposed change removes this tier as the Exchange 
would rather redirect future resources and funding into other programs 
and tiers intended to incentivize increased order flow.
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    \13\ Fee code B is appended to displayed orders that add 
liquidity to BYX in Tape B securities.
    \14\ Fee code V is appended to displayed orders that add 
liquidity to BYX in Tape A securities.
    \15\ Fee code Y is appended to displayed orders that add 
liquidity to BYX in Tape C securities.
    \16\ Fee code AD is appended to displayed orders executed in a 
Periodic Auction.
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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.\17\ Specifically, the Exchange believes the proposed rule change 
is consistent with the Section 6(b)(5) \18\ 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) \19\ 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) \20\ 
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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    \17\ 15 U.S.C. 78f(b).
    \18\ 15 U.S.C. 78f(b)(5).
    \19\ Id.
    \20\ 15 U.S.C. 78f(b)(4).
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    As described above, the Exchange operates in a highly competitive 
market in which market participants can readily direct order flow to 
competing venues if they deem fee levels at a particular venue to be 
excessive or incentives to be insufficient. The Exchange believes that 
its proposal to modify current Remove Volume Tier 6 (proposed Remove 
Volume Tier 7) and introduce proposed Remove Volume Tier 6 reflects a 
competitive pricing structure designed to incentivize market 
participants to direct their order flow to the Exchange, which the 
Exchange believes would enhance market quality to the benefit of all 
Members. Additionally, the Exchange notes that relative volume-based 
incentives and discounts have been widely adopted by exchanges,\21\ 
including the Exchange,\22\ and are reasonable, equitable and non-
discriminatory because they are open to all Members on an equal basis 
and provide additional benefits or discounts that are reasonably 
related to (i) the value to an exchange's market quality and (ii) 
associated higher levels of market activity, such as higher levels of 
liquidity provision and/or growth patterns. Competing equity exchanges 
offer similar tiered pricing structures, including schedules or rebates 
and fees that apply based upon members achieving certain volume and/or 
growth thresholds, as well as assess similar fees or rebates for 
similar types of orders, to that of the Exchange.
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    \21\ See e.g., EDGA Equities Fee Schedule, Footnote 7, Add/
Remove Volume Tiers.
    \22\ See e.g., BYX Equities Fee Schedule, Footnote 1, Add/Remove 
Volume Tiers.
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    In particular, the Exchange believes its proposal to modify current 
Remove Volume Tier 6 (proposed Remove Volume Tier 7) and introduce 
proposed Remove Volume Tier 6 is reasonable because the tiers will be 
available to all Members and provide all Members with an opportunity to 
receive a higher enhanced rebate. The Exchange further believes that 
modified Remove Volume Tier 6 (proposed Remove Volume Tier 7) and 
proposed Remove Volume Tier 6 will provide a reasonable means to 
encourage adding displayed orders in Members' order flow to the 
Exchange and to incentivize Members to continue to provide volume to 
the Exchange by offering them an additional opportunity to receive a 
higher enhanced rebate on qualifying orders. An overall increase in 
activity would deepen the Exchange's liquidity pool, offers additional 
cost savings, support the quality of price discovery, promote market 
transparency and improve market quality, for all investors.
    The Exchange believes proposed modified Remove Volume Tier 6 
(proposed Remove Volume Tier 7) and proposed Remove Volume Tier 6 are 
reasonable as they do not represent a significant departure from the 
criteria currently offered in the Fee Schedule. The Exchange also 
believes that the proposal represents an equitable allocation of fees 
and rebates and is not unfairly discriminatory because all Members will 
be eligible for the new and revised tiers and have the opportunity to 
meet the tiers' criteria and receive the corresponding reduced fee if 
such criteria are met. Without having a view of activity on other 
markets and off-exchange venues, the Exchange has no way of knowing 
whether these proposed rule changes would definitely result in any 
Members qualifying for the new proposed tiers. While the Exchange has 
no way of predicting with certainty how the proposed changes will 
impact Member activity, based on the prior months volume, the Exchange 
anticipates that at least three Members will be able to satisfy 
proposed Remove Volume Tier 6, and at least four Members will be able 
to satisfy proposed Remove Volume Tier 7. The Exchange also notes that 
the proposed changes will not adversely impact any Member's ability to 
qualify for reduced fees or enhanced rebates offered under other tiers. 
Should a Member not meet the proposed new criteria, the Member will 
merely not receive that corresponding enhanced rebate.
    The Exchange believes that its proposal to eliminate current Remove 
Volume Tiers 7-8 and the Step-Up Tier is reasonable because the 
Exchange is not required to maintain these tiers nor is it required to 
provide Members an opportunity to receive enhanced rebates or reduced 
fees. The Exchange believes its proposal to eliminate the tiers is also 
equitable and not unfairly discriminatory because it applies to all 
Members (i.e., the tiers will not be available for any Member). The 
Exchange also notes that the proposed rule change to remove these tiers 
merely results in Members not receiving an enhanced rebate or reduced 
fee, which, as noted above, the Exchange is not required to offer or 
maintain. Furthermore, the proposed rule change to eliminate the tiers 
enables the Exchange to redirect resources and funding into other 
programs and tiers intended to incentivize increased order flow.

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.''

[[Page 19378]]

    The Exchange believes the proposed rule changes do not impose any 
burden on intramarket competition that is not necessary or appropriate 
in furtherance of the purposes of the Act. Particularly, the proposed 
modified current Remove Volume Tier 6 (proposed Remove Volume Tier 7) 
and proposed Remove Volume Tier 6 will apply to all Members equally in 
that all Members are eligible for the tiers and enhanced rebates, have 
a reasonable opportunity to meet the proposed tiers' criteria and will 
receive the enhanced rebate on their qualifying orders if such criteria 
is met. The Exchange does not believe the proposed changes burden 
competition, but rather, enhance competition as they are intended to 
increase the competitiveness of BYX by amending existing pricing 
incentives in order to attract order flow and incentivize participants 
to increase their participation on the Exchange, providing for 
additional execution opportunities for market participants and improved 
price transparency. Greater overall order flow, trading opportunities, 
and pricing transparency benefits all market participants on the 
Exchange by enhancing market quality and continuing to encourage 
Members to send orders, thereby contributing towards a robust and well-
balanced market ecosystem.
    Additionally, the Exchange believes the proposed elimination of 
current Remove Volume Tiers 7-8 and the Step-Up Tier does not impose 
any burden on intramarket competition that is not necessary or 
appropriate in furtherance of the purposes of the Act. Specifically, 
the proposed change to eliminate current Remove Volume Tiers 7-8 and 
the Step-Up Tier will not impose any burden on intramarket competition 
because the changes apply to all Members uniformly, as in, the tiers 
will no longer be available to any Member.
    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 
than 16% of the market share.\23\ 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.'' \24\ 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'. . . .''.\25\ 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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    \23\ Supra note 3.
    \24\ See Securities Exchange Act Release No. 51808 (June 9, 
2005), 70 FR 37496, 37499 (June 29, 2005).
    \25\ 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 \26\ and paragraph (f) of Rule 19b-4 \27\ 
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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    \26\ 15 U.S.C. 78s(b)(3)(A).
    \27\ 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-2024-007 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-2024-007. 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

[[Page 19379]]

withhold entirely from publication submitted material that is obscene 
or subject to copyright protection. All submissions should refer to 
file number SR-CboeBYX-2024-007 and should be submitted on or before 
April 8, 2024.
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    \28\ 17 CFR 200.30-3(a)(12).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\28\
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-05634 Filed 3-15-24; 8:45 am]
BILLING CODE 8011-01-P